ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 05-CV-296543
DATE: 2012-03-02
B E T W E E N:
INTERNATIONAL WALL SYSTEMS LTD. Plaintiff
Jeffrey C. Silver for the Plaintiff
- and -
ENGLISH LANE RESIDENTIAL DEVELOPMENTS LIMITED and HSBC BANK CANADA (formerly known as HONGKONG BANK OF CANADA) Defendant
Theodore B. Rotenberg for the Defendant
HEARD: Via written submissions
Mr. Justice J.S. Fregeau
DECISION ON COSTS
[ 1 ] This is a decision on costs of a full day motion heard September 14, 2011.
[ 2 ] The Defendant, English Lane Residential Developments Limited (“English Lane”) brought a motion requesting an order refusing confirmation of the Report of Case Management Master Polika dated Sept 22, 2010 and entered December 14, 2010. English Lane also sought a new reference and trial before a different Case Management Master.
[ 3 ] I released my decision on December 2, 2011. English Lane’s motion was dismissed. The parties have provided written submissions as to costs. The Plaintiff, International Wall Systems LTD. (“International Wall”) sought, and was granted, leave to file reply submissions as to costs.
THE POSITION OF INTERNATIONAL WALL
[ 4 ] International Wall seeks costs on a substantial indemnity basis. International Wall filed an offer to settle dated March 30, 2011 which was not accepted by English Lane. International Wall submits that this offer to settle is more favourable to English Lane than the result of the motion. International Wall cites Rules 49.10 and Rule 49.13 in support of their submission that this entitles them to costs on a substantial indemnity basis.
[ 5 ] International Wall further submits that this court should exercise its discretion as to costs pursuant to Section 131(1) of the Courts of Justice Act and Rule 57 and award costs on a substantial indemnity basis based on the following considerations:
- Their repeated efforts to settle without response from the defendant;
- The “intransigence and studied indifference” of the defendant throughout;
- The importance of the issues;
- The amount of the judgement (with interest now over $470,000.00);
- Master Polika’s findings of egregious conduct on the part of the defendant at trial;
- The defendant opposed confirmation of the report on issues where Master Polika made findings of fact based on overwhelming evidence;
- Alleged abusive conduct on the part of the defendant in raising the allegation of apprehension of bias for the first time in the motion to oppose confirmation rather than at trial.
[ 6 ] As to the quantum of costs, International Wall submits that the issues raised and the manner in which they were raised required its responding factum to be very detailed, with reference to both the Master’s reasons and the transcripts. It is further submitted that the salient issue on the motion to oppose confirmation was the alleged reasonable apprehension of bias on the part of master Polika. Addressing this issue is suggested to have been a highly fact specific inquiry, requiring a complete review of the transcripts.
[ 7 ] Finally, International Wall submits that the motion dealt with numerous areas of law, some of which are relatively novel and argued infrequently, necessitating considerable research.
[ 8 ] Counsel for International Wall suggests an hourly rate of $500.00 is appropriate for Toronto counsel with over 20 years experience exclusively in commercial litigation. International Wall submits that a substantial indemnity rate of $475.00/hour and a partial indemnity rate of $325.00/hour should be used in assessing costs, together with a counsel fee of either $3,500.00 or $2,000.00 for the one day hearing of the motion.
[ 9 ] On a substantial indemnity basis, International Wall suggests that costs of $73,936.47 should be awarded. If costs are awarded on a partial indemnity basis, International Wall suggests that costs of $50,392.92 are appropriate.
THE POSITION OF ENGLISH LANE
[ 10 ] English Lane concedes that International Wall is entitled to costs of the motion and does not expressly dispute the $500.00 hourly rate claimed by counsel for the plaintiff. English Lane submits that the appropriate scale of costs is partial and not substantial or full indemnity.
[ 11 ] English Lane submits that the appropriate partial indemnity rate for plaintiff’s counsel is $300.00/hour, or 60% of his actual rate. English Lane submits that International Wall should be held to this partial indemnity rate and a total quantum of costs of $24,693.89, based on 70.5 hours of expended time. English Lane submits that this is consistent with an estimate of costs for this motion provided by counsel for International Wall in March 2010 as submitted in a motion for security for costs for this motion.
[ 12 ] English Lane submits that International Wall has misinterpreted both Rules 49.02(2) and 49.10 as they apply to this motion. English Lane submits that because they were the moving party in this motion, they should be seen to be in the position of a plaintiff for the purposes of Rule 49.10. This is submitted to be one of the “necessary modifications” under Rule 49.02(2). English Lane submits that International Wall, while a plaintiff in the action, is a respondent in the motion and should not receive the benefit of Rule 49.10 in support of its claim for substantial indemnity costs.
[ 13 ] In the alternative, English Lane suggests that this court should exercise its residual discretion and decline to apply the costs consequences provisions of Rule 49.10 for two reasons:
International Wall’s offer to settle was for $459,904.60, plus post-judgement interest at the rate set out in the Report, plus the partial indemnity costs of International Wall on the motion. English Lane submits that this offer represents a compromise of only $1,000.00 from the judgement amount. It is submitted that a court may refuse to apply Rule 49.10 for the benefit of a plaintiff where it is fair to do so.
The motion is alleged to have raised a serious issue as to the Master’s conduct and was, in the submission of English Lane, decided on the basis of a “broader inquisitorial power” of a Master, for which there was no prior case law. In these circumstances, it is submitted that it would be neither fair nor reasonable to award substantial indemnity costs based on an early offer with no element of compromise.
[ 14 ] English Lane further submits that any issues of alleged misconduct in the action prior to the motion were dealt with when costs of the action were assessed by Master Polika. English Lane also submits that this court did not find that English Lane’s grounds for the motion were frivolous or that the motion was abusive.
[ 15 ] Finally, English Lane submits that a litigant has a right to advance arguments it believes has merit and that a lack of success does not, in and of itself, justify an award of substantial indemnity costs.
DISCUSSION
[ 16 ] An award of costs is a matter in the discretion of the court by virtue of s. 131(1) of the Courts of Justice Act, which provides:
“Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in the proceeding are in the discretion of the court, and the court may determine by whom and to what extent costs shall be paid.”
[ 17 ] In Serra v. Serra (2009), 2009 ONCA 395, 66 R.F.L. (6 th ) 40 (Ont. C.A.), at p. 42, the Court of Appeal reiterated the fundamental purposes which modern costs rules are designed to foster, as set out in Fong v. Chan (1999), 46 O.R. (3d) 330 (Ont. C.A.), at para. 22:
(1) to partially indemnify successful litigants for the costs of litigation;
(2) to encourage settlement; and
(3) to discourage and sanction inappropriate behaviour.
[ 18 ] In Anderson v. St. Jude Medical Inc., 2006 85158 (ON SCDC), [2006] O. J. No. 508 (Ont. Div. Ct.), at para. 22, the Divisional Court set out the principles to be applied by the court in exercising its discretion (citations omitted):
The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in Rule 57.01(1).
A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant.
The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: Rule 57.01(1)(O.b).
The court should seek to avoid inconsistency with comparable awards in other cases. “Like cases [if they can be found], should conclude with like substantive results.”
The court should seek to balance the indemnity principle with the fundamental objective of access to justice.
[ 19 ] The Court of Appeal has made it clear that in assessing costs, the overriding principle is one of reasonableness, and that the failure to follow that principle can produce a result that is contrary to the fundamental objective of access to justice (Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (Ont. C.A.), at p. 302.
[ 20 ] In Zesta Engineering Ltd. v. Cloutier, [2001] O.J. No. 4495 (Ont. C.A.), at para. 4 the Court of Appeal did not make a specific finding with respect to the amount of time spent or the rates charged by counsel, and stated:
“In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant.”
[ 21 ] Rule 1:04(1.1) reads:
“These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.”
[ 22 ] Rule 49.10(1) reads:
“Where an offer to settle,
(a) is made by a plaintiff at least seven days before the commencement of the hearing;
(b) is not withdrawn and does not expire before the commencement of the hearing; and
(c) is not accepted by the defendant,
and the plaintiff obtains a judgment as favourable as or more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer to settle was served and substantial indemnity costs form that date, unless the court orders otherwise.
[ 23 ] Rule 57.01(1) reads:
“In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceedings and any offer to settle or to contribute made in writing,
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charges and the hours spent by that lawyer;
(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceedings for which costs are being fixed;
(a) the amount claimed and the amount recovered in the proceeding;
(b) the apportionment of liability;
(c) the complexity of the proceeding;
(d) the importance of the issues;
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(g) a party’s denial of or refusal to admit anything that should have been admitted;
(h) whether it is appropriate to award any costs or more than one set of costs where a party,
(i) commenced separate proceedings for claims that should have been made in one proceeding, or
(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and
(i) any other matter relevant to the question of costs.”
[ 24 ] I do not accept the position of English Lane that International Wall is not able to seek the costs benefits of Rule 49.10(1) because they are the responding party on the motion. In the absence of authority to the contrary, the plain meaning of Rule 49.10(1) allows the plaintiff, International Wall, to argue for the costs benefits of that Rule, if all the conditions are met, “unless the court orders otherwise”.
[ 25 ] I find that this court’s decision on the motion was as or more favourable to International Wall than the terms of the offer to settle. International Wall is therefore presumptively entitled to partial indemnity costs to the date the offer was served and substantial indemnity costs from that date, unless I order otherwise.
[ 26 ] However, in all the circumstances, I am persuaded that costs of the motion should not be fixed strictly in accordance with the provisions of Rule 49.10. I choose to exercise my discretion to depart from the provisions of Rule 49.10(1) because I do not perceive International Wall’s offer to have been a genuine offer of compromise. While an element of compromise is not an essential element of an offer to settle, its absence is a relevant factor that I can, and do, take into account in choosing to order otherwise. As pointed out by English Lane, this offer represented a concession of $1,000.00, less than one quarter of one per cent of the amount of the judgement.
[ 27 ] I find the absence of compromise to be a relevant consideration in this case because the primary issue raised by English Lane on the motion opposing confirmation (interference by the Master giving rise to a reasonable apprehension of bias) had some merit. That issue, viewed objectively, could reasonably have raised uncertainty as to the outcome of the motion. Some form of compromise, in these circumstances, would have been a reasonable proposition.
[ 28 ] I am not persuaded, however, that International Wall should be held to its cost estimate (pertaining to the appropriate partial indemnity rate and estimated hours) provided for the purposes of the motion for security for costs for this motion.
[ 29 ] As correctly submitted by International Wall in their reply costs submissions, that costs estimate is not an appropriate guideline for determining costs of this motion. The amended notice of motion before this court was significantly different than the original notice of motion for which the costs estimate was prepared. The amended notice of motion expanded the issues involved on this motion and the time necessarily required by counsel to respond to the motion to oppose confirmation.
[ 30 ] Pursuant to s. 131 of the Courts of Justice Act, I do take the offer to settle of International Wall, together with the result of the motion, into consideration. I also take into consideration the following factors from Rule 57.01(1):
- The principle of indemnity;
- The amounts claimed and recovered;
- The complexity of the proceeding;
- The importance of the issues.
[ 31 ] Both the Ontario Divisional Court, in Anderson v. St. Jude Medical Inc., and the Ontario Court of Appeal, in Zesta Engineering, suggest that experience, rates charged and hours expended are appropriate considerations in fixing costs, but are subject to the “overriding principle of reasonableness” in a particular case. The costs award must reflect what I feel to be fair and reasonable for this motion, taking into consideration all relevant factors.
[ 32 ] Given the nature of this motion, as dictated by the grounds raised by English Lane to oppose confirmation, time spent in preparing written material was justifiably significant, as was time spent in preparing for oral argument. I do not hesitate to acknowledge that the written material provided to the court, especially that of International Wall, was of great assistance to me in coming to a decision on this motion.
[ 33 ] The matter was of moderate complexity and importance, but none the less extremely time consuming given the nature of the issues and the volume of material. English Lane suggests that International Wall be awarded costs of between $24,600.00 and $36,600.00, both figures inclusive of disbursements and HST. With respect, I find that this to be less than what an unsuccessful party could reasonably expect to pay on this motion.
[ 34 ] I award International Wall costs fixed in the amount of $50,000.00 inclusive of disbursements and HST.
_______ ”original signed by”_ ___
Mr. Justice J.S. Fregeau
Released: March 2, 2012
COURT FILE NO.: 05-CV-296543
DATE: 2012-03-02
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
INTERNATIONAL WALL SYSTEMS LTD. Applicant
- and –
ENGLISH LANE RESIDENTIAL DEVELOPMENTS LIMITED AND HSBC BANK CANADA (formerly known as HONGKONG BANK OF CANADA) Defendants
DECISION ON COSTS
Mr. Justice J.S. Fregeau
Released: March 3, 2012
/mls