DATE: 20050331

DOCKET: C42364

COURT OF APPEAL FOR ONTARIO

RE:

AILEEN KELLY (Plaintiff/Appellant) v. RYAN DOSCH, KELLY HUGHSON, COLLINGWOOD TOWN & COUNTRY REALTY LIMITED carrying on business as REALTY WORLD – COLLINGWOOD TOWN & COUNTRY REALTY and JOHN R. WILSON (Defendants/Respondents)

BEFORE:

DOHERTY, SHARPE & ARMSTRONG JJ.A.

COUNSEL:

Daniel Dooley

for the appellant

B. Saunderson for the respondent Dosch and T.H. Marshall, Q.C.

for the respondent Hughson

HEARD: March 23, 2005

RELEASED ORALLY: March 23, 2005

On appeal from the costs order of Justice McIsaac of the Superior Court of Justice dated May 28, 2003.

E N D O R S E M E N T

[1] This is an appeal with leave from the trial judge’s order that the respondents (defendants at trial) were entitled to the costs of the trial calculated on a substantial indemnity basis.

[2] We agree that the trial judge’s decision is entitled to deference. We can interfere with that decision only if it is based on an error in principle or is clearly unreasonable.

[3] The trial judge relied on three factors in awarding costs on a substantial indemnity basis. With respect to that decision, we are satisfied that none of those factors afforded any ground for the order.

[4] The trial judge found that there was no merit in the appellant’s (the plaintiff at trial) claim. In doing so, he referred to the opinion of the solicitor for the respondents as to the merits of the case. In our view, even on the evidence of the respondents at trial, there was a legitimate issue as to the intention of the party when the contract was formed. It was not a case where it could be said that the appellant’s claim was so devoid of merit as to justify the extraordinary award of costs on a substantial indemnity basis.

[5] The trial judge also referred to the two “reasonable” offers to settle prior to trial made by the respondents. The offers were not Rule 49 offers. Neither offer contained any element of compromise. In our view, they provided no grounds for the award made by the trial judge.

[6] The trial judge also referred to the “sharp practice” of the appellant’s original counsel (not counsel at trial or on appeal) in determining that substantial indemnity costs were appropriate. This finding by the trial judge was based entirely on written submissions made on the issue of costs by counsel for the respondent. The trial judge should not have made a finding of sharp practice against the lawyer without an appropriate inquiry into the circumstances said to support such a serious allegation. We have been provided with the correspondence relevant to the events that gave rise to the “sharp practice”. That correspondence reveals a significant dispute as to the relevant events and makes it at least questionable whether the lawyer’s conduct could properly be characterized as “sharp practice”.

[7] In any event, the lawyer’s conduct occurred in respect of the motion for a certificate of pending litigation. If in fact there was “sharp practice”, the appropriate place to deal with the cost consequences of the conduct was in the motion for the certificate of pending litigation and not the trial. The alleged “sharp practice” had nothing to do with the course of the trial or the conduct at trial. The finding of sharp practice was, in our view, unsupportable and in any event did not justify an award of costs on a substantial indemnity basis for the trial as opposed to the motion for a certificate of pending litigation.

[8] The appeal is allowed and the costs order is set aside and an order granting costs on a partial indemnity basis is substituted.

[9] Given the amount claimed by way on a partial indemnity basis at trial, and the fact that the trial judge awarded about two-thirds of the amount claimed, we are satisfied that an appropriate amount for costs on a partial indemnity basis is $40,000.00, inclusive of GST and disbursements.

[10] Given the somewhat convoluted history of this appeal and the companion appeal against the merits of the trial decision which the appellant abandoned on the eve of that appeal, we make no order as to costs on the appeal.

“D.H. Doherty J.A.”

“R.J. Sharpe J.A.”

“R.P. Armstrong J.A.”