CITATION: Barrie Trim v. Heath et al, 2010 ONSC 2598

COURT FILE NO.: DC-09-0569

DATE: 20100503

DIVISIONAL COURT - SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Barrie Trim & Mouldings Inc., Plaintiff/Respondent

AND:

Carl Heath & Cynthia Heather et al, Defendants/Appellants

BEFORE: JUSTICE S.E. HEALEY

COUNSEL: K. Owen-King, Counsel, for the Plaintiff/Respondent

D.R. Service, Counsel, for the Defendants/Appellants

HEARD: by written submissions

ENDORSEMENT

[1] By my endorsement released on April 9, 2010 I granted the appellants’ appeal, set aside the judgment against them in the Small Claims Court action, and granted them their costs in that court as well as the costs of their appeal. This endorsement quantifies those costs.

Costs of the Small Claims Court Action

[2] The primary costs sources in the Small Claims Court Rules and Courts of Justice Act are R.19 and s.29. The powers to award costs are specifically limited by s.29 of the Courts of Justice Act, which limits the amount of costs that can be awarded (excluding disbursements) to 15% of the amount claimed or the value of property sought to be recovered, adding that the limit applies “unless the court considers it necessary in the interests of justice to penalize a party or a party’s representative for unreasonable behaviour in the proceeding”.

[3] The latter clause does not apply; the appellants concede that there is no suggestion that there was unreasonable behaviour in this proceeding by the respondent Barrie Trim & Mouldings Inc. (“BTM”).

[4] The amount claimed in the action by BTM was $10,000 and accordingly on a narrow interpretation of s.29 the maximum amount of recoverable costs is $1,500. However, in November 2007 the appellants made an offer to settle the action against BTM in terms of a dismissal of the action without costs. This offer met the requirements of Rule 14.02(2) and 14.07(2), having been made well in advance of seven days prior to the commencement of trial, and so potentially triggered the cost consequences set out in Rule 14.07. Rule 14.07(2) permits the court to award an amount not exceeding twice the costs awardable to a successful party from the date the offer was served. As submitted by counsel for the appellants, the issue in fixing costs in the face of such an offer is whether the “double costs” rule applies to increase the maximum to double the s.29 limit or whether the “double costs” total must remain less than the s.29 limit.

[5] BTM relies on the case of Bird v. Ireland 2005 CarswellOnt 6945 (Div.Ct.) as well as Transport Training Centres of Canada v. Wilson 2010 CarswellOnt 2155 (Div. Ct.) to argue that, absent a finding of unreasonable behaviour, costs should not exceed 15% despite the offer. Bird v. Ireland was an appeal from a Small Claims Court trial which included an appeal of the costs award. The trial judge had taken 15% of the sum recovered, which amounted to $994.28, had doubled the amount to $1,988.56 after finding that Rule 14 applied, and finally rounded the cost award up to $2,000.00. On appeal to this court Justice Clark stated that if the circumstances entitling the party to have their costs doubled under Rule 14 applied, then the deputy judge was permitted to award a maximum of $600 (two times the maximum daily representation costs award that applied under the Rules then in effect). He went on to say that the power to award costs conferred by Rule 19 is limited by s.29, as in his view s.29 was intended by the legislature to limit the power of the Small Claims Court to award costs, not to increase it. Justice Clark indicated that the purpose of s.29, it seemed to him, was to keep costs awards in proportion to the amounts recovered. Justice Clark went on to say that while the trial judge was correct to double the initial costs amount, he erred by applying R. 14.07 to the sum of $994.28 and should have applied it to the sum of $300. It is important to note that the decision revolved considerably around the wording of Rule 19.04, which at that time provided that the maximum costs award to counsel was $300.00 per day. R.19 has since changed such that the $300 limit referred to in Bird has now been replaced with “a reasonable representation fee”. As such, Bird can be distinguished as the question remains open as to whether the removal of the maximum costs award per day would alter Justice Clark’s reasoning.

[6] As such, although Transport Training Centres of Canada v. Wilson adopts the reasoning in Bird, it fails to grapple with the fact that Bird was decided before the amendment. Further, there was no offer to settle made by the successful party in Transport and so no discussion of the apparent contradiction between s.29 and Rule 14.

[7] It is more helpful to look to post-amendment cases in which the courts address the interplay between r.14.07(1) and s.29: Beatty v. Reitzel Insulation Co., [2008] O.J. No. 953; Royal Green Landscaping & Plowing v. Lonero, [2007] O.J. No. 5037. Although these are both decisions of the Small Claims Court and not binding, their logic is persuasive. In Beatty v. Reitzel Winny J. began by expressing concern that if the 15% “cap” could not be doubled under Rule 14.07 without offending s.29, then the effectiveness of the cost consequences aspect of Rule 14 is undermined and in many cases would be drained of any real meaning. Judge Winny stated that in his view, the costs consequences of a party’s failure to accept a reasonable offer should be real consequences if they are to encourage settlements in a meaningful way. Further, to interpret s.29 as if it were to freeze the operation of R. 14.07 is undesirable and unwarranted based on the legislative context and the need for a reasonable and just rule dealing with the cost consequences of offers to settle in the Small Claims Court. It would tend to undermine the court’s discretion to impose cost consequences where parties inflate or exaggerate their claims and would encourage parties to claim unreasonable amounts by allowing them to do so without fear of any real cost consequences.

[8] I agree with this reasoning and so conclude that s.29 was not intended to cap the costs at 15% in the circumstances of an offer that gives rise to the cost consequences outlined in R.14.07. This seems to give meaning to the need to encourage the acceptance of reasonable settlement offers, while maintaining proportionality with the amounts in dispute and allowing the judge to consider what is fair and reasonable in all of the circumstances.

[9] The appellants seek their costs in the sum of $3,000 plus disbursements of $411.30 for the two day trial. Were it not for their offer, the maximum that I could award for a reasonable counsel fee would be $1,500. The appellants’ offer was more favourable than the outcome; BTM’s action against the appellants was dismissed on appeal but BTM would have been saved from paying costs had the offer been accepted. The appellants’ lawyer has 30 years experience and an award of $750 for each trial day is not at all unreasonable. I am mindful that if the representation fee is too low, successful parties at trial could ultimately be unsuccessful monetarily by the time that they pay their lawyers or agents. Accordingly, I award the appellants a counsel fee of $1,500, which I will double due to the appellants’ offer to settle. The appellants will therefore have their costs of the Small Claims Court action fixed in the sum of $3,411.30 inclusive of disbursements and GST. Order to go accordingly.

Costs of the Appeal

[10] The Appellants claim fees and disbursements in the amount of $15,289.26, which represents substantial indemnity for them. I agree with BTM that costs on that scale would be unwarranted where there has not been any reprehensible conduct in relation to the cause of action or in the conduct of the proceeding. On a partial indemnity scale, applying a rate of 67% to the fees claimed, the above amount reduces to $10,595.92.

[11] Applying the factors set out in Rule 57.01(1), perhaps the most significant in this case is the fact that the Respondent’s action was for recovery of $10,000 only. Yet it was unsuccessful in defending the appeal. It also maintained this action, which meant a partial duplication of actions from the appellants’ perspective, when it could have continued to be part of the construction lien action where it had already properly had been made a party. Yet considering 57.01(0.b), it is difficult to imagine that BTM would expect to pay over $10,000 in costs in relation to an appeal over an award of $10,000 plus interest. The issues were not overly complex or of importance beyond the interests of the parties themselves. Considering also the above cost award made in relation to the proceeding itself, I consider that the sum of $5,000 inclusive for the costs of this appeal is fair and just in the circumstances and proportionate to the sum claimed in the proceeding. Order to go accordingly.

Writ of Seizure and Sale

[12] The appellant wrote to me following argument of the appeal but before this cost decision was released to request that counsel be given an appointment to argue the issue of removal of a Writ of Seizure and Sale filed by BTM against the appellants. Counsel for BTM objects on the basis that the relief requested in the Notice of Appeal made no reference to the Writ and that any dispute about its removal should be argued on proper notice and only after each party has filed a complete record.

[13] While it strikes one that BTM would not want to incur further costs or cost sanctions to dispute the Writ, it may have a legitimate reason for so doing that is not apparent on the record before me. The appellants have recourse to Rule 60.17(c) to bring a motion in this court before any judge in the usual course for directions under that rule if the dispute cannot be otherwise resolved, which is what I direct should occur.

HEALEY, J.

Date: May 3, 2010