Court File and Parties

COURT FILE NO.: 01-CV-206672CM
DATE: 20120831
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: KELLY-JEAN MARIE ORR, Plaintiff

AND:

MTCC NO. 1056; GOWLING, STRATHY & HENDERSON; BROOKFIELD LEPAGE RESIDENTIAL MANAGEMENT SERVICES A DIVISION OF BROOKFIELD MANAGEMENT SERVICES LTD.; PATRICK POST; PAMELA CAWTHORN; BRUCE WARD; LARRY BOLAND; FRANCINE METZGER; MICHAEL KOSICH and RICHARD DORMAN, Defendants

AND:

RICHARD WELDON, Third Party

BEFORE: Madam Justice Darla A. Wilson

COUNSEL:
J. Berkow & R. Das, Counsel for the Plaintiff
T.B. Rotenberg & B.A. Percival Q.C., Counsel for the Defendant MTCC 1056
T. Bates, Counsel for the Defendant Gowlings
R. Clayton, Counsel for the Defendant Brookfield
D. P. Preger, Counsel for the Third Party Weldon

HEARD: January 31, 2012

ENDORSEMENT

[ 1 ] The trial of this action proceeded over the course of 3 months and my written reasons were released August 18, 2011. In a meeting with counsel following release of my Reasons, I agreed to hear costs submissions and fix the costs.

[ 2 ] The parties delivered written submissions and I heard oral argument on January 31, 2012. What follows are my reasons for my decision on the issue of costs.

Background

[ 3 ] This litigation has a long, protracted history that made its way through the courts over the course of a dozen years, concluding after a lengthy, hard-fought trial that commenced October 26, 2009 and finished February 1, 2010, with written submissions being delivered subsequently. I make reference only to events of significance in the process, in order to give context to my reasons on costs.

[ 4 ] In 1997, the Plaintiff Orr, now known as Rainville [“Rainville”], executed an agreement of purchase and sale with the Third Party Weldon [“Weldon”] for a condominium located on Lakeshore Boulevard West. Rainville hired the Defendant Gowlings to handle the real estate transaction on her behalf.

[ 5 ] After the deal closed, the Plaintiff discovered there were defects in the construction and leaking problems with the roof. In addition, she learned that she did not have legal title to the third floor of the unit and it had been constructed without a permit. The Plaintiff sued the vendor, Weldon, the condominium corporation [“MTCC 1056”] and the property management company [“Brookfield”] and sought a declaration that she had valid title to her unit, including the third floor, as well as damages for the monies she spent on repairs and renovations to the unit. While initially, Weldon was a defendant in the action the claim was dismissed against him prior to trial.

[ 6 ] In addition to the main action, there was another action which had originated as an application brought by the Plaintiff as well as an action brought by MTCC 1056 against the Plaintiff seeking an order that the Plaintiff cease any work on the unit and that she be directed to close up the third floor space. The Defendant MTCC 1056 also issued a Third Party Claim against Weldon for contribution and indemnity.

[ 7 ] Some of the claims advanced by the Plaintiff against MTCC 1056 were covered by the liability policy of insurance issued to the condominium while others were not. As a result, MTCC 1056 had to retain two different counsel to represent these interests.

[ 8 ] In my Reasons for Judgment, the claim was dismissed against Brookfield, Post, and Cawthorn as well as against the other individual defendants. Gowlings was found to be negligent and was ordered to pay the Plaintiff approximately $300,000 plus interest and various costs to be determined by the Master. The Defendant MTCC 1056 was ordered to pay the Plaintiff $20,840.50 for repairs to common element defects. The Plaintiff was order to pay to MTCC 1056 $56,399.02 for her occupation of the third floor. Weldon was ordered to pay to MTCC 1056 $18,739.31 for his occupation of the third floor, plus $50,000 in punitive damages and he was ordered to indemnify MTCC 1056 the amount it was ordered to pay to the Plaintiff.

[ 9 ] It is important to note that in October 2008, the various Defendants made significant Rule 49 offers to contribute: Gowlings offered $125,000 plus $50,000 towards costs; Brookfield offered $150,000 plus costs; MTCC 1056 (insured) offered $200,000 plus costs; and MTCC 1056 (uninsured) offered$145,000 plus costs, agreeing to abandon its claim of $55,000 for the occupancy of the third floor. The Plaintiff did not accept these offers nor was there a Rule 49 offer made by the Plaintiff prior to trial.

Positions of the Parties

Plaintiff

[ 10 ] Although the written materials requested a charging order on any costs or damages ordered payable to the Plaintiff, at the outset of his submissions Mr. Berkow withdrew this request.

[ 11 ] Counsel for the Plaintiff argued that Gowlings ought to pay her costs because it was the negligence of Gowlings that led to all of the other claims. Counsel submitted that the Plaintiff ought to be awarded her costs on a partial indemnity scale from the inception of the action to the end of the trial. Although there were offers to contribute, it was not unreasonable for the Plaintiff to pursue legalization of her unit, since she purchased the unit in good faith. Had the Plaintiff known it was only a two-storey condominium, she would not have purchased it.

[ 12 ] Further, the Plaintiff agrees with the position of the Defendants that a Sanderson order be made requiring Gowlings to pay any costs that the Plaintiff is ordered to pay. It is submitted that the Plaintiff was an innocent purchaser of the unit and to make a costs award against the Plaintiff would be unfair in all of the circumstances, resulting in no recovery for the Plaintiff.

[ 13 ] It was submitted that the Plaintiff ought not to be saddled with having to pay the costs of both sets of counsel retained by the condominium, noting that the total being claimed is in excess of a million dollars. The Plaintiff has no knowledge of insured/uninsured claims.

[ 14 ] Brookfield ought not to be awarded its costs; they prepared a faulty estoppel certificate and although they were not found liable, it is a novel point and it was not unreasonable for the Plaintiff to pursue them.

[ 15 ] On the issue of quantum of costs, counsel submitted that the cases make it clear that the overriding principle is that of reasonableness and an unsuccessful party ought not to be ordered to pay costs that are outside the realm of what they could have contemplated. It was submitted that the overriding consideration must be what is reasonable for the unsuccessful party to contribute towards the costs of the successful party and the quantum sought by the Defendants far exceeds any fair and reasonable expectation of the Plaintiff and such an order would negatively impact on access to justice. Mr. Das submitted that a reasonable amount for the costs of the counsel for the condominium is $200,000, subject to a Sanderson order. With respect to the quantum of the costs being sought by Brookfield, Mr. Das agreed the amount requested was reasonable.

Defendant MTCC 1056—insured claims

[ 16 ] Mr. Percival argued that with respect to the insured claims against MTCC 1056, the overwhelming majority of these claims were dismissed and he requests costs on a partial indemnity scale in the sum of $369,615.42 inclusive of disbursements, and the $10,000 the Plaintiff was ordered to pay for a prior adjournment of the trial. This sum is based on 1420 hours for senior counsel at $200 per hour and 193.8 hours of junior counsel at $150 per hour.

[ 17 ] Mr. Percival submits that a Sanderson order be made requiring Gowlings to pay these costs. He argued that this order would be just and fair in the circumstances because the Plaintiff’s condominium is fully mortgaged and she had limited success at trial, so unless a Sanderson order is made, the Defendants will not recover their costs.

Defendant MTCC 1056—uninsured claims

[ 18 ] Mr. Rotenberg submitted that his client is entitled to its costs on a partial indemnity scale to the date of the offers and on a substantial indemnity scale thereafter. He argued that the Plaintiff never made a Rule 49 offer and refused to accept the offers that were made by the Defendants so she forced the matter on to trial, resulting in all of the parties incurring significant costs. Given the outcome, it is clear she would have been much better off had she accepted the offers to settle in October 2008. Mr. Rotenberg submits that the court ought to allocate costs between the parties based on the percentage of trial time the various issues required.

[ 19 ] Mr. Rotenberg seeks payment of his client’s costs on a partial indemnity scale against the Plaintiff in the sum of $365,100.00 to October 24, 2008 and on a substantial indemnity scale thereafter for a further $449,600.00. He also seeks payment of costs on its crossclaim for compensation for loss of the third floor on a partial indemnity scale in the sum of $179,000, which is to be deducted from any amounts payable by the Plaintiff. He supports the argument that a Sanderson order ought to be implemented.

[ 20 ] Mr. Rotenberg seeks costs against Weldon for his occupancy of the unit in the sum of $5,900 and for his share of trial costs on a substantial indemnity basis in the amount of $388,600.00, arguing Weldon is responsible for the illegal third floor and failing to inform the Plaintiff of this fact, thus generating the litigation.

Defendant Brookfield

[ 21 ] Mr. Clayton argued that Brookfield’s offer was eminently reasonable and the claim was dismissed against his client at trial. Thus, he argues that Brookfield is entitled to its costs on a partial indemnity scale to the date of its offer and on a substantial indemnity scale thereafter. The sum of $285,689.13 is sought by Brookfield’s counsel and Mr. Clayton agrees that a Sanderson order ought to be made against Gowlings.

Defendant Gowlings

[ 22 ] Mr. Bates submitted that the role of Gowlings in the overall scheme of things was small and discrete: only 4 days of trial time was devoted to the solicitor’s negligence claim. It was submitted that the only damages sought by the Plaintiff against Gowlings were the diminution in value of the unit, costs to renovate the third floor, costs to return the third floor to attic space, the resulting renovation costs to the other floors and legal fees paid to Gowlings. He argued that it would be unfair for a Sanderson or Bullock order to be made because of the multitude of issues, and the complexity and length of the trial were not within the power of the Defendant Gowlings to change. It would be unfair to make Gowlings pay the costs of the Plaintiff who dragged the litigation out for more than a decade, engaging in what was described as “litigation behaviour”.

[ 23 ] Mr. Bates argued that the Plaintiff ought to bear her own costs of the numerous claims that were dismissed. He does not dispute that the Plaintiff is entitled to her costs against Gowlings. Mr. Bates submitted that the fees claimed in the Bill of Costs of the Plaintiff in the sum of $260,017 on a partial indemnity scale were reasonable. However, he argued that Gowlings ought to be required to pay 30% of these costs because the vast majority of trial time was spent pursuing other Defendants for damages unrelated to the illegality of the third floor such as common element leaks and problems with the roof. Similarly, it was submitted, Gowlings ought to pay 30% of the disbursements because many were unrelated to the claims asserted by the Plaintiff against Gowlings.

[ 24 ] Mr. Bates argued that it would be unfair to make a Sanderson order against Gowlings because the Plaintiff would not be dissuaded from pursuing her claims for legalization of her unit and that is what forced the case on to trial.

Third Party Weldon

[ 25 ] Mr. Preger agreed that a Sanderson order payable by Gowlings is appropriate in the circumstances. The two step test articulated in the jurisprudence is met on the facts of this case: the Defendants tried to shift responsibility onto each other; and on the issue of whether one Defendant caused the successful Defendant to be added as a party, Mr. Preger argued that if the Plaintiff had not sued the various Defendants, Gowlings would have added them.

[ 26 ] Further, it was submitted that Weldon ought to be liable only for the costs associated with the uninsured claims made against him by MTCC 1056: his occupation of the third floor; repairs for the common element deficiencies; and the punitive damages of $50,000.

[ 27 ] Although Mr. Preger acknowledged that Weldon created the “mess” that led to the lawsuit, he submitted his client is not responsible for the manner in which the litigation unfolded. Further, although punitive damages were awarded against Weldon for his conduct, to then order him to pay substantial indemnity costs would be double recovery and unfair in the circumstances.

Analysis

[ 28 ] Section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 along with rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 governs the award of costs and provides the court with discretion to fix costs. Rule 57 enumerates the various factors a court may consider when determining the issue of costs. The Divisional Court in Andersen v. St. Jude Medical, Inc. (2006), 2006 85158 (ON SCDC), 264 D.L.R. (4th) 557 (Ont. Div. Ct.), at para. 22, set out the principles which should guide the court exercising its discretion to fix costs:

1. 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): Boucher, Moon and Coldmatic.

2. A consideration of experience, rates charged and hours spent (formerly a costs grid calculation) is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case: Boucher. 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: Zesta Engineering.

3. 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)(0.b).

4. 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”: Murano at p. 249.

5. The court should seek to balance the indemnity principle with the fundamental objective of access to justice: Boucher.

[ 29 ] The court must take into account the principles set forth by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), specifically that the overall “objective [of fixing costs] is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant” (para. 26).

[ 30 ] Rule 57 and section 131(1) of the Courts of Justice Act grant the courts wide discretion over cost awards. I will set out for ease of reference the various factors for consideration pursuant to Rule 57:

(0.a) the principle of indemnity…;

(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 of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(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 lawyer; and

(i) any other matter relevant to the question of costs.

Conclusion

[ 70 ] The Defendant Gowlings shall pay to the Plaintiff her costs fixed at $300,000 inclusive of fees, disbursements and taxes.

[ 71 ] The Plaintiff shall pay to Brookfield 75% of its costs fixed at $200,000 inclusive of fees, disbursements and taxes and the Defendant Gowlings shall pay the remaining 25%.

[ 72 ] A Sanderson order shall issue requiring the Defendant Gowlings to pay the costs of the Defendant MTCC 1056 fixed at $500,000 inclusive of fees, disbursements and taxes, payable in the sum of $250,000 for the insured claims and $250,000 for the uninsured claims.

[ 73 ] The Third Party Weldon shall pay to the Defendant MTCC 1056 the sum of $25,000 in costs for the claim for his occupancy of the illegal third floor.

[ 74 ] Mr. Rotenberg submitted various draft judgments for signature. He is to finalize the judgments including the costs and forward approved copies to me for my review and signature. If there are any other outstanding matters arising from my judgment or costs endorsement, I may be contacted through Judges’ Administration.

D.A. Wilson J.

Date: August 31, 2012