DATE: 2004-09-14

DOCKET: C40072

COURT OF APPEAL FOR ONTARIO

ARMSTRONG, BLAIR and JURIANSZ JJ.A.

B E T W E E N:

RED CARPET INNS LIMITED

Joseph J.M. Hoffer, for Red Carpet Inns Limited

Plaintiff (Appellant and Respondent on Cross-Appeals)

• and -

HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO and THE METROPOLITAN TORONTO AND REGION CONSERVATION AUTHORITY

Deborah Berlach, for the Metropolitan Toronto and Region Conservation Authority

Sara Blake, for Her Majesty the Queen in Right of Ontario

Defendants (Respondents and Cross-Appellants)

Heard: In writing

ADDENDUM TO REASONS DATED JUNE 29, 2004

R.A. BLAIR J.A.:

[1] On June 29, 2004, we released our decision respecting the appeal and cross-appeal in this matter. In the course of counsel’s attempts to agree upon the formal order, it has become apparent that there is an inconsistency – if not a contradiction – in the portions of my reasons respecting costs. The purpose of this addendum is to clarify those reasons and to deal with the Crown’s cross-appeal with respect to costs that should have been dealt with in the main reasons but through inadvertence was not.

[2] Red Carpet had appealed from the trial judge’s decision that it was not entitled to its full damage claim and from his failure to hold the Crown liable as principal for the Conservation Authority in respect of communicating the alleged negligent misrepresentation that was at the heart of the case. The Conservation Authority had cross-appealed against the finding of negligent misrepresentation. In addition, Red Carpet and the Crown both sought to set aside the trial judge’s award as to costs, Red Carpet asserting that he erred in reducing its costs to 50% of the fixed amount, and the Crown alleging that he erred in failing to award it any costs at all.

[3] We dismissed Red Carpet’s appeal and allowed the Conservation Authority’s cross-appeal. As a result, it was not necessary to determine the question of whether the Crown acted as agent for the Conservation Authority. At para. 5 of my reasons I said: “The costs should follow the event”. At paras. 28 – 31 of the reasons, I concluded:

Costs

[28] Given our disposition of the appeal and cross-appeal, the arguments of Red Carpet and the Crown respecting the costs below need not be addressed. The defendants have been wholly successful. Costs should follow the event.

Disposition

[29] The appeal is dismissed and the cross-appeal allowed.

[30] The respondents are entitled to their costs of the appeal on a partial indemnity basis, fixed for each in the amount of $15,000, inclusive of fees, disbursements and GST.

[31] The respondents are also entitled to their costs of the trial on a partial indemnity basis. In view of the complexity of the issues, the length of the trial, the amounts claimed, and the unfamiliarity of this court with the trial dynamics, we do not think we should fix the costs. The costs of the respondents at trial are therefore to be assessed rather than fixed by this court.

[4] Having dismissed the appeal and the cross-appeal, there was indeed no need to deal with Red Carpet’s appeal with respect to costs. The action was dismissed. Red Carpet is not entitled to any costs of the trial.

[5] The same cannot be said for the Crown’s cross-appeal, however. The Crown was successful at trial and remained successful following the appeal. Its submissions with respect to costs should have been dealt with, but were not. I do so now.

[6] The trial judge accepted the plaintiff’s argument that the Crown was a proper party to the action and, although the Crown contests this, I see no reason to interfere with that finding. Notwithstanding the Crown’s success at trial, however, the trial judge declined to award it any costs of the action. At paras. 8 – 13 of his Endorsement on Costs he said:

[8] It was in fact the input from HMQ and its witnesses which implicated the MTRCA in this proceeding and in the tort of negligent misrepresentation for which it was found liable.

[9] In my reasons, I found that the HMQ did an about-face in terms of its willingness to proceed with the land exchange recommendation of the MTRCA. I did, however, find that by putting the matter in abeyance as constructed [sic?] by Mr. Groneng, Mr. Simpson and the MNR in the Spring of 1987 were acting within their prerogative and the best interests of the taxpayers.

[10] I noted in paras. 53,54 and 55 of my judgment that it was not until after this lawsuit was commenced that the plaintiff became aware that HMQ had actually directed MTRCA to put the land exchange on hold in May of 1987. HMQ did not direct a copy of their correspondence to the plaintiff which was unusual given the negotiations which were in play.

[11] It would have been a simple matter, even courteous, for HMQ, through its agent, to advise the plaintiff, of the change in their position, who it knew continued to be interested in concluding the proposed agreement. It was unusual that HMQ did not communicate with the plaintiff during this period.

[12] I am not sympathetic to the position taken on the issue of costs by HMQ which would impact upon the plaintiff’s net recovery in the circumstances of this case. HMQ does not ask for its costs against MTRCA.

[13] I agree with the submissions made by the plaintiff that HMQ could easily have put MTRCA and Red Carpet in a position whereby the damages suffered by Red Carpet might well have been avoided had it chosen to use communication as it had in the past as a tool with both parties rather than remaining silent. HMQ bears some moral responsibility for the circumstances giving rise to this litigation and should therefore not be entitled to its costs. HMQ paid no consideration to Red Carpet’s position.

[7] Ms. Blake submitted that the trial judge cited “no proper legal principles or considerations favouring a denial of costs” and failed to give effect to the general rule that, in the absence of special circumstances – which she argues do not exist here – a successful party is entitled to a reasonable expectation of obtaining an order for the payment of its costs by the unsuccessful party: see Bell Canada v. Olympia & York Developments Ltd. (1994), 1994 239 (ON CA), 17 O.R. (3d) 135 at 142-146 (C.A.). She also emphasizes the trial judge’s comments in para. 9 of his reasons that in the spring of 1987, the Crown representatives were acting within their prerogative and in the best interests of the taxpayers. Finally, she submits that the trial judge penalized the Crown for not communicating directly with Red Carpet when the evidence, she contends, shows that it was Red Carpet who chose not to deal directly with the Crown.

[8] Section 131(1) of the Courts of Justice Act R.S.O. 1990, c. C.43, as amended, gives a broad discretion to the judge to determine by whom, and to what extent, the costs of a proceeding shall be paid.

[9] There was evidence to support the trial judge’s conclusions with respect to the Crown’s failure to communicate the true situation regarding the proposed land exchange. Moreover, his acknowledgement that the Crown had been acting within its prerogative and in the taxpayers’ interests in deciding not to proceed with the proposal is not inconsistent with his criticism of the Crown for its failure to ensure that that position was accurately communicated to the plaintiff. It was within the proper exercise of his discretion to take into account the impact on the plaintiff’s net recovery of a potential costs award in favour of the Crown. Equally, it was within the proper exercise of that discretion to take into account the fact that, even though the Crown was not legally liable in the circumstances of the case, many of the problems might have been avoided if the Crown had acted more responsibly in communicating its decision not to proceed with the land exchange project.

[10] I can see no error in the exercise of the trial judge’s discretion in not awarding the Crown costs of the trial that would warrant interference by this court.

[11] My earlier reasons should therefore be varied to reflect the foregoing. Leave is granted to the Crown to cross-appeal with respect to costs, but the Crown’s cross-appeal is dismissed. Paragraph 31 of my reasons is clarified to stipulate that it is the respondent Conservation Authority that is entitled to its costs of the trial on a partial indemnity basis, to be assessed as therein provided. The disposition of the appeal and cross-appeals otherwise remains the same.

“R.A. Blair J.A.”

“I agree R.P. Armstrong J.A.”

“I agree R.G. Juriansz J.A.”

Released: September 14, 2004