ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-09-0433-SR
DATE: 2012-04-27

B E T W E E N:

1401337 ONTARIO LTD. o/a CKS CONSULTING,

Derek E. Zulianello , for the Plaintiff

Plaintiff

• and -

MACIVOR HARRIS RODDY LLP

Michael Harris , for the Defendant

Defendant

HEARD: February 8, 2011, at Thunder Bay, Ontario

J. dep. Wright, J.

Reasons On Application For Costs

[ 1 ] The successful plaintiff asks for costs from an unsuccessful defendant: on a partial indemnity basis to August 20, 2010 and on a substantial indemnity basis thereafter.

[ 2 ] On September 18, 2009 this action was commenced for the recovery of accounting fees totaling $22,368 plus pre-judgment interest and costs.

[ 3 ] On the August 20, 2010, the plaintiff served a notice offering to settle upon payment to her of $22,368 plus pre-judgment interest with costs on a partial indemnity scale to the date that was five days following service of the offer to settle and on a substantial indemnity scale thereafter.

[ 4 ] Plaintiff’s counsel says that its account to its client is $13,229.29. The plaintiff seeks an order of indemnity from the defendant amounting to $11,888.83, $10,685.94, or $13,229.29, depending upon the calculation.

[ 5 ] The defence submits that costs of $6,000 plus disbursements as claimed are appropriate in the circumstances.

[ 6 ] The issues raised involve Rule 49.10(1) of the Rules of Civil Procedure :

R 49.10(1)

Plaintiff’s offer

49.10 (1) 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(b) is not withdrawn and does not expire before the commencement of the hearing; and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 from that date, unless the court orders otherwise. R.R.O. 1990, Reg. 194, r. 49.10 (1) ; O. Reg. 284/01, s. 11 (1).

Must an offer under R.49.10(1) disclose a willingness to settle for less than is claimed?

[ 7 ] The defendant submits that the “offer” is not a good faith offer to settle evidenced by a willingness to compromise but rather a demand for total capitulation which does not differ from the demand in the Statement Of Claim.

[ 8 ] The plaintiff cites Data General ( Canada ) Ltd v. Molnar Systems Group Inc (1991) 1991 7326 (ON CA) , 3 C.P.C. (3d) 180 (CA) which enunciates these principles:

• The difference between an offer to settle and a demand for capitulation is not set out in R. 40.10(1) [¶21],

• An element of compromise is not an essential element of an offer to settle [¶21], and

• In a case where there is no defence of any substance to a liquidated claim the plaintiff’s offer need not be for something other than the full amount of the claim.[¶27]

Was this an action for a liquidated claim?

[ 9 ] A liquidated claim is “a demand, the amount of which has been ascertained or settled by agreement of the parties, or which is susceptible to being arrived at by mere mathematical calculations from facts which are or ought to be in possession or knowledge of the party to be charged.” ( Logistique & Transport Internationaux Ltee v. Armada Lines Ltd. (1991), 50 F.T.R. 21 ).

[ 10 ] This claim is not intrinsically a liquidated claim. This was a claim for services rendered by an accountant in reviewing files to determine tax liability. There had been no prearrangement with respect to a total fee, the hourly rate to be charged or the time to be spent. The amount was not “susceptible to being arrived at by mere mathematical calculations from facts which are or ought to be in possession or knowledge of the party to be charged". Nor was this a claim on a settled account. It is true that at trial the defendant accepted the amount claimed and only questioned its liability for the account but when the action was commenced the claim could not be considered to have been liquidated.

Was there a defence of any substance raised by the defendants?

[ 11 ] The defendants are a firm of solicitors. A member of that firm, who is now deceased, had made arrangements with the plaintiff to review the accounts of a client for purposes of contesting a claim for arrears of tax by National Revenue. The court had to decide: was the defendant the principal or the agent, ie. was the plaintiff retained by the client or by the solicitors?

[ 12 ] The surviving members of the firm were not privy to the commercial relationship which existed between the plaintiff and the defendant. In deciding the question in dispute the court had to determine whether, under the circumstances, s. 13 of the Ontario Evidence Act operated to require corroboration of essential evidence before the plaintiff could recover against the firm. If s. 13 did not require corroboration against a partnership could it be extended to cover a partnership? Should it be extended to cover the partnership in this case?

[ 13 ] The plaintiff had not taken the precaution of obtaining a formal retainer from the firm. Nor was there any writing which clearly enunciated either party’s understanding that the plaintiff was acting on behalf of the defendants. The trial of the issue took a day. The plaintiff testified for most of the morning. The balance of the day was devoted to argument. The plaintiff’s evidence was not always clear cut. At the trial I had occasion to refer to the fact that the recollection of events by its witness was not always supported by such documents as did exist.

[ 14 ] It seems clear to me that the defendants were perfectly entitled to require that the plaintiff prove its case under these circumstances.

On the facts of this case does the court have a discretion to make an "order otherwise”?

[ 15 ] In Data General (Canada) Ltd v. Molnar Systems Group Inc (1991) 1991 7326 (ON CA) , 3 C.P.C. (3d) 180 (CA) the Court of Appeal expressed its lack of sympathy for those who contest liquidated claims when there is no defense of any substance. That court held that rule 49.10 made such defendants liable for substantial indemnity costs from the date of an offer of settlement demanding payment in full.

[ 16 ] This was not a liquidated claim and the defendant did have a defense of substance. Under these circumstances the discretion to "order otherwise" is not foreclosed.

Should the court make an “order otherwise”?

[ 17 ] In determining whether a “order otherwise” should be made in this case I considered the following:

General Rule:

“. . .resort should only be had to the exception [contained in Rule 49.10(1)] where, after giving proper weight to the policy of the general rule, and the importance of reasonable predictability and the even application of the rule, the interests of justice require a departure.” Niagara Structural Steel (St. Catherine's) Ltd. v. W.B. LaFlamme Ltd . 1987 4149 (ON CA) , 58 O.R.(2d) 773 @ p.777

Good Faith of The Defendants

[ 18 ] I accept the good faith of the defendants but I also accept that this has little weight. Until there is some evidence or indication to the contrary, the good faith of parties is to be generally assumed. Niagara Structural Steel (St. Catherine's) Ltd. v. W.B. LaFlamme Ltd . 1987 4149 (ON CA) , 58 O.R.(2d) 773 @ p.777.

Fact That The Offer Contained No Element Of Compromise.

[ 19 ] Data General ( Canada ) Ltd v. Molnar Systems Group Inc (1991) 1991 7326 (ON CA) , 3 C.P.C. (3d) 180 ¶ 21 . (CA) held that an element of compromise is not an essential element of an offer to settle. However, it also held that “where the defendant has relied upon a defence of substance -- one that reasonably gave rise to uncertainty on the question of liability, lack of compromise on the part of the plaintiff may be taken into account when considering whether to “order otherwise” under the Rule. (¶ 38)

[ 20 ] And this is so even though it reduces the certainty so valued in Niagara Structural Steel ( St. Catherine's) Ltd. v. W.B. LaFlamme Ltd . 1987 4149 (ON CA) , 58 O.R.(2d) 773.

“ 40 I recognize that in applying the exception in rule 49.10(1) the potential relevance of compromise may adversely affect the predictability of the ultimate application of the rule in some cases. I think that, in the interest of justice, this is unavoidable. It is inherent in the nature of discretion.” ( Data General (Canada) Ltd v. Molnar Systems Group Inc (1991) 1991 7326 (ON CA) , 3 C.P.C. (3d) 180 (CA))

Conduct Of The Defendant

[ 21 ] The Plaintiff argues that the defendant should have admitted the particular facts in its Request To Admit. I do not agree. On the other hand the defendant facilitated the trial considerably by accepting the quantum claimed when it had little reason to do so.

Conclusion

[ 22 ] Given all of these factors the demand for full payment as a term of settlement was not conducive to a settlement and the interests of justice dictate that the defendant should be entitled to the benefits of an “order otherwise” under R. 49.10(1) .

[ 23 ] As the successful party the plaintiff is entitled to costs but on a partial indemnity basis throughout.

Assessment

[ 24 ] In fixing the costs of this action I am mindful that the costs awarded must be both reasonable and proportional.

[ 25 ] In considering reasonableness I am mindful of Sub-rule 57.01(1) that sets out factors that the court may take into consideration when exercising its discretion under s. 131(1) in addition to any other matter relevant to the issue of costs:

• The result of the proceeding,

• Any offer to settle or contribute made in writing,

• The principle of indemnity including the experience of the lawyer for the party entitled to the costs, the rates charged by that lawyer and the hours [reasonably] spent by that lawyer.

• The amount of costs an unsuccessful party could reasonably expect to pay

• The amount claimed and the amount recovered

• The apportionment of liability

• The complexity of the proceeding

• The importance of the issues

• Conduct that tended to shorten or to lengthen unnecessarily the duration of the proceeding,

• Whether any step was improper, vexatious or unnecessary,

• Whether any step was taken through negligence, mistake or excessive caution,

• A party’s denial of or refusal to admit anything that should have been admitted.

• Whether the claimant initiated or was forced to defend separate proceedings for claims that should have been made in one proceeding

[ 26 ] I have also considered the submission of the defendant that costs in the amount of $6,000 plus disbursements would be reasonable. I do not consider that I am bound by that figure for counsel fee. Counsel said the amount would be reasonable, he did not press the court to accept it. Parties are free to settle a matter between themselves. But when they place it before the court it is ultimately for the court to determine, especially when making an award as between lawyers that will be looked to as a precedent for the future. Counsel may be candid without their client’s necessarily being bound by their submission.

[ 27 ] In considering proportionality I cannot overlook the fact that such claims will now be tried in the Small Claims Court.

[ 28 ] I fix counsel fees on a partial indemnity basis at $5,150 which sum is made up of the following:

Receipt of instructions, issue a statement of claim $1,600

Review Statement of defence $100

Request to Admit $200

Offer to Settle $150

Trial Record $150

Evidence Act Notice $100

Attend to speak to list $250

Preparation for trial $800

Counsel Fee at trial $1,500

Attend to argue costs (1hr) $300

$5,150

[ 29 ] In his brief, counsel for the plaintiff has divided Disbursements into “taxable disbursements” and “non-taxable disbursements”. I conclude that “taxable” refers to liability for G.S.T./H.S.T. and not the assessability of the item on a taxation of the account. The “non taxable disbursements” were almost ignored but for the fact that that they were obviously allowable items. The word “taxation” may have been supplanted by the word “assessment” to make the procedure more intelligible to laypersons but counsel should be aware of the dangers in the change of language.

[ 30 ] Disbursements are claimed at $1,124.10 before G.S.T./H.S.T. This includes $530.25 for photocopies, a sum that is surprising. There is no indication of the number of photocopies made or the cost per page. However the defendant made it very clear that it was not taking issue with disbursements and the policy considerations concerning lawyers fees which dictate that the court make an independent assessment not existing, disbursements are accepted at $1,124.10

[ 31 ] Judgment will go directing the defendant to pay to the plaintiff its costs of the trial on a partial indemnity basis in the amount of $6,274.10 plus G.S.T./H.S.T.

The Hon. Mr. Justice J. deP. Wright

Released: April 27, 2012

COURT FILE NO.: CV-09-0433-SR

DATE: 2012-04-27

ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: 1401337 ONTARIO LTD. o/a CKS CONSULTING, Plaintiff - and – MACIVOR HARRIS RODDY LLP Defendant REASONS ON APPLICATION FOR COSTS J. deP. Wright J.

Released: April 27, 2012

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