Court File and Parties
Court File No.: 07-CV-345986
Date: 20120606
Superior Court of Justice - Ontario
Re: FAST MOTION MEDIA GROUP INC.
Plaintiff
And:
GINO PRIOLO
Defendant
Before: Mr. Justice Lederer
Counsel:
Michael Ellis & Christopher Karpacz , for the Plaintiff
Richard Hammond & Alex Flesias , for the Defendant
Costs Endorsement
[ 1 ] This action arose from an agreement of purchase and sale of a property intended for specialized use as a “motion capture studio” associated with the making of motion pictures and the production of video games. As part of the agreement, the vendor was to undertake modifications to the building that would make it suitable for the purpose for which it was being purchased.
[ 2 ] The work was not completed pursuant to the arrangement that had been made and the plaintiff suffered losses attributable to the cost of hiring others to complete the project, loss of anticipated profits and the loss associated with a particular opportunity that, as a result of the delay, could not be realized.
[ 3 ] The plaintiff was successful. The damages awarded totalled $301,708.78.
[ 4 ] The plaintiff requests an order for costs in the amount of $133,008, plus disbursements in the sum of $41,596.34, plus HST in the sum of $17,291.04, representing a claim of $191,895.38.
[ 5 ] The trial began on January 16, 2012. On January 9, 2012, the plaintiff, apparently, made an offer to settle the matter for $300,000, inclusive of pre-judgment interest. I say apparently because no Offer to Settle (see: Form 49A-Offer to Settle) was provided with the submissions as to costs. The plaintiff relies on Rule 49.10 of the Rules of Civil Procedure (“Costs Consequences for Failure to Accept”) to request costs on a partial indemnity scale up to January 8, 2012 and on a substantial indemnity scale thereafter.
[ 6 ] In furtherance of the claim, a “Bill of Costs of the Plaintiff” was provided. Over four and a half pages, it refers to all of the activities undertaken in furtherance of prosecuting this action, beginning with the drafting and finalizing of the Statement of Claim and ending with the preparation of the Costs Submissions. At the end of the list, the fees requested are broken down into three parts:
• for costs on a partial indemnity scale (August 23, 2007 to January 8, 2012);
• for costs of preparation for trial on a substantial indemnity scale (January 9, 2012 to February 8, 2012); and,
• for the costs of trial on a substantial indemnity scale (13 days beginning on January 16, 2012).
[ 7 ] Disbursements, including the involvement of experts and the preparation of their evidence, are summarized following the outline of the value of the fees claimed.
[ 8 ] Based on this form of Bill of Costs, it is impossible to determine the time spent or cost of a single or particular task or event. The costs for fees must be assessed on the total hours spent and the fees charged for each of the lawyers covering each of the three parts into which the action is broken down. The submissions made in support of the claim for costs rely on the proposition that a partial indemnity claim should be 60% of the actual rates and fees charged whereas a substantial indemnity claim would represent 90% of that figure. The difficulty is that, while the rates charged are higher for that portion of the matter for which substantial indemnity costs are requested, there is no indication as to how either of the hourly rates were arrived at for the purpose of this claim.
[ 9 ] The costs for disbursements are represented by a monetary value, but without any indication of the time spent by the experts involved.
[ 10 ] In the circumstances, the costs to be evaluated can only be assessed on a global, rather than particular, basis.
[ 11 ] Counsel for the defendant takes the position that it would be inappropriate for costs to be awarded on anything other than a partial indemnity scale. He pointed out that, for there to be reliance on Rule 49.10, any offer to settle must be made “at least seven days before the commencement of the hearing” (see: Rule 49.10(1)(a)). In the normal course, January 9, 2012 would be seven days before January 16, 2012; however, in this case, the offer to settle was received by counsel for the defendant, by facsimile, at 4:29 p.m. Where service of a document, by facsimile, is made between 4 p.m. and midnight, it is deemed to have been served on the following day (see: Rule 16.05(1)). On this basis, the offer to settle would be taken as having been served on January 10, 2012, six days before the commencement of the trial. Moreover, in computing time under the rules, where a period of seven days or less is prescribed, holidays are not to be counted (see: Rule 3.01(1)(b)). Holidays includes “any Saturday or Sunday” (see: Rule 1.03(1)). January 9, 2012 was a Monday. Accordingly, in counting the seven days, Saturday January 14 and Sunday, January 15 could not be counted. It is also true that had the notice been served on Friday, January 6, 2012, Saturday, January 7, 2012 and Sunday, January 8, 2012 would also have had to be discounted. In other words, to give a full seven days’ notice, this offer to settle would have to have been served on January 5, 2012.
[ 12 ] In response, counsel for the plaintiff pointed out that, even where Rule 49.10 is not complied with, the court maintains the discretion to take into account any offer to settle made in writing, the date the offer was made and the terms of the offer (see: Rule 49.13).
[ 13 ] Counsel for the defendant also submitted that, to be effective, an offer made pursuant to Rule 49 “must be crystal clear” (see: Malik v. Sirois 2003 CarswellOnt 3372, 176 O.A.C. 248 ). The implication of this submission is that, in this case, this test is not met and that, accordingly, it is not clear that the judgment was more favourable to the plaintiff. The submissions, as to costs, made on behalf of the plaintiff say that the offer was for $300,000, inclusive of pre-judgment interest, plus costs. The judgment was for $301,708.70, plus pre-judgment interest, plus costs. The two variables are the value attributed to pre-judgment interest and to costs.
[ 14 ] The judgment includes an award of pre-judgment interest, pursuant to the Courts of Justice Act , R.S.O. 1990 c. C. 43. On this basis, interest would be at the rate of 4.8% and, as calculated by counsel for the plaintiff, would represent an amount of $62,734.08. Counsel for the defendant, in his submissions, asks that the rate of interest be varied. He points out that, in the years between the date the Statement of Claim was issued and the date the decision was rendered, the applicable interest rate was reduced to 1.3%. Counsel for the defendant has calculated that the average rate of pre-judgment interest over that time was 1.89%. He submitted that this would reduce the value of pre-judgment interest by “about $40,000”. This would reduce the difference between the judgment and the settlement offer by approximately that amount. I am not prepared to amend the judgment. This submission should have been made at the end of the trial.
[ 15 ] Insofar as costs are concerned, counsel for the defendant submitted that, from the Bill of Costs, there is no way of knowing what the costs would have been at the time the offer was made, as compared to what is being requested or may be awarded following the trial. This is not entirely true. The Bill of Costs does provide an indication of the hours worked and rates charged by counsel up until January 8, 2012 and the calculation of fees that would result. They are as follows:
Counsel (Michael C. Ellis) [called to the Bar 1998]
Aug. 23, 2007-Jan. 8, 2012
$292.50 x 74.1 hours = $21,674.25
Counsel (Chris Karpacz) [called to the Bar 2011]
Sept. 30, 2010-Jan. 8, 2012
$90 x 58.6 hours = $5,274
Sr. Law Clerk (V. Jovanoski)
$80 x 6.6 hours = $528
TOTAL $27,476.25
[ 16 ] This is substantially less than the ($133,008-$27,476.25) $105,531.75 requested as fees for the time spent after January 8, 2012. This does not account for the difference in the cost of disbursements before and after the offer to settle. As well, to be entirely accurate, the expenditures for January 9, 2011 would have to be accounted for as being expended before the settlement offer was made. Be that as it may, based on the evidence provided to the court, it is clear that the judgment was more favourable than the offer to settle.
[ 17 ] Nonetheless, in the circumstances, I am not prepared to make an award of costs at an elevated scale. The Offer to Settle has not been presented. It was not served in the time-frame set by Rule 49.10. There is no reason that would lead me to exercise my discretion and make an award of costs at an elevated scale for any part of this proceeding.
[ 18 ] For whatever reason, counsel for the plaintiff has not provided calculations that would demonstrate the value of the costs he seeks, for the period after January 8, 2012, on a partial indemnity scale. In order to get some idea of the impact, I have taken the number of hours attributed to each counsel, the law clerk and a student for the period after January 8, 2012 and multiplied those hours by the rates utilized to calculate the costs prior to that date:
Counsel (Michael C. Ellis)
Trial preparation (Jan. 9, 2012 – Feb. 8, 2012) 52.2 hours x $292.50 = $15,425.10
For conduct of the trial – 104 hours x $292.50 = $30,420
For 4 weekends/holidays – 30.5 hours x $292.50 = $8,921.25
For 5 “no court days” – 3.5 hours x $292.50 = $1,023.75
Sub-total $55,790.10
Counsel (Chris Karpacz)
Trial preparation (Jan. 9, 2012-Feb. 8, 2012) 23 hours x $90 = $2,070
For conduct of the trial – 104 hours x $90 = $9,360
For 5 “no court days” – 15 hours x $90 = $1,350
Sr. Law Clerk (V. Jovanoski) 7.8 hours x $80 = $624
Law Student (Jaime Bell)
Research of law – 45.8 hours x $75 = $3,435
Sub-total $18,909
TOTAL $74,699.10
[ 19 ] In order to come to an understanding of what the claim for fees, based on a partial indemnity scale would be, one need only add the fees being sought for the period before January 9, 2012 to the calculation of fees for the period after, and including that date on the same scale: $27,476.25 + $74,699.10 = $102,145.33.
[ 20 ] For his part, counsel for the defendant suggested that there was no need for a second counsel and that fees for counsel should be limited to $50,000.
[ 21 ] To this point, this assessment does not include a consideration of the costs being requested on account of disbursements. This figure is made of three components:
(1) $6,544.12 generally, made up of filing fees, copying costs, printing and the like;
(2) $20,824.39 preparation of professional witnesses for trial; and,
(3) $14,227.83 as the costs for expert’s reports and architectural drawings
for a total of $41,596.34. Counsel for the defendant suggested that the costs for disbursements should cover only the costs associated with the first of the three components. He submitted there should be “no additional costs awarded for... ‘expert’ witnesses.”
[ 22 ] Accordingly, for this thirteen-day trial and all the preparation, counsel for the defendant suggested total costs of $56,544.00.
[ 23 ] As counsel for the defendant suggested, costs are to be assessed based on what the party paying them could reasonably expect to pay. To my mind, the figure suggested by counsel for the defendant simply does not bear this in mind. The fees for the principal counsel, on a partial indemnity scale over the course of the proceeding as a whole, total in the area of ($21,674.25 + $55,790.10) $77, 464.35. There is no reason to reduce this to $50,000. Moreover, it is no longer unusual for a second lawyer to be involved. Some costs associated with more junior counsel are appropriate.
[ 24 ] It is customary that the cost of experts be recognized and, in this case, the experts called by the plaintiff were helpful in understanding the requirements of the project and the economic impact of the failure of the defendant to complete the work.
[ 25 ] Having said this, the trial should not have taken thirteen days. Considered on a global level, the cost of ($102,145.33 for fees + $41,596.34 for disbursements) $143,741.67 is somewhat more than the defendant could reasonably expect to pay.
[ 26 ] I award costs payable to the plaintiff by the defendant in the amount of $130,000 on account of fees and disbursements, plus the HST this amount attracts.
LEDERER J.
Date: 20120606