DATE: 20060714

DOCKET: C44545

COURT OF APPEAL FOR ONTARIO

RE:

COMPUTERIZED SECURITY SYSTEMS INC. (Plaintiff, Defendant by Counterclaim (Respondent)) v. ECO TECH CLEANING SYSTEMS INC. and WESTMONT HOSPITALITY MANAGEMENT LIMITED (Defendants, Plaintiffs by Counterclaim (Appellant))

BEFORE:

O’CONNOR A.C.J.O., LABROSSE and FELDMAN JJ.A.

COUNSEL:

H.W. Reininger for the appellant

J.R. Morse for the respondent

HEARD & RELEASED ORALLY:

July 7, 2006

On appeal from the judgment of Justice Hoilett of the Superior Court of Justice dated July 29, 2005.

E N D O R S E M E N T

[1] We are of the view that the award of the costs in the form of damages cannot stand. We reach this conclusion having regard to the lack of specificity of the pleadings to make such a claim, the conflicting positions presented to us by counsel about what happened regarding this issue during the trial, and the absence of clarification offered by the trial judge on this issue.

[2] The trial judge awarded costs against Westmont in the amount of $227,000. We are of the view that the offers made by CSS to Westmont and the co-defendant substantially complied with Rule 49.11 and, therefore, it was open to the trial judge to award substantial indemnity costs with regard to the claim against Westmont under Rule 49.10.

[3] We see no basis to interfere with the trial judge’s exercise of discretion in awarding costs of the counterclaim against Westmont. The trial judge was aware of all of the relevant circumstances and there is nothing in the record before us to allow us to interfere with that exercise of discretion. However, we conclude that Rule 49 should not operate to affect the scale of costs awarded against Westmont for the counterclaim. Westmont was not a party to the counterclaim and it did not have the ability to accept an offer that would necessarily have resulted in the counterclaim being withdrawn.

[4] Subject to the one qualification that the trial judge should not have awarded costs of the counterclaim against Westmont on a substantial indemnity scale, we see no basis to interfere with the quantum of costs awarded.

[5] In order to give effect to our conclusions, it is necessary to apportion the costs of the proceeding between the main claim and the counterclaim. We have had little assistance from counsel in this regard and the record before this court does not help. However, we wish to avoid sending this matter back and consequently we will dispose of it on the following basis. We apportion the costs between the claim and the counterclaim on a fifty-fifty basis and we reduce the costs awarded for the counterclaim by one-third to reflect the difference between the substantial and partial indemnity scales. In the result, after rounding out, the costs award is reduced to $190,000. Paragraphs 4 and 7 of the judgment shall be amended accordingly.

[6] The appeal is allowed and the judgment below is varied as set out in paras. 1 and 5 above. Costs to the appellant of all proceedings in this court are fixed in the amount of $7,500, inclusive of disbursements and GST.

“Dennis O’Connor A.C.J.O.”

“J.M. Labrosse J.A.”

“K. Feldman J.A.”