COURT FILE NO.: CV-17-438-00 DATE: 2020-07-28

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1422986 Ontario Limited, Plaintiff v. Syncor et al., Defendants

HEARD: Written Submissions BEFORE: Nieckarz J.

COUNSEL: Jordan Lester, for the Plaintiff James Carpino, for the Defendants

Decision on Costs

[1] The Plaintiff designed townhomes to be built by the Defendant, 183326 Ontario Limited operating as Syncor Contracting Limited (“Syncor”). This action arose out of the Plaintiff’s claim that Syncor and the co-defendant, Jeremiah Gammond (“Gammond”) used its design in a subsequent townhome project, without the Plaintiff’s permission. In doing so, the Plaintiff alleged that the Defendants infringed its copyright interests. The Plaintiff sought declaratory relief, injunctive relief, damages, and other remedies.

[2] At trial the Defendants conceded a copyright interest owned by the Plaintiff, but they denied that the copyright had been infringed by them in the design of their new townhome project. The Defendants sought dismissal of the Plaintiff’s claims.

[3] The trial of this action took place over four days (August 13-16, 2019). In addition, extensive written submissions were filed and completed by September 20, 2019.

[4] On February 14, 2020 I released my Reasons for Judgment. I granted the following relief in favour of the Plaintiff:

1. A declaration that copyright in the Weiler Townhome designs and drawings subsisted with the Plaintiff, and that those rights had been infringed by the Defendants;
2. Statutory damages payable by the Defendants in the amount of $6,500; and
3. Pre-judgment and Post-judgment interest.

I denied the Plaintiff’s claim for delivery up of the copies of the designs and drawings as well as the claim for punitive damages. I invited submissions from the parties as to costs in the event they could not agree.

[5] The parties have been unable to agree as to costs. The Plaintiff seeks costs on a substantial indemnity basis in the total amount of $66,510.10. In the alternative, the Plaintiff seeks partial indemnity costs to June 5th, 2019 (being the date of an offer to settle) and substantial indemnity costs thereafter, for a total of $59,086.85.

[6] The Defendants deny that the Plaintiff is entitled to costs. The Defendants claim that they are entitled to their costs because of the Plaintiff’s failure to accept an offer to settle dated June 17, 2019.

[7] For reasons that follow, the Defendants shall pay to the Plaintiff the sum of $30,000 on account of costs, inclusive of fees, disbursements and HST. No submissions were made as to apportionment of the costs as between each Defendant and therefore each Defendant is ordered to pay one half of this amount.

Submissions of the Plaintiff:

[8] The Plaintiff takes the position that it has tried to resolve this matter on a reasonable basis since prior to the commencement of the litigation, and throughout up until the time of trial. The Plaintiff argues that the offers made by it should attract an award of substantial indemnity costs.

Pre-Litigation Offer to Settle:

[9] The Plaintiff states that it made efforts to resolve the matter without litigation prior to commencing the action. The Plaintiff points to correspondence dated August 4, 2016, from counsel for the Plaintiff to counsel for Syncor. The letter offered to settle the contemplated action for the sum of $6,500 for each use of the Plaintiff’s drawings, in addition to costs in the amount of $2,500. No releases were to be provided to either Syncor or Gammond.

[10] The Plaintiff acknowledges that while this pre-litigation offer is not an offer to settle within the meaning of Rule 49 of the Rules of Civil Procedure, it nonetheless demonstrates the reasonableness of the Plaintiff and reflects the spirit of Rule 49; substantial indemnity costs should therefore follow. The Plaintiff further argues that Syncor’s failure to accept the offer (it is not clear whether the same counsel represented Gammond at that time or not) demonstrates the Defendants’ unreasonable conduct in forcing expensive and protracted litigation.

June 5, 2019 Offer to Settle:

[11] The Plaintiff further points to its offer to settle dated June 5, 2019, in support of a claim for substantial indemnity costs. The Plaintiff argues that it should, at the very least, be awarded substantial indemnity costs from the date of this offer to settle, with partial indemnity costs prior to June 5, 2019.

[12] The June 5th offer provided that:

1. The Defendants shall pay to the Plaintiff the sum of $6,500;
2. The Defendants shall pay the Plaintiff’s costs, to be assessed, on a partial indemnity basis;
3. The Defendants shall acknowledge the Plaintiff’s copyright in the townhome designs;
4. The Defendants shall relinquish all copies of the drawings of the townhome designs; and
5. The Plaintiff shall dismiss the action.

[13] The Plaintiff argues that the result it achieved at trial was more favourable than this offer. Specifically:

1. The judgment included a declaration that copyright rights had been infringed by the Defendants. The offer did not include any such admission of liability;
2. The judgment included an injunction prohibiting the Defendants from using the townhome design in any other project without permission of the Plaintiff, whereas the offer contains no such prohibition; and
3. The judgment provides for prejudgment interest, whereas the offer does not.

[14] It is undisputed that the offer was not withdrawn or accepted by the Defendants prior to the trial. The Plaintiff states that Rule 49.10(1) of the Rules of Civil Procedure is triggered so as to entitled it to substantial indemnity costs from the date of the offer.

Defendant’s Offer to Settle:

[15] The Plaintiff acknowledges that the Defendants served an offer to settle dated June 17, 2019. The Plaintiff argues that this offer does not detract from its entitlement to costs.

[16] The Defendants’ offer contains the following essential provisions:

1. The Defendants shall pay the Plaintiff the sum of $6,500 inclusive of prejudgment interest and costs;
2. The Defendants shall acknowledge the Plaintiff’s copyright in the drawings;
3. The Defendants shall relinquish all copies of the drawings;
4. The Plaintiff shall dismiss the action without costs.

[17] This offer was not withdrawn or accepted prior to trial. The Plaintiff argues that its decision not to accept the offer was reasonable, particularly given that the parties were on the eve of trial and there was no provision made for costs or prejudgment interest. The Plaintiff further argues that the Defendant purposely only agreed to copyright over the drawings and not the design; the Plaintiff argues this is a crucial distinction.

Reasonableness of the Amount Claimed:

[18] While the Plaintiff acknowledges that the amount claimed on account of costs far exceeds the amount recovered at trial, it points to the importance of the declaratory relief, the necessity for expert evidence, and that the Defendants vigorously fought the action knowing that both parties would incur significant costs as a result.

Submissions of the Defendants:

Success:

[19] The Defendants argue that the Plaintiff was not entirely successful at trial, and at best was modestly successful; any cost award should reflect this. The Defendants state that there were eleven (11) claims for relief made by the Plaintiff and they were successful on only five (5) of them. The Defendants further note that of the total damages claimed of $45,000, the Plaintiff was awarded only $6,500.

Rule 57.05(1) – amount recovered within jurisdiction of Small Claims Court:

[20] The Defendants also point to Rule 57.05(1) of the Rules of Civil Procedure in support of their argument that the Plaintiff should be denied its costs. This Rule gives the court discretion to deny a Plaintiff its costs if the amount recovered falls within the monetary jurisdiction of the Small Claims Court.

Impact of Offers to Settle:

[21] The Defendants argue that it is they who should be entitled to costs and not the Plaintiff. The Defendants seek costs from the date of their June 17th, 2019 offer to settle. The Defendants take the position that the Plaintiff’s recovery at trial was not as favourable as the Defendants’ offer.

[22] The Defendants submit that if the Plaintiff is entitled to any costs, it is only their partial indemnity costs from the date of the commencement of the litigation to June 17, 2019. The Defendants are entitled to their costs from June 17, 2019 onwards. When the two amounts are set-off against each other, the Defendants are owed $3,395.41 from the Plaintiff.

Neither reasonable nor proportionate:

[23] Finally, and in the alternative, the Defendants state that the Plaintiff’s costs should be significantly reduced given that the amount claimed represents approximately ten (10) times more than what was awarded at trial. The Defendants argue that this amount is excessive, disproportionate and not reasonable given the facts and circumstances of this case.

Legal Framework:

[24] An award of costs is in the discretion of the court by virtue of s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[25] In Fong v. Chan, 46 O.R. (3d) 330 at para. 22 the Court of Appeal held that there were three fundamental purposes for modern costs rules:

1. To indemnify successful litigants for the cost of litigation;
2. To encourage settlement; and
3. To discourage and sanction inappropriate behavior by litigants.

[26] In general, costs follow the event unless there are special circumstances: Watts v. Benvenutti, at para. 8.

[27] The court must also consider any offers to settle that were made, and whether Rule 49.10 of the Rules of Civil Procedure has been triggered.

[28] Rule 49.10 encourages the parties to explore settlement and deliver their best offers prior to trial: Burnett Construction v. Gregory and Suzanne Gartner, 2013 ONSC 2008 at para. 22.

[29] Provided certain requirements are met, costs consequences are imposed on a party by Rule 49.10 for not accepting an offer that was as favourable or more favourable than the result obtained at trial. Specifically:

1. Rule 49.10(1) awards a plaintiff partial indemnity costs to the date their offer was served and substantial indemnity costs thereafter if that offer was as favourable or more favourable than the result achieved; and
2. Rule 49.10(2) provides that when a defendant serves an offer and the result at trial is as favourable or more favourable to the defendant, the plaintiff is entitled to partial indemnity costs to the date of the offer is served and the defendant is entitled to partial indemnity costs from that date.

[30] In addition to the result of the case and any offers to settle, the discretion of the court is to be exercised with consideration given to the factors provided for in Rule 57.01(1) of the Rules of Civil Procedure. These factors include, but are not limited to: the amount claimed and recovered; the complexity of the case; the importance of the issues; the conduct of the parties that tended to shorten or lengthen unnecessarily the duration of the proceeding; whether there were unnecessary steps; and a party’s denial of or refusal to admit anything that should be admitted.

[31] In exercising its discretion, a court must take care to ensure that a costs award is fair and reasonable. It is not just a mechanical exercise of considering hours and rates. It should also reflect the reasonable expectations of the parties and seek to balance the indemnity principle with the fundamental objective of access to justice: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.) at paras. 37-38; Andersen v. St. Jude Medical Inc. at para. 22.

Analysis:

Amount recovered within the jurisdiction of the Small Claims Court:

[32] While the amount recovered falls within the jurisdiction of the Small Claims Court, the crux of this dispute pertained to relief in the form of a declaration that the Plaintiff’s copyright interests had been infringed. It was important to the Plaintiff to prevent further infringements. The Defendants acknowledge that declaratory and injunctive relief is not within the jurisdiction of the Small Claims Court. The application of Rule 57.05(1) is therefore not appropriate.

Success:

[33] While the Plaintiff was not successful with respect to all relief claimed, it was successful with respect to the primary issue that was litigated; whether the copyright interests had been infringed. I find that overall the Plaintiff is the successful party and should not be deprived of its costs because it was unsuccessful with respect to certain heads of relief claimed or arguments advanced.

[34] I do agree with the Defendants that these unsuccessful claims should be taken into consideration in determining the amount of costs the Plaintiff is entitled to. The Defendants did have to respond to these issues and deal with them (including but not limited to the claim for punitive damages and delivery up of the drawings) and while these issues could not be said to have been the focus of the proceeding or the trial, I am cognizant of the fact that they did cause some additional cost for the Defendants to successfully defend them.

Offers to Settle:

Pre-Litigation Offer:

[35] As the Plaintiff has acknowledged, pre-litigation offers do not attract Rule 49.10 cost consequences. I see no other reason as to why this offer should cause me to exercise my discretion to award substantial indemnity costs. Substantial indemnity costs are awarded in limited circumstances only. None of those circumstances are present here.

[36] While it is appreciated that the Plaintiff offered to settle the litigation for a reasonable sum prior to the commencement of the action, and without any formal recognition of its copyright interest, I agree with the Defendants that their failure to accept the offer did not amount to unreasonable conduct that warrants sanction from this court. The offer expressly stated that Syncor was to pay $6,500 for each use of the drawings but that there would be no releases provided to either Defendant. Without a release, the Defendants could not be assured that there would be no litigation.

Other Offers:

[37] I also find that neither the offer of the Plaintiff nor of the Defendant made in June 2019 attracts the cost consequences provided for in Rule 49.10.

[38] While each offer comes close to the result at trial, there are some subtle differences between the offers and the judgment:

1. The Plaintiff’s offer requires the delivery up of all drawings that contain or are derived from its townhome design, which relief was not granted at trial; and
2. The Defendants’ offer does not provide for prejudgment interest and acknowledges copyright in the drawings but not the design of the townhomes. The Plaintiff argues that this is a significant difference, while the Defendants argue it is not. I do also note that the Defendants’ offer gave the Plaintiff delivery up of the drawings, which the judgment did not.

[39] I note that both offers were also extremely close to each other, with the primary difference (other than the distinction between “drawings” and “design”) relating to the issue of costs; the Plaintiff’s offer sought costs to be assessed while the Defendants’ offer provided for no costs. Given that the parties were ad idem on virtually all other important aspects of the case (subject to some wording amendments), it is unfortunate that they could not have simply argued the issue of costs and avoided an expensive trial. Both parties are suffering the consequences of this decision as the costs incurred to the date of these offers were not as significant as the trial costs.

[40] In these circumstances, the application of Rule 49.10 is not appropriate.

Other Factors:

[41] As the successful litigant, the Plaintiff is entitled to its partial indemnity costs throughout the proceeding. The question then becomes the amount.

[42] The Plaintiff’s claim for partial indemnity costs claimed, inclusive of fees, disbursements and HST are as follows:

To June 5, 2019 $19, 534.46 After June 5, 2019 $33,615.06 For a total of $53,149.52.

Calculation Error:

[43] As the Defendants correctly point out, there appears to be a calculation error in the Plaintiff’s claim. The bill of costs shows total costs to June 5, 2019 of $12,432.82 and not $19,534.46. The Plaintiff states in its reply submissions that the difference is disbursements that were omitted from the bill of costs, but the Plaintiff did not provide any information as to what those disbursements are. I also note that the disbursements that were factored into the “after June 5, 2019” portion of the bill of costs suggest they relate to the entire action. For example, there is a claim for $220 for issuing the Statement of Claim. Adjusting for the calculation error, the Plaintiff’s total claim is $46,047.88.

Reasonableness, Proportionality and Reasonable Expectations:

[44] This litigation was very important to both parties. That is evident by the fact that it was hard fought by each of them, even when they appeared close to resolution. The issues were somewhat complex, requiring expert evidence from both sides. It was neither an easy case to litigate nor was it an easy case to decide.

[45] The Defendants argue that despite the importance of the litigation to the parties, the costs incurred by the Plaintiff are not reasonable, nor are they proportionate to the issues in dispute and should be reduced accordingly.

[46] I do not agree with the Defendants that “reasonableness” and “proportionality” should be determined solely by reference to the damages claimed and recovered. As indicated earlier, the most important issue in this litigation was not damages but rather the declaratory relief sought.

[47] I do agree with the Defendants that some reduction in the amount sought is warranted based on the principle of what would the unsuccessful party could reasonably expect to pay. While the Defendants did not provide a bill of costs outlining their costs to the date of their June offer, they did provide one from June 17th onwards. The total costs incurred by the Defendants, inclusive of fees, disbursements and HST on a partial indemnity basis is $21,885.87. This is compared to the $33,615.06 sought by the Plaintiff.

[48] I acknowledge that some consideration must be given to the fact that Plaintiff’s counsel is more senior to Defendants’ counsel and therefore attracts a higher hourly rate. However, on certain tasks Plaintiff’s counsel, when combined with student and other staff time, spent considerably more time than Defendants’ counsel. This is not to criticize Plaintiff’s counsel at all; counsel must devote such time as they feel is necessary to do the job expected of them by their clients. It is not for the court to say how much time should or should not be devoted to a task. Plaintiff’s counsel’s level of preparedness is reflected in the trial work done, including submissions made. However, the unsuccessful party should not always be responsible for these costs.

[49] There are also certain fees claimed in the bill of costs that are not reasonable to expect the Defendants to pay. They include:

1. The sum of $1,219.80 (not including HST) claimed for Mr. Douglas Shanks (senior counsel). While the bill of costs does not provide dockets to show the dates of the items claimed, based on the pre-litigation offer and Mr. Shanks’ involvement with that letter, these costs appear to relate to pre-litigation items.
2. A total of $3,583.40 (not including HST) is claimed for law clerk time at a partial indemnity rate of $117.00 per hour. The majority, although not all, of the work performed at “law clerk” rates is secretarial or administrative work and should be reduced accordingly.
3. A total of $5,614.95 (not including HST) is claimed for law student time. While the bill of costs reveals that research and some drafting was done by the students that would have saved on lawyer time charged at a higher rate, the amount of time claimed suggests there was some element of learning built in to the claim. In addition, there is lawyer time claimed for instructing students, which results in some duplication.

[50] With respect to the disbursements, there are various expenses that would otherwise be considered overhead, such as printing charges and therefore not recoverable from the Defendants. There is no indication as to whether all or portion of the photocopying fees relates to allowable expenses under the tariff. For the foregoing reasons I deny the Plaintiff’s claim for photocopying fees, printing fees (not including the UPS print fee), stationary and facsimile charges.

Order:

[51] Taking into consideration the fees and disbursements I find not properly chargeable to the Defendants, the claims that the Plaintiff was not success in advancing, and the principles of indemnity, reasonableness and proportionality, I find that a fair and reasonable amount for the Defendants to pay to the Plaintiff on account of its costs incurred in this proceeding is $30,000 inclusive of fees, HST and disbursements. Each Defendant shall pay one-half of this amount, or $15,000 each. An Order shall issue accordingly.

[52] If there are any calculation errors in this decision with respect to the claims of either party, I may be spoken to by way of teleconference arranged through the trial coordinator.

“Original signed by” The Honourable Madam Justice T.J. Nieckarz

Date: July 28, 2020