King Line Investments Inc. v. 973976 Ontario Limited, 2010 ONCA 345

CITATION: King Line Investments Inc. v. 973976 Ontario Limited, 2010 ONCA 345

DATE: 20100512

DOCKET: C50844

COURT OF APPEAL FOR ONTARIO

Laskin, Gillese and Juriansz JJ.A.

BETWEEN

King Line Investments Inc.

Plaintiff (Respondent/Appellant by way of cross-appeal)

and

973976 Ontario Limited

Defendant (Appellant/Respondent by way of cross-appeal)

Earl A. Cherniak and Jasmine T. Akbarali, for the appellant

Theodore B. Rotenberg, for the respondent

Heard: April 22, 2010

On appeal and cross-appeal from the judgment of Justice Edward Belobaba of the Superior Court of Justice, dated July 2, 2009.

ENDORSEMENT

A. THE APPEAL

[1] The issue in the litigation was whether the vendor, the respondent King Line Investments, was entitled to a readjustment of the purchase price of approximately $433,000. The trial judge concluded that it was entitled to this readjustment. We agree with his conclusion and substantially with his reasoning.

[2] The appellant, 973976 Ontario Limited can succeed only if the rollover credit agreed to by King Line was one of the “terms and conditions” of the Cesan substituted offer. However, as the trial judge correctly concluded, the rollover credit was not a term and condition of the contract, but simply an adjustment to the purchase price.

[3] Moreover, as there were 28 co-tenants in King Line, the rollover credit was to be calculated by taking 6/28 of the purchase price of both properties ($12 million), and not, as 973976 contends, by taking 6/14 of the $7 million purchase price for one of the properties.

[4] The appeal is dismissed.

B. THE CROSS-APPEAL

(a) Costs

[5] King Line settled with its solicitor for $100,000. To avoid what he characterized as “double recovery”, the trial judge applied the $100,000 as a credit to the damages award against 973976. King Line submits that he erred in doing so. We agree.

[6] The trial judge’s error was in concluding (at para. 15 of his costs endorsement) that legal costs are not a proper head of damages. The decision of this court in Toronto Industrial Leasehold Ltd. v. Posesorski, 1994 CanLII 7199 (ON CA), [1994] O.J. No. 2691 stands for the principle that when a client must sue a third party because of its lawyer’s negligence, the client’s costs of suing may be claimed as damages against its lawyer.

[7] In the Toronto Industrial Leasehold case, the lawyer was held responsible for the additional costs incurred by his negligence. The case before us is the reverse. King Line seeks to apply all or a portion of the $100,000 settlement funds from its lawyer to its otherwise unrecoverable costs against 973976. In our view, although the factual situation differs, the principle from Toronto Industrial Leasehold applies to this case. Doing the best we can with the evidence, in the absence of a full assessment, we attribute $50,000 of the settlement funds to King Line’s unrecoverable costs against 973976. Accordingly, we allow King Line’s costs appeal and reduce its judgment against 973976 by $50,000 instead of $100,000.

(b) Pre-judgment interest

[8] The trial judge denied King Line pre-judgment interest from the date of closing (July 25, 2005) to the date the statement of claim was issued (September 19, 2006). He did so because both parties had agreed to delay the commencement of the litigation. We agree with King Line that the trial judge erred in denying it pre-judgment interest from July 25, 2005.

[9] Pre-judgment interest is essentially compensatory. Admittedly, dilatory conduct by a successful party may deprive it of pre-judgment interest. However, in this case the delay was a mutual decision and thus affords no basis for depriving King Line of its pre-judgment interest. Accordingly, the appeal on pre-judgment interest is allowed, and pre-judgment interest will run from the date of closing, July 25, 2005.

(c) Costs of the appeal and cross-appeal

[10] In accordance with the agreement of the parties, King Line is entitled to its costs of the appeal and the cross-appeal in the total amount of $20,000, inclusive of disbursements and G.S.T.

“John Laskin J.A.”

“E.E. Gillese J.A.”

“R.G. Juriansz J.A.”