ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-11-0191
DATE: 2012-04-10
B E T W E E N:
SCOTT SIMPSON
Roderick W. Johansen, for the Plaintiff
Plaintiff
- and -
BRIDGEWATER BANK
Mark Hartman and Doug Bourassa, for the Defendant
Defendant
HEARD: Via written submissions
Mr. Justice D.C. Shaw
Decision on Costs
[1] This is a decision on the costs of a motion for summary judgment brought by the defendant, Bridgewater Bank (“the Bank”). I dismissed the motion and reserved the issue of costs, pending receipt of written submissions. Submissions have been received and reviewed.
[2] The plaintiff submits that he should be awarded partial indemnity costs up to November 22, 2011, and substantial indemnity costs thereafter. The plaintiff seeks fees of $20,660.92, and disbursements of $1,493.49, both inclusive of HST, for a total of $22,154.41. On November 22, 2011, the plaintiff submitted an offer to settle the action for the sum of $25,000, plus costs on a partial indemnity basis.
[3] The plaintiff’s Bill of Costs shows 44.7 hours claimed by Mr. Johansen, at a partial indemnity rate of $225 per hour and an actual rate of $325 per hour, plus 10 hours claimed by Mr. Newton at a partial indemnity rate of $275 per hour and an actual rate of $375 per hour. Mr. Johansen has 24 years experience. Mr. Newton has 27 years of experience.
[4] The plaintiff submits that although the action involved only $22,227.28, it was a significant sum for him. He was a contractor who had lost over $90,000 and costs in building a home which was ultimately sold under a power of sale for the benefit of the Bank as mortgagee.
[5] The plaintiff submits that the motion raised relatively complex issues involving trust funds, the trust provisions of the Construction Lien Act and limitation period issues.
[6] The plaintiff submits that the defendant’s conduct, in failing to recognize the merits of the plaintiff’s position, unnecessarily lengthened the proceedings and resulted in unnecessary steps.
[7] The Bank submits that costs should be limited, at most, to $5000.00, inclusive of HST and disbursements. The Bank bases its position on the following submissions:
(a) the costs claimed by the plaintiff are grossly disproportionate to the amount in dispute in the action, namely $22,227.28, which the Bank states should have been dealt with in Small Claims Court.
(b) the plaintiff unnecessarily lengthened proceedings by introducing the issue of an undocumented oral agreement between counsel.
(c) the plaintiff proceeded on the basis of a contingency agreement and the plaintiff has incurred no costs for which it is to be indemnified.
(d) the contingency fee amount is at variance from the mandatory provisions of the Solicitors Act and is therefore unenforceable.
Discussion
[8] In my opinion, there is no basis to award substantial indemnity costs. The offer to settle of November 22, 2011 does not meet the criteria of rule 49.10. It was for an amount in excess of the amount claimed in the action. Moreover, I do not find anything in the conduct of the Bank to warrant costs on a substantial indemnity scale. Rule 20.06 provides that a court may order payment of the costs of a motion for summary judgment on a substantial indemnity basis if a party acts unreasonably in making or responding to the motion or acts in bad faith for the purposes of delay. I do not find those elements present in this case.
[9] 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.
[10] 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.
[11] 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.
[12] 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.”
[13] Rule 57.01(1) of the Rules of Civil Procedure provides:
“ 57.01 (1) Factors in discretion - 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 proceeding 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 charged 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 proceeding 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 on any party that tended to shorten or 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 solicitor; and
(i) any other matter relevant to the question of costs.”
[14] Rule 1.04 (1.1) of the Rules of Civil Procedure provides:
1.04 (1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.
[15] In my view, the costs claimed by the plaintiff are not proportionate to the importance and complexity of the issues and, most significantly, to the amount involved in the action. The costs claimed effectively equal the amount in dispute.
[16] As observed by Lane, J. in Stratton Elective Limited v Guarantee Company of North America , 2007 Can LII (Ont. S.C.J.), at para 23, the principles of proportionability are of great importance to the effective operation of the simplified procedures and counsel should not expect the costs regime for the simplified rules to produce awards like regular cases.
[17] The Bank has provided its own Costs Outline, for comparison purposes. The Bank shows fees of $8,813 on a partial indemnity basis, plus HST of $1,145.69, and disbursement of $397.34.
[18] The hours docketed by the Bank’s solicitors are approximately equal to those docketed by the solicitors for Mr. Simpson. The partial indemnity rate shown for Mr. Hartman, who has 33 years experience is $175 per hour. The partial indemnity rate for Mr. Bourassa, who has 2 years experience, is $135 per hour. The partial indemnity rate for Mr. Hacio, who argued the motion, as agent, is $200 per hour.
[19] If an unsuccessful party is contesting the reasonableness of the successful party’s Bill of Costs, it is helpful for the court, in assessing whether the amount claimed is something that the unsuccessful party could reasonably have expected to pay, to have the unsuccessful party’s Bill of Costs, (although the unsuccessful party cannot be compelled to produce its own Bill of Costs).
[20] The existence of a contingency fee agreement does not affect the amount or any right or remedy for the recovery of costs payable by a third party to a client. However, the client who has entered into the agreement is not entitled to recover more than the amount payable by the client to the client’s own solicitor under the agreement. See sections 20(1) and 20(2) of the Solicitors Act , as noted in Orkin, The Law of Costs , Second Edition (Toronto: Canada Law Book, 2011 Looseleaf), at pp 2-58.6 to 2-58.7.
[21] In addition the Solicitors Act provides at s.20.1(1) and (2):
20.1 (1) In calculating the amount of costs for the purposes of making an award of costs, a court shall not reduce the amount of costs only because the client’s solicitor is being compensated in accordance with a contingency fee agreement.
(2) Despite subsection 20 (2), even if an order for the payment of costs is more than the amount payable by the client to the client’s own solicitor under a contingency fee agreement, a client may recover the full amount under an order for the payment of costs if the client is to use the payment of costs to pay his, her or its solicitor.
[22] The contingency fee arrangement between Mr. Simpson and his solicitors is that he will not be required to pay unless he is successful. The solicitors advise that if Mr. Simpson is successful, the solicitors “… will recover based on standard billing rates plus premium for risk” in accordance with their Bill of Costs.
[23] Mr. Simpson was successful on this motion. Pursuant to the representations made by the solicitors, Mr. Simpson will be billed for legal work done on his behalf. Costs awarded to Mr. Simpson for this motion will therefore operate to indemnity Mr. Simpson for the solicitor and client costs he has incurred. There are not sufficient facts before me to conclude, as the Bank submits, that the arrangement between Mr. Simpson and his solicitors is unenforceable under s. 28.1(1) of the Solicitors Act.
[24] Although the amount in dispute in this action is within the jurisdiction of the Small Claims Court, there is nothing to indicate that the Bank ever raised this as an issue until these costs submissions. Proportionality remains a concern, but both parties proceeded on the motion as if the action was properly in the Superior Court. I also note that it was the Bank which brought the summary judgment motion, in reliance on the Superior Court’s Rules of Civil Procedure , and that although the plaintiff’s costs of defending that motion, which was argued over the course of two days, were equal to the amount in dispute, nevertheless the plaintiff had no choice but to incur significant costs or otherwise face dismissal of its action.
[25] In my view, having regard to the factors noted above, and the reasonable expectations which the Bank, as the unsuccessful party, would have had as to the costs of this motion, it would be fair and reasonable to award the plaintiff costs of $10,500.00, inclusive of disbursements and HST.
_______ ”original signed by”_ ___
The Hon. Mr. Justice D.C. Shaw
Released: April 10, 2012
COURT FILE NO.: CV-11-0191
DATE: 2012-04-10
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N: SCOTT SIMPSON Plaintiff - and – BRIDGEWATER BANK Defendant
DECISION ON COSTS
Shaw J.
Released: April 10, 2012
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