SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: 09-46161
DATE: 2012/09/27

In the matter of the Construction Lien Act, R.S.O. 1990, c. C.30 as amended

RE: Deslaurier Custom Cabinets Inc. v

6383009 Canada Inc. o/a Le Groupe Brigil

BEFORE: Master Calum MacLeod

COUNSEL:
Ronald Caza, for the Defendant/Moving party
John Margie, for the Plaintiffs/Responding parties

COSTS DECISION

[ 1 ] On June 5th, 2012 I released reasons dismissing motions by the defendant in three related lien actions ( 2012 ONSC 3350 ). Those motions had been to declare the liens expired and were based on what I held to be an incorrect interpretation of s. 37 (1) of the Act. In my reasons I indicated that costs would be payable to each of the plaintiffs on a partial indemnity scale and invited counsel to reach agreement on the quantum and how the costs should be allocated. I have now received written costs submissions. My disposition of the question of costs is set out below.

Scale of Costs

[ 2 ] Both parties ask that I reconsider the scale of costs. The defendants argue that there should be no costs because of the novelty of the question. The plaintiffs on the other hand argue that costs should be awarded on a substantial indemnity scale because the motion had no merit, because of an offer to settle and because of certain background facts which they contend should give rise to extraordinary cost consequences.

[ 3 ] I will comment on each of these briefly.

Novelty

[ 4 ] While it is true that no case directly on point was cited by either party, it is also true that my ruling was consistent with the wording of the statute and what I described in my reasons as the conventional view of the meaning of the section. The point was therefore not so novel that it required adjudication to make sense of the statute. On the other hand I would not describe the position taken by the defendant as frivolous.

[ 5 ] As discussed in my reasons there are some fairly nuanced questions of timing which may apply if lien claimants elect to rely on actions by other lien claimants to protect their rights. The plaintiffs could have removed any doubt as to the expiry of their liens by specifically setting each action down for trial. Thus in my view the merits of the motion are a neutral factor and would not in and of themselves justify a departure from the ordinary order that costs follow the event on a partial indemnity scale.

Conduct

[ 6 ] The plaintiffs are understandably upset by the manner in which these motions came about. In simplest terms, it was believed by all of the plaintiffs that the defendant would consent to a judgment of reference. In April of 2011 a reference had been proposed and a draft judgment had been circulated. Had that proceeded then the actions would not have been set down for trial. Rather there would have been an order for trial setting a date for the reference to proceed before the master and all of the lien claims would have been dealt with under s. 58 (4) of the Act.

[ 7 ] The plaintiffs were never informed that Brigil was not consenting to a reference although it became apparent that the judgment would not be obtained before the deadlines for expiry of the liens pursuant to s. 37 (1). Consequently, counsel for Pomerleau set his action down for trial on September 7 th , 2012 and the other three lien claimants did not since they assumed it was not necessary to do so. Brigil had never advised them that if the deadlines passed without each individual action being set down for trial, Brigil would be taking the position that the liens had expired. On September 27 th , 2012 counsel for Brigil wrote to counsel for the three lien claimants taking that position and inviting them to agree to release of the security. This position was subsequently maintained and was ultimately the focus of the subject motions.

[ 8 ] I am not prepared to comment on the conduct of Brigil’s former counsel as he is not before the court and I do not know what instructions he received nor his version of events. I would point out that there is a fine line captured by Rule 6 (3) of the Rules of Professional Conduct not to “take advantage of or act without fair warning upon slips, irregularities, or mistakes on the part of other legal practitioners not going to the merits or involving the sacrifice of a client's rights.” It may be the duty of a lawyer under certain circumstances not to warn other counsel that they are about to miss a limitation period since to do so might sacrifice the rights of the client at the altar of civility. It is quite another thing to induce a party to miss a deadline by holding out false promise of settlement or procedural collaboration and then to take an unexpected position concerning the interpretation of the statute. The latter might constitute “sharp practice”. I do not make such a finding.

[ 9 ] I can conclude however that the defendant acted unreasonably by not immediately advising whether or not it would consent to a reference and then by standing by when it knew or ought to have known that the plaintiffs assumed setting the Pomerleau action down for trial protected all of the lien claims. I do not however consider this a case in which there should be a punitive costs award.

[ 10 ] To be clear about this, the court undoubtedly has the power to punish litigation misconduct through an award of costs. The Supreme Court of Canada has recognized that while indemnity for costs incurred by a successful party remains a major purpose of costs awards, it is not always the sole purpose or even the primary purpose. The court has specifically recognized that costs may be used as an instrument of policy and can be used to sanction behaviour that increases the duration or cost of litigation or is otherwise frivolous and vexatious. [1] These criteria also appear in Rule 57.01 (1).

[ 11 ] Conduct is sometimes a reason to withhold costs from a winning party or even to award costs against it. It is rare however for a court in Ontario to specifically fine a party by overcompensating the winning party for costs. One reason for this is that it may be unnecessary. Similar to punitive damages, in my view punitive costs awards should only be necessary if the costs already awarded seem insufficient to express the court’s disapproval. In the matter before me for example, the consequence of Brigil’s unexpected position was that counsel for each of these lien claimants had to report the matter to LawPro and to swear affidavits in opposition to the defendants’ motions. Mr. Chambers and Mr. Thompson were cross examined. Brigil also retained new counsel. Accordingly the motion was ultimately argued by Mr. Caza for the defendant and Mr. Margie for the plaintiffs.

[ 12 ] A certain amount of time was spent dealing with the conduct of Brigil and its counsel and the effect that might have had on the disposition of the motion. Ultimately it played no role in the decision because I concluded that the interpretation of s. 37 advanced by Mr. Margie on behalf of the lien claimants was the correct one. Had I reached a different conclusion, however, the question of conduct might have been relevant either to an exercise of discretion (assuming the court was left with discretion) or to an estoppel argument and it would of course have been relevant to the question of costs. Thus I am of the view that the time spent on the motion is reasonable under all of the circumstances. Since I have reached that conclusion, simple application of the principle of indemnity will result in a higher cost award than might otherwise be the case. Increased cost in those circumstances is its own punishment and there is no need to consider an additional sanction.

Offers to Settle

[ 13 ] There was a Rule 49 offer of which I was not aware. That offer was delivered by e-mail on March 7, 2012. The offer was for dismissal of the motion without costs. Though Mr. Caza argues that this is not a real offer because it contains no genuine proposal to compromise, in the context of this motion, it is a genuine offer and clearly the plaintiffs achieved an equal or better result. This creates a presumptive entitlement to substantial indemnity costs from that date forwards.

[ 14 ] Fortunately for the defendant, that makes little practical difference. In this case there is little difference between partial indemnity and substantial indemnity because of the discounted rates charged to LawPro. Mr. Margie’s ordinary hourly rate for example is $575.00 per hour whereas his actual LawPro rate is $325.00 per hour. Mr. Margie was called to the bar in 1995 and under the “information to the profession” mini costs grid published by the rules committee in 2005 the maximum rate for partial indemnity for a lawyer 17 years in practice is $300.00. I agree with Mr. Margie that because of the absence of case law on s. 37 this was a motion of more than average complexity. Even minor indexing for inflation therefore easily justifies the actual LawPro rate even if I did not award substantial indemnity costs. The cases are clear that the court should not give the benefit of a reduced fee arrangement enjoyed by the party entitled to costs to the party required to pay costs when determining partial indemnity.

Fixing costs

[ 15 ] Fixing costs is intended to be a summary procedure and not a scientific exercise. Though I consider the time spent to be reasonable under the circumstances and the plaintiffs are entitled to substantial indemnity costs after March 7 th , 2012, this does not mean the party asking for costs should get the full amount requested. The court must still consider what it is fair to require the unsuccessful moving party to pay. Because of the time spent on these motions, the complexity of the issues, the complicating factor of conduct and the offer to settle, the amounts I am awarding to each of the responding parties will be reasonably close to the amount requested.

Conclusion and Costs Awards

[ 16 ] In conclusion, the defendant shall pay costs to each plaintiff on a partial indemnity scale to the date of the offer to settle and on a substantial indemnity scale thereafter. Those costs are fixed as follows:

a) Jo Peach: $10,500.00 for fees plus the disbursements of $1,244.74 and applicable HST on both.

b) Tripoli: $10,000.00 for fees plus the disbursements of $1,347.06 and applicable HST on both.

c) DesLaurier: $6,000.00 plus the disbursements of $556.16 and applicable HST on both.

[ 17 ] The costs are due and payable within 30 days.

Master MacLeod

DATE: October 9, 2012

[1] British Columbia v. Okanagan Indian Band 2003 SCC 71 , [2003] 3 S.C.R. 371 @ para. 25