Court File and Parties

Court File No.: CV-18-30 Date: 2021-03-10

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Elizabeth Breen and John Breen, Plaintiffs – and – The Corporation of the Township of Lake Bays, Defendant

Counsel: David Morin and Peter Reinitzer, for the Plaintiffs Stuart Zacharias, for the Defendant

HEARD: In writing

COSTS AND PREJUDGMENT INTEREST DECISION FROM TRIAL

SUTHERLAND J.:

Introduction

[1] On January 22, 2021, I released a decision from a seven-day trial.

[2] In my decision, I found that the defendant breached its duty of care owed to the plaintiffs and awarded damages in favour of the plaintiffs in the sum of $361,875.33.

[3] In my reasons, I invited the parties to serve and file written submissions on costs and prejudgement interest, if they were unable to resolve those two issues.

[4] I have received those written submissions.

[5] Below is my decision.

Legal Framework on Costs

[6] Pursuant to the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the Rules), namely Rule 57.01(2), a presumption exists that costs should be awarded to the successful party. Rule 57.01 sets out factors the court may take into consideration when the court exercises its discretion to award costs.

[7] Rule 57.01(4) indicates that nothing in Rules 57.02 to 57.07 affects the court’s ability to award costs under section 131 of the Courts of Justice Act, R.S.O 1990, c. C.43. The subrule sets out five ways the court can award costs.

[8] The Court of Appeal in the decision of Serra v. Serra, 2009 ONCA 395 confirmed that the modern day costs rules are designed to encourage and foster three fundamental purposes, namely, to partially indemnify successful litigants for the costs of litigation, to encourage settlement and to discourage and sanction inappropriate behaviour by litigants, bearing in mind that the award should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful party.

[9] Further, the Court of Appeal also indicated in the decision of Boucher et al. v. Public Accountants Council for the Province of Ontario and Delellis v. Delellis, that when assessing costs, it is not simply a mechanical exercise. It is not simply a calculation of hours spent and hourly rates, but the court is to take a proportional methodology. The overall objective is to fix an amount of costs that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case.

[10] Rule 49 of the Rules of Civil Procedure deals with offers to settle. Rule 49.03 sets out the time for making an offer to settle. Rule 49.10 sets out the consequences for failure to accept an offer to settle by either the plaintiff or the defendant. Rule 49.13 provides the court with discretion to consider any offer to settle made in writing, the date of the offer was made and the terms of the offer.

[11] Rule 1.04(1.1) codifies that when the court is applying the rules, the court shall make orders that are proportionate to the importance and complexity of the issues and the amount involved.

Position of the Plaintiffs and the Defendant

[12] The plaintiffs seek costs in the amount of $220,915.33 on a partial indemnity basis. The plaintiffs indicate that they did not serve an Offer to Settle. The defendants served an offer to settle in the amount of $100,000 plus disbursements and costs agreed upon or assessed. The plaintiffs argue that the costs consequences for Offers to Settle as described in the Rules do not apply.

[13] The plaintiffs further argue that the rates sought in their Costs Outline reject the adjusted rates set out in the Costs Bulletin, which replaced the cost grid in 2005. The plaintiffs contend that the hourly rates, as adjusted for inflation, of $225.00 per hour on a partial indemnity basis for a lawyer under 10 years of experience is reasonable. In addition, the hourly rate of $442.11 for a lawyer over 10 years and an hourly rate of $101.66 for a law clerk are reasonable. In the present circumstances that plaintiffs are seeking an hourly rate of $410 per hour on a partial indemnity basis for Mr. Morin, who has been a lawyer for 27 years and $165 per hour for Mr. Reinitzer, who was called to the Bar in 2015. For the law clerk, the plaintiffs are seeking an hour rate of $135 per hour on a partial indemnity basis. The plaintiffs further contend that:

(a) The proceedings were complex, involving contested facts, engineering opinions and legal argument on the duty and standard of care.

(b) They were required to defend claims of contributory negligence despite having provided the defendants “with clear and cogent evidence early in the proceedings, that they took their obligation to maintain their cottage very seriously.”

(c) They were required to defend an allegation of failure to mitigate their damages and betterment allegations that were not pursued at trial.

[14] The principle of proportionality should not be used to reduce costs where the unsuccessful party have forced a long and expensive trial. It would only be unfair to the successful party to have their request for costs reduced based on some notional concept of proportionality. Luxterior Design Corp v. Gelfand, 2014 ONSC 990 at para.23, citing Cimmaster Inc., 2010 ONSC 846 (SCJ) at paras 19, 24 and 25.

[15] The defendant does not dispute that the plaintiffs were the successful party. The defendant does dispute that amount requested for fees and disbursements. The defendant argues that the costs grid no longer applies and the amounts calculated at 55%-60% of a reasonable actual rate might more appropriately reflect partial indemnity. Canfiled v. Brockville Ontario Speedway, 2018 ONSC 3288, at para. 22 and Inter-Leasing v. Ontario (Revenue), 2014 ONCA 683 and Bain v. UBS Securities Canada Inc., 2018 ONCA 190, at para.32. The defendant contends that the amount requested by the plaintiffs far exceed the percentage of 60% of a reasonable actual rate. The defendant therefore submits that the appropriate rates are:

(d) For Mr. Morin $315 per hour

(e) For Mr. Reinitzer $150 per hour

(f) Ms. Burton-law clerk $120 per hour

[16] Based on these hourly rates, the defendant calculates that amount for fees is $121,581.00 plus HST for a total amount of $137,386.53.

[17] The defendant presents that their actual fees as of the date of the trial decision is $165,895 plus HST. A partial indemnity rate, using 60%, is $112,476.81 plus HST.

[18] On disbursements, the defendant disputes that the plaintiffs should receive the amount requested for expert reports and photocopies. On Mr. Koerth’s invoices, the defendant disputes:

(a) Mileage and travel time should be $3,881.96 inclusive of HST and not the amount claimed.

(b) Of the charged time for testimony time of 16.5 hours, the defendant accepts 8 hours translating into a reduction of $3,361.75.

[19] The total amount of Mr. Koerth’s claim should be $34,668.22 rather than $41,911.93.

[20] On Mr. Duke’s claimed amount, the defendant argues that the total should be $1,582.00 inclusive of HST and not the claimed amount of $4,840.64.

[21] The defendant accepts the amount of $2,895 for Mr. Dahl.

[22] Concerning travelling and accommodation, no allocation should be provided because no supporting documentation was provided.

[23] The plaintiffs claim for open file fees, photocopies, research, long distance calls, courier and postage should not be allowed. The defendant relies on the decision of Mew J. in Lloyd v. Bush, 2020 ONSC 2892. Moreover, no supporting documentation was provided for these claims.

[24] The defendant submits that the plaintiffs’ claim for costs should be $112,500 for fees and $49,197.70 for disbursements for a total of $154,697.70.

Analysis

[25] I will start with the statement that the purpose of the modern day costs rule is to encourage and foster three fundamental purposes, namely, to partially indemnify successful litigants for the costs of litigation, to encourage settlement and to discourage and sanction inappropriate behaviour by litigants, bearing in mind that the award should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful party.

[26] The fixing of costs is not a mechanical exercise of calculating hourly rates and the hours spent. At the end of the day, the court is to fix an amount for costs that is fair and reasonable for the unsuccessful party to pay given the circumstances of the proceeding.

[27] In this proceeding, there was no Offer to Settle that invokes Rule 49. The defendant is the only party that served an offer to settle.

[28] There is no allegation from either litigant that the other acted unreasonably. The issue for the court to determine is solely: what is a fair and reasonable amount for the defendant to pay the plaintiffs for costs?

[29] The proceeding was fairly complex litigation. There were issues of the duty of care, standard of care and the liability for any damages based on the evidence of expert witnesses. The presentation of expert evidence and the correlation of that evidence with construction and the building code was fairly complex. The defendant did not concede any of these issues. Though, the parties did agree on basic facts through an agreed statement of facts, the qualifications and scope of each other’s expert and the presentation of documentary evidence which permitted the trial to run efficiently.

[30] In this context, I will deal with the amount claimed for fees and disbursements separately.

Fees

[31] On the issue of the cost grind, I agree with the submission of the defendant. The cost grid in itself is not a determination of the hourly rates that are fair and reasonable in the circumstances. In that vein, the Court of Appeal has stated that the cost grid no longer applies. I do accept that generally, partial indemnity of costs is 60% of the actual rate charged, but this percentage alone does not determine the hourly rate. Again, it is for the court, when exercising its discretion, to fix costs that are fair and reasonable for the unsuccessful party to pay in the circumstances. This may mean that in some circumstances the rate is 60% or in other circumstances, the rate is lower or higher than 60%. Thus, as in most cases the court exercises discretion, it depends.

[32] The defendant contends that its partial indemnity fee amount is reasonable. I do not accept this submission. This submission assumes that the work performed by the defendant and the plaintiffs are the same. This may not be so. Given the burden of prove is on the plaintiff and the proceedings are commenced by the plaintiff, I am of the view that generally speaking, it is not unusual that the fees incurred by a plaintiff is more than the fees incurred by a defendant.

[33] Furthermore, it is difficult for the court to compare the time spent by counsel for both parties. The defendant did not provide a bill of costs and did not attach a screen shot from their docket system.

[34] I also wish to indicate that I do not accept the contention of the plaintiffs that they were forced to take this matter to trial. The evidence provided is that the defendant served an offer to settle, the plaintiffs did not. One of the purposes of the modern costs rule is to encourage settlement. Though I acknowledge that I do not know if there were settlement negotiations and the details of any such negotiations, I do know that from the evidence provided, the plaintiffs did not serve an Offer to Settle. It is therefore difficult for the court to ascertain if the defendant forced the plaintiffs to incur the costs of a trial unnecessarily or not.

[35] In the circumstances of this proceeding, taking into consideration the complexity, the issues involved, the amount awarded, the lack of an offer to settle of the plaintiffs, and the length of trial, I find that a fair and reasonable amount for the defendant to pay in fees is $130,000 plus HST.

Disbursements

[36] The defendant disputes specific disbursements of the plaintiffs, namely:

(a) The invoices of Mr. Koerth in the amount of $7,243.71;

(b) The invoices of Mr. Duke dated October 17, 2014, January 21, 2020 and November 6, 2020;

(c) Travelling and accommodation expenses;

(d) Open fee, research and photocopies.

[37] I will deal with each item separately.

a) Invoices of Mr. Koerth

[38] The defendant directs the court to the decision of Hamfler v. Mink for the proposition that for the court to determine the reasonableness of amounts charged by an expert, the party seeking the costs must provide the court with adequate information to allow the court to properly asses the disbursement claimed. I do not dispute that proposition. The court has an obligation to assess costs and disbursements claimed to ascertain if those costs and disbursements are fair and reasonable. This applies to costs claimed by third parties such as expert witnesses. In exercising that obligation, the more information the court receives the better.

[39] Concerning invoices 26331, 30243, 35971 I agree with the defendant that the charge of $1,290 for travel time is not explained. What does the travel time refer to? From where to where? I do not find this amount is fair and reasonable without further information. In the mileage claimed in invoice 26331, the amount is self explanatory, and I do find the charge to be fair and reasonable in the circumstances. The property in question is in the Lake of Bays and Mr. Koerth’s office is in Toronto. I allow the mileage charges claimed. Thus, I will reduce the amount claimed by $1,290 plus HST.

[40] Concerning invoice 90008911 with $5,775 for “Testify, Depo and/or EUO”, I note that Mr. Koerth testified over two days, October 28th and 29th. I do not find the charge of 16.5 hours unreasonable. This amount is allowed.

b) Duke Engineering

[41] I agree HST cannot be charged twice.

c) Travelling Accommodation

[42] Again, the more the information the court receives on these types of expenses claimed, the better. The information provided for the claim of travelling accommodation is sparse. There is no backup documentation. There is no explanation of the reason for the expense or how the expenses are calculated. Is it a charge per kilometre travelled for a specific purpose? The lack of information makes it difficult, if not impossible, for the court to determine if the expenses claimed is necessary and reasonable in the circumstances. It is not for the court to speculate. I agree with the defendant, given the lack of information, these expenses are not allowed. Thus, a deduction for theses expenses will be made.

d) Open Fee, Research and Photocopies

[43] I agree with the defendant. There is no explanation of the fee. It cannot be the Law levy given that there is a separate claim for the levy. Thus, this fee is not allowed.

[44] On photocopies, faxes and research, the defendant directs the court to the decision of Mew J. in Lloyd v. Bush, 2020 ONSC 2892. I agree that general charges for postage, faxes and photocopies for work performed on a file are not generally recoverable in an assessment between the litigants. However, photocopies and binding for the purpose of examination for discovery and court attendances, such as pretrial and trials, I am of the view are legitimate expenses that can be claimed in an assessment of costs between litigants. These costs are incurred for the specific purposes of court proceedings and are not costs that pertain to the general work on a file. If a claim is made for these purposes, specific information on the purpose on how the amount claimed was calculated is necessary for the court to assess the reasonableness of the claimed amount.

[45] Having said this, I am also of the view that the relevance of these types of expenses and the amount that can be claimed is decreasing due to technology. With scanning, pdfs and document sharing platforms, I do see in the very foreseeable future that the ability to make the claim for these types of expenses will be nonexistent.

[46] On the expenses of research, I agree with Mew J., due to technology that research costs are generally an overall office expense and is not an expense that generally should be claimed in an assessment of costs between litigants.

[47] Consequently, on the amounts claimed in item 35 of the Bill of Costs of the plaintiff, I allow the amount for courier, which totals $116.42 plus HST.

Conclusion

[48] These amounts not allowed are:

(i) $1,290 plus HST in the amount of $1,457.70.

(ii) HST on the Duke Engineering invoices in the amount of $376.35

(iii) Travel and accommodation in the amount of $716.40 plus HST for an amount of $809.53.

(iv) Open fee in the amount of $50 plus HST- $56.50.

(v) Charges in item 35: $91.20, $1,532.20, $144.88, $11.24, $2.90, $81.52. Total $1,863.94 plus HST is $2,106.25.

(vi) The total amount for deductions is $4,806.33. Deducting this from the total amount claimed inclusive of HST which is $55,615.54 comes to a total of $50,809.21.

Prejudgment Interest

[49] The parties agree that the amount for prejudgment interest is $1,698.90.

Disposition

[50] I make the following order:

(a) The defendant shall pay prejudgment interest to the plaintiffs in the amount of $1,698.90.

(b) The defendant shall pay costs to the plaintiffs in the amount of $197,709.21, within thirty days.

Justice P.W. Sutherland Released: March 10, 2021

11 This amount encompasses fees in the amount of $130,000 plus HST for a total of $146,900 plus disbursements assessed in the amount of $50,809.21.