R & G Draper Farms (Keswick) Ltd. v. Nature's Finest Produce Ltd. et al. Nature's Finest Produce Ltd. et al. v. R & G Draper Farms (Keswick) Ltd.; 2077583 Ontario Ltd. et al., Third Parties

[Indexed as: R & G Draper Farms (Keswick) Ltd. v. Nature's Finest Produce Ltd.]

Ontario Reports

Court of Appeal for Ontario,

Blair, MacFarland and Lauwers JJ.A.

August 16, 2016

133 O.R. (3d) 395 | 2016 ONCA 626

Case Summary

Civil procedure — Costs — Proportionality — Motion judge granting plaintiff's motion for summary judgment and awarding plaintiff costs — Motion judge critical of both sides for turning relatively simple collection case into complicated litigation — Defendant's appeal dismissed — Plaintiff awarded costs of action and appeal — Those costs plus costs of summary judgment motion just $5,000 less than amount recovered by plaintiff — Costs reduced by $20,000 on basis of overall disproportionality.

The plaintiff moved successfully for summary judgment. The motion judge granted the plaintiff its costs of that motion. The defendants' appeal was dismissed. The plaintiff sought its costs of the trial and the appeal.

Held, the plaintiff should be awarded costs in the amount of $44,500.

Without considering proportionality, the plaintiff was entitled to costs in the amount of $64,500. Adding that amount to the $75,000 plus disbursements and HST that the motion judge awarded for costs of the summary judgment motion would result in a total of $163,000. The amount recovered by the plaintiff on the summary judgment motion was about $169,000. The motion judge was critical of both sides for turning a relatively simple collection case into a very complicated piece of litigation, but was especially critical of the defendants. The costs award should be reduced by $20,000 to better proportionalize the costs burdens in this unfortunate piece of litigation.

Cases referred to

Andersen v. St. Jude Medical, Inc., 2006 85158 (ON SCDC), [2006] O.J. No. 508, 264 D.L.R. (4th) 557, 208 O.A.C. 10, 145 A.C.W.S. (3d) 786 (Div. Ct.); Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, [2004] O.J. No. 2634, 188 O.A.C. 201, 48 C.P.C. (5th) 56, 132 A.C.W.S. (3d) 15 (C.A.); Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 2005 1042 (ON CA), 75 O.R. (3d) 638, [2005] O.J. No. 160, 5 C.P.C. (6th) 258, 136 A.C.W.S. (3d) 647 (C.A.); Davies v. Clarington (Municipality) (2009), 100 O.R. (3d) 66, [2009] O.J. No. 4236, 2009 ONCA 722, 312 D.L.R. (4th) 278, 254 O.A.C. 356, 77 C.P.C. (6th) 1, 182 A.C.W.S. (3d) 291; Moon v. Sher, 2004 39005 (ON CA), [2004] O.J. No. 4651, 246 D.L.R. (4th) 440, 192 O.A.C. 222, 135 A.C.W.S. (3d) 202 (C.A.); R & G Draper Farms (Keswick) Ltd. v. Nature's Finest Produce Ltd., [2016] O.J. No. 3181, 2016 ONCA 481, 350 O.A.C. 198, 268 A.C.W.S. (3d) 323; R & G Draper Farms (Keswick) Ltd. v. Nature's Finest Produce Ltd., [2015] O.J. No. 4939, 2015 ONSC 5788 (S.C.J.)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.04(1.1), 49.10 [page396]

RULING on costs.

Raymond G. Colautti and Anita Landry, for appellants/ respondents by way of cross-appeal.

Morris Manning, Q.C., for respondent/appellant by way of cross-appeal.

The judgment of the court was delivered by

[1] LAUWERS J.A.: — For the reasons set out in R & G Draper Farms (Keswick) Ltd. v. Nature's Finest Produce Ltd., [2016] O.J. No. 3181, 2016 ONCA 481, we dismissed the appeal of the defendants Nature's Finest Produce Ltd., Kejay Farms and Kejay Investments Inc., and also found that the settlement of the action carried with it an implied obligation on the part of the appellants to provide a release of their counterclaim. This brought the litigation to an end, except for costs.

The Costs Context

[2] The motion judge fixed the costs of the summary judgment motion in the amount of $75,000, plus disbursements plus HST: see R & G Draper Farms (Keswick) Ltd. v. Nature's Finest Produce Ltd., [2015] O.J. No. 4939, 2015 ONSC 5788 (S.C.J.). He specifically noted that "at this stage" he was not awarding the plaintiff its disbursements of the action as a whole, and he specifically excluded any disbursements for expert's fees. He did, however, award $13,575.81 plus HST for disbursements for the summary judgment motion.

[3] In the course of making his costs ruling, the motion judge observed [at para. 1] that "there has been a complete lack of cooperation amongst counsel with respect to the conduct of this litigation". He noted [at para. 2]: "the defendants have chosen to make what was a relatively uncomplicated issue, i.e., the question of whether or not there was a settlement, into a very complicated piece of litigation that now involves a counterclaim". The motion judge also criticized the plaintiffs for using two senior counsel and found [at para. 6] that "it cannot reasonably be expected that the losing party would be expected to pay for two senior counsel, given the nature of the dispute between the parties". He took [at para. 7] into account "the principles of proportionality in relation to the total amount of costs claimed in relation to the amount awarded to the plaintiff on the summary judgment motion", being about $169,000. The motion judge noted as well that the plaintiff had offered to settle the action as a whole for $150,000, all in, and took that into account. [page397]

[4] The record before us amply demonstrates the accuracy and appropriateness of the motion judge's comments, which were critical of both sides, but especially the defendants in expanding the action.

The Positions of the Parties

[5] The successful party, the respondent R & G Draper Farms (Keswick) Ltd., seeks costs of the action on a substantial indemnity basis, given the outcome and the offer to settle.

[6] The request for costs breaks down into five categories:

the costs of the action in the amount of about $29,000 for fees and about $29,000 for disbursements relating largely to the fees of an expert in the amount of $28,420.99. The total, including HST, comes to about $63,000;

the costs of the undertakings motion before Di Tomaso J. in the total amount of about $9,400;

the costs of the motion to extend time to file the notice of cross-appeal before Pepall J.A. in the amount of about $5,400;

the costs of the motion to set aside the order of Pepall J.A. in the amount of about $1,700; and

the costs of the appeal and cross-appeal in the amount of about $14,000.

[7] The grand total the respondent seeks on a substantial indemnity basis is about $93,000, which is on top of the $75,000 plus HST plus disbursements ordered to be paid by the motion judge for costs in relation to the summary judgment motion.

[8] The appellants argue this is excessive; the respondent should be "entitled to costs of the Appeal only and not any other part of the Action since this was already covered in the significant amount of costs awarded by the Learned Motions Judge". This is plainly not the case, as the motion judge stated [at para. 8] expressly that he was only "fixing the plaintiff's costs of the motion for summary judgment in the amount of $75,000 plus HST, plus disbursements".

[9] The appellants complain that the respondent filed four separate confusing notices of motion that raised "over eleven (11) issues hoping something would resonate with the court", forcing them "to address and defend numerous allegations of every nature and kind including but not limited to, breach of contract, inducing breach of contract, conversion, deceit, unjust [page398] enrichment, tracing of funds which were converted, disgorgement of all profits, an accounting, declarations of constructive trust against the Defendants real and personal property . . . the threat of a Certificate of Pending Litigation . . . aggravated damages . . . and punitive damages. . . ." The appellants point out that the plaintiffs were not entirely successful, since the individual defendants, Kevin Stallaert and Jason Stallaert, were both found not to have been bound by the settlement.

The Governing Principles

[10] The relevant principles for the exercise of the court's discretion were canvassed by this court in Davies v. Clarington (Municipality) (2009), 100 O.R. (3d) 66, [2009] O.J. No. 4236, 2009 ONCA 722, at para. 51, per Epstein J.A. The focus is on "the specific facts and circumstances of the case in relation to the factors set out in Rule 57.01(1)": see Andersen v. St. Jude Medical, Inc., 2006 85158 (ON SCDC), [2006] O.J. No. 508, 264 D.L.R. (4th) 557 (Div. Ct.), at para. 22, referring to Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, [2004] O.J. No. 2634 (C.A.); Moon v. Sher, 2004 39005 (ON CA), [2004] O.J. No. 4651, 246 D.L.R. (4th) 440 (C.A.); and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 2005 1042 (ON CA), 75 O.R. (3d) 638, [2005] O.J. No. 160 (C.A.).

[11] Epstein J.A. noted, at para. 52 of Davies, that

. . . the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, at para. 37, where Armstrong J.A. said "[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice".

[12] A relevant factor is the losing party's reasonable expectation as to the costs payable: Moon v. Sher, at paras. 22, 35. Proportionality always plays a role: rule 1.04(1.1) [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194].

The Application of the Principles

[13] I now turn to consider the respondent's request for substantial indemnity costs in detail. I first consider each of the heads of costs claimed by the respondent and make [page399] provisional awards. Then I make a further reduction on the basis of disproportionality.

[14] In my view, there is no basis for an award of costs on a substantial indemnity basis for any of the heads claimed by the respondent.

[15] The respondent seeks the costs of the appeal and cross-appeal in the amount of about $14,000. There is no doubt that the respondents were successful on the appeal and are entitled as a matter of principle to something on that account. I would award costs of the appeal in what I view as the reasonable amount of $7,500, inclusive of disbursements and applicable taxes.

[16] I now turn to the costs of the action. Regrettably, the appellant did not provide a detailed critique of the respondent's costs outline but argued that the motion judge was too generous in his award of costs for the summary judgment motion, and that the respondent's behaviour warranted this court's refusal to award additional costs.

[17] The respondent seeks the costs of the action in the amount of about $29,000 for fees, with the partial indemnity costs figure set at about $23,500, all inclusive. Under rule 49.10, a plaintiff who bests the settlement offer is entitled to partial indemnity costs to the date of the offer and substantial indemnity costs following that date, unless the court orders otherwise. The date of the respondent's offer in this case is not in the record, but judging from dates of the activities of counsel in relation to the date of the argument of the summary judgment motion, it appears that the offer came much later.

[18] The time spent by counsel on the listed activities does not seem to be inordinate, nor does the allocation of work between senior and relatively more junior counsel. The partial indemnity rates are not unreasonable. I would award $20,000, inclusive of applicable taxes.

[19] The respondent also seeks about $29,000 for the remaining disbursements on the action, relating largely to the fees of an expert in the amount of $28,420.99.

[20] The appropriateness of the expert's fee was flagged as an issue by the motion judge in this case in his costs award. The size of that fee, at $28,420.99, is noteworthy in a claim of this sort, but the quantum must be compared not with the amount of the original claim, but with the counterclaim, which itself appears somewhat trumped up, coming to about $700,000. The counterclaim and the expert reports produced by the appellant in support of that claim provoked the need for the respondent's report. While the actual report is substantive, there is virtually no back up in the record to explain or justify the size of the fee; [page400] the respondent has not provided an explanation for the quantum of the report in line with the Hamfler approach. That said, there is also no evidence of the amounts paid by the appellants for their expert's reports, and the appellants do not specifically challenge the quantum. In my view, in the circumstances, it is fair to infer that the expert's fee is reasonable, and there is therefore no basis to refuse its full reimbursement. I would order payment of the disbursements claimed in the amount of $29,503.79.

[21] The respondent also seeks the costs of the undertakings motion before Di Tomaso J. in the all-inclusive amount of about $9,400 (partial indemnity $6,700); the costs of the motion to extend time to file the notice of cross-appeal before Pepall J.A. in the amount of about $5,400 (partial indemnity $4,000); and the costs of the motion to set aside the order of Pepall J.A. in the amount of about $1,700 (partial indemnity $1,200). I would award $7,500, all inclusive, for these three heads combined.

[22] The total of all of these awards is $64,500 ($7,500 + $20,000 + $29,503.79 + $7,500).

[23] However, I am also obliged to consider the totality of the costs award to ensure that it is not disproportionate. Adding the amount set out above of $64,500 to the sums of $75,000, plus HST of $9,750, plus $13,575.81 in disbursements that the motion judge awarded for costs for the summary judgment motion, would result in a grand total of about $163,000. This is decidedly steep, since the amount awarded on the summary judgment motion was about $169,000.

[24] Should a further reduction be made on the basis of overall disproportionality?

[25] Both sides, as the motion judge observed, turned a relatively simple collection case into a very complicated piece of litigation. The motion judge was especially critical of the actions of the defence. Although the brunt of the costs for that conduct is being borne by the defence in the outcome of the action, in the circumstances, I would pare back the total costs award from about $163,000 to about $143,000 to better proportionalize the costs burdens in this very unfortunate piece of litigation. I would therefore further reduce the costs award in this decision from $64,500 to $44,500.

Disposition of Costs

[26] I would award costs to the respondent for the appeal and for the action in the amount of $44,500, inclusive of disbursements and taxes, payable by the appellants forthwith.

Order accordingly.

End of Document