ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 09-46657
DATE: 2012/02/28

BETWEEN:

First Capital (Canholdings) Corporation Applicant – and – North American Property Group Respondent

Andrew D. Gray / Darryl C. Patterson, for the Applicant

Lawrence Thacker, for the Respondent

Application under the Partition Act , R.S.O. 1990, c. P.4

HEARD: By written submissions

DECISION on COSTS

R. Smith J.

[ 1 ] Should partial indemnity costs be ordered at hourly rates in excess of the maximum rates set out as guidelines by the Costs Subcommittee in its Notice for the Profession? This issue must be decided to determine costs on this motion.

Positions of Parties

[ 2 ] First Capital (Canholdings) Corporation (“Canholdings”) seeks costs on a partial indemnity scale in the amount of $35,000.00 inclusive of disbursements and HST. Canholdings submits that the amount is fair and reasonable having regards to the importance of the matter, the conduct of North American Property Group (“North American”) that lengthened the proceeding and the amount of costs that North American would reasonably expect to pay.

[ 3 ] North American submits that Canholdings is not entitled to costs because it interfered with and frustrated the sale process by refusing to accept the bids that were received and made counteroffers to the offers received. In the alternative, North American submits that the number of hours spent were excessive and the hourly rate claimed exceeds the rates set out by the Costs Subcommittee in the Information for the Profession (“Information Notice”). North American submits that $17,500.00 including disbursements and taxes is a reasonable amount of costs.

Factors

[ 4 ] The factors to be considered when fixing costs are set out in Rule 57 of the Rules of Civil Procedure and include in addition to success, the amount claimed and recovered, the complexity and importance of the matter, unreasonable conduct of any party which unduly lengthened the proceeding, scale of costs and any offer to settle, the hourly rate claimed, hours spent, the principles of indemnity and proportionality, and the amount that a losing party would reasonably expect to pay.

Success

[ 5 ] Canholdings was successful in opposing North American’s motion to order the sale and grant it a right of first refusal. Canholdings was partially successful on its motion as a public auction was not ordered. An alternative to the positions of both North American and Canholdings, namely a private auction with only the two co‑owners as bidders was ultimately ordered. As a result I find that there was shared success on the Canholdings motion and Canholdings was successful in opposing North American’s motion to obtain a right of first refusal.

Complexity and Importance

[ 6 ] The issues involved were not overly complex however North American’s motion was very similar to the motion argued before me previously and was factually driven based on the allegation that Canholdings’ action had frustrated my previous order. I found that this had not occurred. The issues were important to the parties.

Scale of Costs

[ 7 ] The parties agree that the scale of costs is on a partial indemnity basis.

Hourly Rates above Maximum Rates in Notice to Profession and Reasonable Expectations

[ 8 ] Canholdings claims a partial indemnity rate for Mr. Gray of $455.00 per hour, which is approximately 75 per cent of his regular billing rate of $610.00 per hour. Mr. Gray was called to the bar in 2002. Canholdings also seeks to recover costs for Mr. Patterson at the rate of $309.00 per hour which is equal to 75 per cent of his regular billing rate of $415.00 per hour. Mr. Patterson was called to the bar in 2007.

[ 9 ] I would not award costs in excess of 65 per cent of the actual rate charged in these circumstances under Rule 1.03(1), substantial indemnity rates are defined as being one and one half times the partial indemnity rate. As a result, the partial indemnity rate is 66 2/3 per cent of the substantial indemnity rate. The substantial indemnity rate would also be slightly less than the full indemnity rate. If 60 per cent of the full indemnity rate was used, this would result in hourly rates of $366.00 and $249.00 respectively for Messrs. Gray and Patterson, on a partial indemnity scale.

[ 10 ] The Information Notice sets out a maximum partial indemnity rate of $225.00 per hour for lawyers who have been called to the Bar for less than ten years. The Information Notice published by the Costs Sub‑committee of the Civil Rules Committee was effective as of July 1, 2005. The Information Notice was intended to provide some guidance to the profession on partial indemnity costs.

[ 11 ] The Information Notice also states that the maximum rate of $225.00 per hour for lawyers with less than 10 years experience would only be expected to apply to the most complicated matters and for more experienced counsel within each category.

[ 12 ] North American submits that the motion was not the most complicated however, the amount involved for the shopping centre was substantial, approximately 31‑33 million dollars and both co‑owners were commercially sophisticated parties who both retained well respected law firms from the City of Toronto.

[ 13 ] I accept North America’s submission that the hourly rate guidelines set out in the Information would generally conform with what the unsuccessful party would reasonably expect to pay. However, these amounts were fixed as of July 1, 2005 and should be increased to account for inflation over the past six and one half years. In addition, the hourly rates used in the Information Notice were the maximum rates used in the previous costs grid which was in effect for several years before 2005. The hourly rates should therefore be adjusted to account for inflation since these maximum rates were established.

[ 14 ] I will approve partial indemnity hourly rates that are higher than the maximum hourly rates established in the Information Notice for Mr. Gray for the following reasons:

(a) the maximum hourly rates used in the Information Notice should be increased for inflation from at least 2005;

(b) the maximum hourly rates in the Information Notice are intended to provide guidance and are not mandatory;

(c) the amount involved in the dispute was substantial as the matter involved a commercial dispute related to a shopping centre worth 31 million dollars;

(d) both parties retained well respected Toronto firms where hourly rates and office overhead costs are higher than the provincial average. I also infer that both parties would be incurring similar full indemnity costs and their reasonable expectations of the unsuccessful party would be to pay partial indemnity costs in excess of the maximum in the Information Notice in these circumstances; and

(e) Mr. Gray has been called to the Bar for almost ten years (nine and one half years) which is almost the full ten year period.

[ 15 ] I did not receive a costs outline from North American as required in Rule 57.01 (6). It would have been of assistance to me to have seen the partial indemnity rate that North American would have sought if they had been successful when assessing the reasonableness of the costs claimed by Canholdings and in assessing the reasonable expectation of the unsuccessful party.

[ 16 ] The hourly rate for Mr. Gray who had approximately nine years before the Bar will be allowed at $335.00 per hour and the rate of Mr. Patterson with four years at the Bar is allowed at $200.00 per hour given the importance of the matter, the amount involved, the sophistication of the parties and to account for the reasonable expectations of the unsuccessful party where both retained Toronto counsel.

Disposition

[ 17 ] After considering the above principles I will reduce the amount of costs claimed to account for the partially divided success on the motion as discussed above and to adjust the hourly rates as stated above.

[ 18 ] Costs of $20,000.00 inclusive of HST plus disbursements of $1,865.00, inclusive of HST are payable by North American to Canholdings.

R. Smith J.

Released: February 28, 2012