COURT OF APPEAL FOR ONTARIO

DATE: 20040928

DOCKET: C39692

RE: MICHAEL GELLER, RUTH BLUMENSTEIN and JUDY KAHN, ESTATE TRUSTEES of the ESTATE OF BETTY BLISS, also known as BETTY GELLER AND BETTY GELLER BLISS (Plaintiffs (Appellants)) – and JOHN BLISS, SONNY GOLDSTEIN ANNUITY AND INSURANCE AGENCIES INC. and SONNY GOLDSTEIN (Defendant (Respondent))

BEFORE: SIMMONS AND CRONK JJ.A. AND THEN J. (ad hoc)

COUNSEL: Mark M. Orkin, Q. C. and Stephen R. Jackson for the appellant Daniel J. Dochylo for the respondent John Bliss

HEARD: September 23, 2004

On appeal from the judgment as to costs of Justice Victor Paisley of the Superior Court of Justice dated November 25, 2002.

ENDORSEMENT

[1] The appellants appeal from an order of Paisley J. dated November 25, 2002 awarding the costs of the action to the respondent on a partial indemnity basis in the amount of $70,000, inclusive of disbursements and applicable G.S.T., leave to appeal having been granted by this court.

[2] We did not call on the respondent to address the appellants’ submissions concerning the respondent’s entitlement to costs. The appellants made an offer to settle shortly before trial in which they conceded their primary claim, offered the respondent certain allowances in relation to a valuation issue and stipulated that the parties should bear their own costs. When their offer was not accepted, the appellants proceeded to trial and asserted their primary claim. The respondent resisted this claim successfully and also obtained certain monetary allowances in excess of the amounts the appellants had offered. We agree with the trial judge’s finding that the respondent succeeded at trial and we see no merit in the appellants’ assertion that, on the basis of the appellants’ offer, the trial judge should have departed from the usual rule that costs follow the event.

[3] However, in our view, the trial judge made two errors in fixing the quantum of costs that warrant appellate intervention. First, the trial judge fixed the respondent’s costs based on a bill of costs claiming hourly rates in excess of the rates stipulated in the costs grid. Although a trial judge has a discretion to depart from the hourly rates stipulated in the costs grid where counsel has special expertise, the trial judge did not allude to the excessive claim in his reasons relating to costs and made no finding of special expertise. The respondent concedes that at least $6,500 should be deducted in respect of excessive rates.

[4] Second, the trial judge fixed the respondent’s costs in virtually the exact amount set out in the respondent’s partial indemnity bill of costs, without any critical examination. Most significantly, he did not advert to the principle that, in fixing costs, the court should award an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount solely based on the actual costs incurred by the successful litigant. In this case, the appellants’ primary claim related to ownership of a RRIF having a value of about $108,000 and the action culminated in a four-day trial. On our review of the respondent’s ‘partial indemnity’ bill of costs, it approaches substantial indemnity. Although the respondent submits that a partial indemnity costs award approaching substantial indemnity is justified in this case based on the appellants’ conduct in making an unreasonable offer and pursuing a frivolous claim, the trial judge made no such findings. In all the circumstances, we conclude that the amount claimed by the respondent substantially exceeded what was fair and reasonable for the appellants to pay.

[5] Based on the foregoing reasons, the appeal is allowed, the trial judge’s costs order is set aside and an order for payment of costs by the appellants on a partial indemnity basis fixed in the amount of $50,000 inclusive of disbursements and applicable G.S.T. is substituted therefor. As the appellants did not seek costs of either the appeal or the leave motion, we make no costs order in this proceeding.

“Janet Simmons J.A.”

“E. A. Cronk J.A.”

“Edward Then J.”