Superior Court of Justice – Ontario
Court File Nos.: 99-CV-171619 ;
CV-11-419024; CV-11-419029; CV-11-419047
Date: 20120106
Court File No.: 99-CV-171619
RE: OMERS REALTY CORPORATION and PRICE WATERHOUSE
COOPERS INC.
Appellants
AND:
THE MINISTER OF FINANCE
Respondent
AND BETWEEN: Court file No. CV-11-419024
OMERS REALTY CORPORATION
Appellant
- and -
THE MINISTER OF FINANCE
Respondent
AND BETWEEN: Court File No.: CV-11-419029
OMERS ADMINISTRATION CORPORATION
Appellant
- and -
THE MINISTER OF FINANCE
Respondent
AND BETWEEN: Court File No. CV-11-419047
OMERS REALTY CORPORATION
Appellant
- and -
THE MINISTER OF FINANCE
Respondent
BEFORE: Mr. Justice Lederer
COUNSEL:
Joseph Steiner, for the Appellants, Omers Realty Corporation & PriceWaterhouse Coopers Inc.
Lori Patyk & Jessica Fiore, for the Respondent, The Minister of Finance
COSTS ENDORSEMENT
[ 1 ] On these motions, the appellants were successful. They seek costs. The respondent acknowledges that, as the successful party, the appellants should be awarded costs. It is the amount that is in dispute. The respondents are concerned that costs are requested for work that does not qualify and submit that no part of the award should be on an elevated scale.
[ 2 ] The appellants request an award of costs in the amount of $260,215.44. The respondents submit that an appropriate value for costs on these motions would be $50,000.
[ 3 ] The appeal concerned four motions for summary judgment. The submissions made on behalf of the appellants advise that there were eleven other appeals which were set aside by the parties and will be resolved based on the results of the motions that were heard by the court. The appellants say that the costs award should cover all fifteen appeals.
[ 4 ] The same submissions advise that there were sixteen additional disputes which raised the same issues and which were held in abeyance pending the outcome of the fifteen appeals. It is said that the preparation and filing of a Notice of Objection is an essential step in prosecuting a dispute regarding liability for land transfer tax. The “front-end work” of analyzing the facts and the law, which would typically be done prior to filing a Statement of Claim in ordinary civil litigation, must be done prior to filing a Notice of Objection in tax litigation. The taxpayer is required to set the full factual details and legal basis for disputing liability for tax in the Notice of Objection (see: Land Transfer Tax Act, ss. 13(1.1) and 14(2.1)). Relying on the work done and this obligation, the appellants submit that fees in respect of the preparation of Notices of Objection, and the ensuing communications with the Ministry, both for the fifteen appeals and the sixteen disputes held in abeyance at the objection stage should be included in the costs award.
[ 5 ] I am not prepared to award costs for either the additional appeals or the sixteen “other disputes”. The reasons issued in respect of the motions observe: “There are four transactions the court is asked to consider. Counsel has advised that there are others which await the result.” There was never any suggestion that the “others” were before the court in respect of either the merits or costs. This is plain insofar as the sixteen “other disputes” are concerned. With respect to the eleven appeals, it appears that counsel, to their considerable credit, came to an agreement that the eleven appeals would abide by the decision in the four that were heard. Obviously, this has saved both the parties and the court time and expense. Having said this, there was nothing to suggest that the costs of the eleven additional appeals were to be decided by the court. No material that would represent the work that was done was filed. There was nothing that would allow for any assessment as to the time or effort that work would reasonably require. The submissions filed on behalf of the respondent suggest that the fifteen appeals dealt with “substantially the same issue”, the Notices of Appeal were “virtually identical” with the exception of the specific facts and that, as a result, the costs associated with the “front-end work” should be reduced. It is not possible to assess these submissions. In the circumstances, this was something to be dealt with when the agreement to proceed to court with only four of the appeals was made. In the absence of any agreement or material demonstrating the work that was done, I have no option but to act on the basis that the parties were left to pay their own costs of these eleven matters.
[ 6 ] The appellants suggest that they made a settlement offer “which met all the requirements of a Rule 49 offer” and should be treated as such. In the circumstances, I am at a loss to understand how the offer made could be taken to be an offer to which the cost consequences in R. 49.10 should apply. The “offer” is contained in a letter, dated July 20, 2011. It is not an offer to settle the four appeals before the court or the fifteen appeals, but all of the matters in dispute between the parties. The basis of the settlement is that the tax would be paid on four of the thirty-one transactions. The four transactions were identified in the offer. Apparently, specific transactions had to be selected so there would be “a clear basis on which to compute refund interest”. The four were selected “arbitrarily” because the tax that would be owed by them totalled approximately $1.4 million ($1,383,344). None of the four was an appeal. As part of the offer, the Minister was required to vacate the assessments issued in respect of all of the transactions which were “the subject of the pending appeals to the Superior Court”. As I understand it, this referred to all fifteen appeals.
[ 7 ] This offer was a continuation of the laudable effort of the parties to deal with the large number of appeals in a co-ordinated and organized way, but is not “a Rule 49 offer”. It extends to matters beyond those before the court. The fact that the parties had agreed that other proceedings would be dealt with based on that result does not bring them all under the ambit of the Rules of Civil Procedure or The Courts of Justice Act, R.S.O. 1990, c. C43. The Rules deal with proceedings before the court and not other similar or related disputes. These are not costs that are “incidental to a proceeding” (see: Courts of Justice Act, supra, at s. 131). They are separate proceedings. This is consistent with the position taken on behalf of the Minister at the time the offer was made. In the response to the offers, it was said that: “These assessments (the 16 “other disputes”) are not currently before the court….”). If, in the end, I am wrong about this, it does not matter. I would, in any event, exercise the discretion of the court against imposing a higher scale of costs for any part of this proceeding.
[ 8 ] The appellants say that the settlement would have resulted in the $1.4 million being paid to the Minister on account of land transfer tax. Since, as a result of the judgment on the motions, no tax will be paid, the appellants say that the Minister would have been in a better position had he accepted the offer and, thus, pursuant to Rule 49.10, should pay costs at an elevated scale from the date of the offer (July 20, 2011). In the submissions made on behalf of the appellants, the tax that would have been paid under the settlement, together with associated interest, is said to have represented 14% of what was claimed. The problem is that, as the matter came to court, there was no middle ground. There were no damages to be assessed. On the principle issue, either the appellants were Crown agencies or they were not. It was an “all or nothing” question. The appellants could take the same position if the offer to settle had been only $1 and the Minister had turned it down. On the other hand, had the Minister succeeded, if it had been held that the appellants were not Crown agencies, all the tax would have been owed. In this case, I find that the settlement offer does not justify an award of costs at an elevated scale. A settlement is supposed to be an accommodation which allows the parties to resolve their differences without going to court. If, in the circumstances of this case, the fact that the settlement offered was more than the Minister ultimately was awarded justifies a higher scale of costs, it means that in any “all or nothing” case, one party could use the offer of a settlement not to find an accommodation but to intimidate the other side with the threat of elevated costs. I do not wish to be taken as saying that appellants, in this case, set out to put that sort of choice to the Minister, but I do observe that accepting a 14% solution would have required the Minister to essentially concede an important proposition. There was a significant issue to be determined. A party should be free to have such matters decided without the fear of elevated costs brought on by a settlement offer it believes is unacceptable.
[ 9 ] I am not prepared to recognize the settlement offer as a basis for awarding an elevated level of costs for any part of the course of these proceedings.
[ 10 ] The Costs Outline provided suggests that the premium for substantial indemnity costs, as claimed, would have been $37,340.00. It is a simple matter to reduce the fees claimed by that amount. Unhappily, based on the same Costs Outline, there appears to be no basis to understand the impact of my determination that it is only the cost of the appeals that I have heard for which I am prepared to award costs. The difficulty is compounded by the fact that, on behalf of the Minister, a figure for costs ($50,000) is proposed without any explanation justifying it.
[ 11 ] I am left to decide the level of fees where the appellants request costs of $203,600.22 (fees of $197,902.50 + disbursements of $5,697.72) + GST/HST and the respondent offers $50,000 all in. The difference is substantial. I am left to guess. I will not do so.
[ 12 ] Accordingly, with this decision in hand, I request that the parties make an effort to come to an agreement as to the costs that remain, failing which I require the appellants to deliver a further Costs Outline as to those costs. To be clear, I have been provided with no basis that would not include the costs of these four proceedings going back to and including the preparation of the Notices of Objections. If, as a result of the nature of the records kept, it is not possible to produce a Costs Outline, I require some submissions that logically deal with the costs that remain. Such submissions are to be no longer than three pages, double-spaced. The Costs Outline or submissions, whichever is to be provided, is to be delivered no later than two weeks after the release of these reasons. The respondent shall respond no later than ten days after the Costs Outline or submissions are received; such response to be no longer than three pages, double-spaced.
[ 13 ] In the event that the parties come to an agreement, I ask that the court be advised so that the file may be closed.
LEDERER J.
Date: 20120106