Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041
CITATION: Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041
COURT FILE NO.: 12-DV-1823
DATE: 2013/02/19
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
GEOGRAPHIC RESOURCES INTEGRATED DATA SOLUTIONS LTD., and THE STATE OF OREGON, ACTING BY AND THROUGH ITS STATE BOARD OF HIGHER EDUCATION, ON BEHALF OF SOUTHERN OREGON UNIVERSITY
Appellants/Plaintiffs
– and –
PERRY PETERSON, NELLIGAN O’BRIEN PAYNE, NELLIGAN O’BRIEN PAYNE LLP, and WING T. YAN
Respondents/Defendants
Patrick Snelling, for the Appellants/Plaintiffs
Heather Williams, for the Respondents/Defendants, Nelligan O’Brien Payne, Nelligan O’Brien Payne LLP, and Wing T. Yan
HEARD: Written Submissions
SUPPLEMENTARY REASONS FOR COSTS
Aitken J.
Nature of Proceedings
[1] The Respondents[^1] seek their costs on a partial indemnity basis in the amount of $10,026.89 inclusive of fees, disbursements and HST. This sum also happens to be the Respondents’ actual costs because their counsel had agreed to charge only partial indemnity rates when accepting their retainer from LawPRO. The Appellants agree that the Respondents should receive their costs on a partial indemnity basis, but they argue that partial indemnity costs should be calculated at 60% of the Respondents’ actual costs. This would amount to $6,117.09.
General Principles
[2] Under s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, the costs of and incidental to a proceeding are in the discretion of the court. In exercising its discretion under this section, in addition to the result in the proceeding and any offer to settle, the court may consider the factors set out in r. 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Two important factors are the principle of indemnity and the amount that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed. As was stated in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.), at para. 26: “the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.”
[3] Under r. 1.03, the term “partial indemnity costs” means “costs awarded in accordance with Part I of Tariff A.” Part I of Tariff A states that the fee for any step in a proceeding shall be determined in accordance with s. 131 of the Courts of Justice Act and the factors set out in subrule 57.01(1).
[4] Under r. 1.03, the term “substantial indemnity costs” means “costs awarded in an amount that is 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A.”
[5] Consequently, the starting point in the calculation of costs is a determination of partial indemnity costs – not a determination of substantial indemnity costs or, for that matter, actual costs.
Factors under r. 57.01
[6] The Appellants take no issue with the hours devoted to the matter by the Respondents’ counsel, and nothing has been brought to my attention that would raise any concerns in this regard.
[7] In terms of the level of experience of the Respondents’ counsel, Heather Williams has been practising civil litigation for 21 years. Susanne Sviergula has been practising civil litigation for 11 years. The maximum partial indemnity rate recommended in 2005 by the Costs Subcommittee of the Civil Rules Committee for each would be $350.00 (20 years and over) and $300.00 (10 to 19 years) respectively, though it should be noted that such rates would apply to the more experienced counsel and to the most complicated matters in each category. If adjusted for inflation, as recommended in First Capital (Canholdings) Corp. v. North American Property Group, 2012 ONSC 1359 (S.C.J.), such rates in 2012 would be $396.13 and $339.54 respectively. Considering each lawyer has just recently arrived in her category, and considering the issues raised on the appeal were of moderate complexity, I consider a rate of $350.00 for Ms. Williams and $275.00 for Ms. Sviergula to be reasonable on a partial indemnity basis.
[8] The amount claimed by the Appellants in the litigation was $32 million plus, as yet, unspecified special damages. Clearly, this made the issues of great importance to the Respondents. In addition, issues were raised as to whether an appellant who was not a client of the Respondents had a claim against the Respondents. Finally, the professional reputation of the Respondents was at stake.
[9] In regard to the conduct of any party that was troublesome, I noted in paragraph 30 of my Reasons that one of the arguments pursued on the appeal had not been raised when the matter was argued before the Master, and had not been raised in the Appellants’ factum filed on the appeal. As to the Respondents’ conduct, their factum, compendium, and book of authorities were served on the Appellants well after the deadline contemplated in the Rules. No explanation was provided for this late service.
[10] Taking all of these factors into account, I conclude that the Respondents’ reasonable partial indemnity costs are $9,800.00 inclusive of disbursements and HST. I consider this within the range that the Appellants could reasonably have expected to pay in regard to the appeal. The partial indemnity costs of the Appellants’ counsel, as listed in their Costs Outline, were $10,116.82.
Actual Costs
[11] The Respondents’ actual costs are $10,026.89 – just marginally greater than the partial indemnity costs that I consider reasonable. Does this matter? Should their partial indemnity costs be reduced so that they are a smaller proportion of the Respondents’ actual costs? The Appellants argue that such a reduction should be applied. They rely on the following passage from Wasserman, Arsenault Ltd. v. Sone (2002), 2002 45099 (ON CA), 164 O.A.C. 195 (Ont. C.A.), at paras. 3-4:
Both of the respondents submit that based on the low hourly rate they had negotiated with their solicitors (which is less than the maximum hourly rate allowable under the partial indemnity costs grid), they should be awarded full indemnity. They assert that this amount would still be less than the appellants would expect to pay under the partial indemnity costs grid. Rumanek & Cooper submit that the respondents should be entitled to only partial, not full indemnity. We agree with this submission. There is no principled basis arising from the conduct of the parties in this case which could justify a costs award on the basis the respondents submit.
The costs grid scheme, which came into force on January 1, 2002 pursuant to O. Reg. 284/01, includes two scales of costs: partial indemnity and substantial indemnity. Partial indemnity means just that – indemnification for only a part, or a proportion, of the expense of the litigation. In Lawyers’ Professional Indemnity Co. v. Geto Investments Ltd., [2002] O.J. No. 921 (S.C.J.), Nordheimer J. wrote at para. 16:
As a further direct consequence of the application of the indemnity principle, when deciding on the appropriate hourly rates when fixing costs on a partial indemnity basis, the court should set those rates at a level that is proportionate to the actual rate being charged to the client in order to ensure that the court does not, inadvertently, fix an amount for costs that would be the equivalent of costs on a substantial indemnity basis when the court is, in fact, intending to make an award on a partial indemnity basis.
[12] This excerpt from Lawyers’ Professional Indemnity was also cited with approval by Armstrong J.A. in Boucher, at para. 35, after which he went on to state at para. 36:
In my view, the granting of an award of costs said to be on a partial indemnity basis that is virtually the same as an award on a substantial indemnity basis constitutes an error in principle in the exercise of the motions judge’s discretion, particularly when the judge rejected a claim for a substantial indemnity award.
[13] I make the following observations regarding the Lawyers’ Professional Indemnity, Wasserman, and Boucher line of cases. First, all were decided under the earlier iteration of rule 57 and Tariff A which included the Costs Grid where partial and substantial indemnity rates were set out. The Costs Grid was revoked effective July 1, 2005. As mentioned above, costs on a substantial indemnity basis are now set at 1.5 partial indemnity costs. The Costs Subcommittee of the Civil Rules Committee has suggested certain hourly rates as maximum rates when fixing partial indemnity costs. There is no reference anywhere in the rules to any required relationship between partial indemnity and actual costs. The main caveat in the jurisprudence is that recovery on a partial indemnity basis cannot exceed a litigant’s actual costs.
[14] Second, there are numerous cases decided more recently under the current rules, albeit only at the trial level, that have emphasized that partial indemnity costs are to be determined in accordance with the guidelines in s. 131 of the Courts of Justice Act and r. 57 of the Rules of Civil Procedure, and not in accordance with any mathematical formula tied to actual costs. Again, this is subject to the caveat that partial indemnity costs cannot exceed a litigant’s actual costs. The leading decision in this regard is Mantella v. Mantella (2006), 2006 17337 (ON SC), 27 R.F.L. (6th) 76 (S.C.J.), where Corbett J. stated, at para. 7:
In this case, because of the rates at which counsel undertook Ms. Murray’s defence, there is little difference between partial indemnity and full recovery costs. The actual fees charged by counsel are not the starting point of a costs analysis. Costs are an indemnity, and thus may not exceed the client’s total liability to her solicitor; the client may not gain a windfall as a result of a costs award [footnote deleted]. However, in fixing partial indemnity costs, the court does not look at the actual fee arrangement between solicitor and client and discount that arrangement to ensure that recovery is “partial”. Rather, the court considers the pertinent factors laid down in the rules in fixing the amount of recovery appropriate on a partial indemnity basis. So long as the amount is equal to or less than the actual fees and disbursements charged, then the amount arrived at by reference to the factors listed in the rules will be the amount of the award – whether that represents 50% of actual fees, 75% of actual fees, or even 100% of actual fees. If counsel is prepared to work at rates approximating partial recovery costs, that is counsel’s choice. There is no reason why the client’s fee recovery ought to be reduced because she has negotiated a favourable rate with counsel, so long as the total of the indemnity does not exceed the fees actually charged.
[15] This statement of principle from Mantella has been followed, applied, or favourably referred to in numerous other cases in the East Region: Crete v. Carleton Condominium Corp. No. 47, 2008 CarswellOnt 77 (S.C.J.), Thomas C. Assaly Charitable Foundation v. B.M.O. Nesbitt Burns Inc., 2008 CarswellOnt 1812, Danso-Coffey v. Ontario, 2009 O.J. No. 1136 (S.C.J.)[^2], and Marcus v. Cochrane, 2012 ONSC 2331 (S.C.J.). I am not convinced that the statement of principle in Mantella is trumped by the earlier statements from the Court of Appeal regarding the interrelationship between partial and substantial indemnity costs at a time when the Costs Grid was in effect under the Rules. In this regard, I note the following statement from the Court of Appeal at para. 5 of Wasserman:
The degree of indemnification intended by an award of partial indemnity has never been precisely defined. Indeed, a mechanical application of the same percentage discount in every case where costs are awarded on a partial indemnity scale would not be appropriate. In fixing costs, courts must exercise their discretion, with due consideration of the factors set out in rule 57.01(1), in order to achieve a just result in each case.
[16] As well, in Boucher, at para. 26, Armstrong J.A. focused on what is “fair and reasonable for the unsuccessful party to pay.” In this case, I fail to see how it would be either unfair or unreasonable for the Appellants to pay the Respondents $9,800.00 as partial indemnity costs when the partial indemnity costs of the Appellants’ own counsel would exceed this sum.
Disposition
[17] Costs on a partial indemnity basis are awarded in favour of the Respondents fixed in the amount of $9,800.00 inclusive of disbursements and HST.
Aitken J.
Released: February 19, 2013
CITATION: Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
GEOGRAPHIC RESOURCES INTEGRATED DATA SOLUTIONS LTD., and THE STATE OF OREGON, ACTING BY AND THROUGH ITS STATE BOARD OF HIGHER EDUCATION, ON BEHALF OF SOUTHERN OREGON UNIVERSITY
Appellants/Plaintiffs
– and –
PERRY PETERSON, NELLIGAN O’BRIEN PAYNE, NELLIGAN O’BRIEN PAYNE LLP, and WING T. YAN
Respondents/Defendants
SUPPLEMENTARY REASONS FOR COSTS
Aitken J.
Released: February 19, 2013
[^1]: In these reasons, “Respondents” mean all of the respondents other than Perry Peterson.
[^2]: The substantive portion of this decision was reversed on appeal and the costs award was therefore also overturned; however, the Ontario Court of Appeal offered no comment as to the reasoning of Hackland R.S.J. when he relied on Mantella in fixing costs. See (2010), 2010 ONCA 171, 99 O.R. (3d) 401 (C.A.), at para. 54.