Court File and Parties

COURT FILE NO.: CV-07-086377-00
DATE: 20120517
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Oskar United Group Inc., 1714469 Ontario Inc., and 1600308 Ontario Inc., Plaintiff

AND:

CHEE, Peter Kin Ho aka Peter Chee, Mi-Ko Urban Consulting Inc., Mi-Ko Urban Inc., Defendants

BEFORE: The Honourable Mr. Justice J.R. McCarthy

COUNSEL:
Lorne Sabsay, for the Plaintiff

Michael Tweedie, for the Defendant

HEARD: by written submissions

COSTS ENDORSEMENT

[ 1 ] On March 7, 2012, I released reasons for a decision allowing a portion of the Plaintiffs’ action against the Defendants.

[ 2 ] At the conclusion of those reasons, I indicated that, in the event that the parties were unable to agree on costs, they should provide written submissions.

[ 3 ] I have now received and reviewed costs submissions from the Plaintiffs and the Defendants, together with a costs outline from the Plaintiffs.

The Plaintiffs’ Costs

[ 4 ] The Plaintiffs were partially successful in their claim against the Defendants and are therefore entitled to their costs of the action. The Plaintiffs submit that they should be awarded substantial indemnity costs throughout. The Defendants have not suggested that they should be entitled to their own costs and did not submit a costs outline. Rather, the Defendants submit that the Plaintiffs’ costs should, at best, be limited to 15 per cent of the amount recovered since the monetary amount recovered was within the monetary jurisdiction of the Small Claims Court.

Factors under Rule 57.01(1)

[ 5 ] The Plaintiffs obtained judgment in the amount of $25,000 for punitive damages. They did not obtain any amount for negligence of the Defendants. The counterclaim brought by the Defendants was settled at or near the outset of trial. The issue of costs of defending the counterclaim was left to the trial judge.

The Principle of Indemnity versus Reasonable Expectations of an Unsuccessful Party

[ 6 ] The Plaintiffs have been invoiced more than $276,000 for fees and GST/HST by their lawyers. While one of the factors for the court to consider in exercising its discretion to award costs is the principle of indemnity, by any stretch of imagination, this figure is clearly exorbitant for litigation culminating in a ten day trial on what turned out to be a two issue case. The principle of indemnity in subparagraph (1)(0.a) of rule 57.01 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194, must be considered in conjunction with subparagraph (1)(0.b):

Factors in Discretion

57.01 (1) 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; …

[Emphasis added]

[ 7 ] The use of the words “reasonably expect” must involve an objective assessment of what a reasonable person, faced with the prospect of moderately lengthy and complex litigation, would expect to face in terms of exposure to costs if he or she was unsuccessful in advancing or defending a position. That reasonable expectation would presumably have informed the decision to maintain a defence, conduct the litigation and formulate offers to settle the case. It can be fairly stated that, in any proceeding where two well-represented litigants require recourse to the courts to settle their differences on issues of fact or law, the prospect of being ultimately unsuccessful is very real. A reasonable person faced with that reality as well as exposure to the quantum of costs now being sought by the Plaintiffs would surely recoil from the process, regardless of the strength of their case, the courage of their conviction or the cost of resolution without adjudication. The spectre of costs must not serve as an absolute deterrent for a citizen seeking a remedy or defending a position in a court of law.

Proportionality

[ 8 ] When applying any of the Rules of Civil Procedure , the court shall make orders that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding: see rule 1.04(1.1) .

The Amount Recovered

[ 9 ] The guiding principle of proportionality is made a specific factor for consideration in ordering costs: see subparagraphs (a), (c) and (d) of rule 57.01(1). In the case at bar, the Plaintiffs were only moderately successful, obtaining a judgment that would now be within the monetary jurisdiction of the Small Claims Court. The amount of that recovery was, at the time of the issuance of the claim, clearly within the monetary limit prescribed by the Simplified Procedure rules: see rule 76. While I am satisfied that the nature of the claim, the relief sought and the maintaining of the counterclaim up until trial combined to make this action appropriate for the normal rules of court, the amount claimed and the amount recovered must still be considered. The amount recovered was a mere fraction of the amount claimed by the Plaintiffs; moreover, the nature of the relief obtained was not congruent with the relief sought. Along the way of the litigation, the Plaintiffs abandoned their claim for pecuniary damages and specific performance. They were unsuccessful in their attempt to obtain a finding of negligence against the Defendants.

Importance of the Issues and Complexity

[ 10 ] I agree with the Defendants that the issues were not terribly complex. The matter was not unduly complicated. The issues were not of such importance that they required the involvement of two senior lawyers at trial. The Plaintiffs were certainly within their rights to employ two lawyers, but the cost of that luxury should not be visited upon an unsuccessful defendant. As Justice D.C. Shaw stated in Municipality of Sioux Lookout v. Goodfellow , 2010 ONSC 2875 at para. 16 , [2010] O.J. No. 2564: “Costs must be proportionate to the value of the legal work necessary to effectively represent the client. If costs are disproportionate, litigation becomes inaccessible as a method of dispute resolution.”

Expert Reports

[ 11 ] The Plaintiffs claim that the Defendants should be responsible for costs of $30,587.39 related to retaining Lehman and Associates as experts. In my view, the costs in that regard can only be borne by the Plaintiffs themselves. The Lehman report was put before the court for no real purpose. Presumably, it served to satisfy the Plaintiffs that the opinion obtained by the Defendants would prevail on the issue of pecuniary damages. The report was of no utility to the court in determining the issues before it. The Plaintiffs did not pursue the issue which it was designed to address, nor could the report be said to have advanced the Plaintiffs’ position in any way.

Rule 49 Offer

[ 12 ] I find that the Plaintiffs did not better their Offer to Settle made on April 13, 2009. The monetary amount in paragraph 1 of that offer is the sum of $50,000 which includes all interest, costs and expenses incurred by the Plaintiffs up to the date of the offer. The judgment obtained by the Plaintiffs was for $25,000 plus interest. There is no way of determining what amount of the $50,000 would have been ascribed to costs on the date of the offer. Rule 49 will not apply to an offer that includes a fixed amount for costs instead of costs as assessed, as the court should not enter into an ad hoc assessment of costs as of the date of the offer: see Noyes v. Attfield (1994), 1994 7286 (ON SC) , 19 O.R. (3d) 319 (C.J.).

[ 13 ] In terms of paragraph 2, I find that the wording employed results in an escalating offer, which would be different on each successive day. That being the case, it is the kind of escalating offer which the Ontario Court of Appeal rejected as being inconsistent with rule 49: see Rooney (Litigation Guardian of) v. Graham (2001), 2001 24064 (ON CA) , 53 O.R. (3d) 685 (C.A.). Offers of this kind are ones of perpetual variation and do not comply with the rule: see Yepremian v. Weisz (1993), 1993 5483 (ON SC) , 16 O.R. (3d) 121 (C.J.).

The Conduct of the Defendants

[ 14 ] Conduct that is reprehensible, scandalous or outrageous, either giving rise to the action or in the proceedings themselves, is grounds for costs on a substantial indemnity basis. Breach of trust supports an award of substantial indemnity costs: see Young v. Young , 1993 34 (SCC) , [1993] 4 S.C.R. 3; York Region Condominium Corporation No. 890 v. RPS Resource Property Services Ltd . , [2011] O.J. No. 1185 (S.C.) . As I held in my reasons for decision, the conduct of Peter Chee was deceitful, reprehensible, scandalous and outrageous. It was that conduct which led to the action being brought.

[ 15 ] There are other factors to consider: the entire process was unduly lengthened by the counterclaim of the Defendants which was ultimately resolved at trial but which served to add a layer of complexity to the case. The Defendants conducted examinations for discovery of the Plaintiffs over four days. This seems an exorbitant length of time in light of the issues in this case. I find that the conduct of the Defendants unnecessarily lengthened the duration of the proceeding.

[ 16 ] The Defendant Chee refused to admit that he was a fiduciary when all of the evidence overwhelmingly pointed to that conclusion. The Defendants maintained, until well into the trial, that early references to “Concession 7, King Township” did not involve the Oskar property. This was so clearly at odds with the documentary evidence, including the Defendants’ own reports, that it is not a position that a reasonable person could possibly maintain. In my view, these represented failures to admit things which should have been admitted for the purpose of rule 57.01(1)(g).

Disposition on Costs

[ 17 ] Under section 131(1) of the Courts of Justice Act , R.S.O. 1990, c. C.43, the court is granted a wide discretion to award or deny costs of and incidental to a proceeding. In the case at bar, the exercise of this discretion must surely involve a balancing between the competing principles of indemnity versus proportionality. That exercise must also weigh in the conduct of the Defendants that gave rise to the litigation. Having considered all relevant factors under rule 57.01(1) and having regard to the Costs Summary of Fees and Disbursements filed by the Plaintiffs, I order that the Plaintiffs are entitled to costs against the Defendants fixed and payable in the amount of $50,000 (fifty thousand dollars), inclusive of fees, HST and disbursements. That amount is payable forthwith.

McCARTHY J.

Date: May 17, 2012