Superior Court of Justice - Ontario

COURT FILE NO.: 421/11
DATE: November 26, 2012

Between:

Aubrey Falls Investments Ltd., Silver Homes Ltd. and Noaro Services Corporation Applicants/Moving Parties – and – Lawrence Kozak Respondent/Responding party

Before: E.J. Koke J.

Counsel:
Counsel, for the Applicants/ Moving Parties, Orlando Rosa

Counsel, for the Respondent/ Responding Party, Jack Jamieson

Costs ENDORSEMENT

[ 1 ] The moving parties brought this application for an order that a dispute which had arisen among them proceed to arbitration and that the court appoint a single arbitrator to adjudicate the dispute. The application was opposed by the Respondent. The court found in favour of the Applicants and granted the order and requested the parties to deliver written submissions with respect to costs.

[ 2 ] The moving parties delivered an offer to settle and they submit that they are entitled to costs on a substantial indemnity basis, and that these costs should be assessed in the amount of $25,379.15 comprised of $21,402 for fees, $2782.26 for HST and $1,194.89 for disbursements. Their costs assessed on a partial indemnity basis are $20,453.48 comprised of $17,043 for fees, $2,215.59 for HST and $1,194.89 for disbursements.

[ 3 ] The respondent submits that there should be no order as to costs, but in the event the court is not so persuaded, an appropriate amount would be $7,500 for costs, plus disbursements as claimed and HST.

The Principle of Indemnity

[ 4 ] The respondent bases his position that there should not be an order as to costs on his assertion that it was entirely reasonable, and at least arguable, that the agreements that had been entered into by the parties did not require a submission to arbitration.

[ 5 ] There are many cases which come before the courts in which the position of the unsuccessful party is both reasonable and arguable. In my view, this fact alone does not disentitle the successful party to indemnification for costs. The situation is different if the court is asked to decide a novel legal issue of significant public interest but this is not such a case.

[ 6 ] In my view, the well-established principle that a successful party is entitled to costs applies in this case.

Should the Court apply the Costs consequences as set out in Rule 49.10?

[ 7 ] The applicants delivered what is referred to as a “Rule 49 offer”. The offer provided that a single arbitrator be appointed, that the respondent be at liberty to choose the arbitrator from a list of arbitrators previously submitted by the applicants and that the costs of the application to date of acceptance be payable on a partial indemnity basis by the respondent, less $250.

[ 8 ] In its decision, the court selected a single named arbitrator to hear the dispute. The applicants submit that the offer which had been submitted by them is “more favourable” than the court’s decision because the offer to settle provided that the respondent could choose the arbitrator. The applicants submit that they are therefore entitled to costs assessed on a substantial indemnity basis. In the alternative, they submit that that even if the court decides that the offer is “as favourable” as the decision of the court, the costs consequences set out in Rule 49.10 are still applicable.

[ 9 ] In my view, the offer which was delivered by the applicants did not contain a sufficient element of compromise to qualify as an offer which should result in a higher award of costs. This is not one of those situations where there is no defence of any substance i.e. a defence to a liquidated claim. In this case, there was a clearly an arguable defence put forward which gave rise to uncertainty on the question of liability; it therefore required some form of compromise [1] .

[ 10 ] The applicant’s costs should therefore be determined on a partial indemnity basis.

The Complexity of the Proceedings

[ 11 ] I accept that the application raised some issues which were relatively complex. Both parties submitted factums and briefs of authorities in support of their positions, and referred to issues with respect to accounting reports which had been placed before the court for its review.

[ 12 ] In my view, the issues were not so complex that it justified a higher award of costs, and I note that this was not argued either. The degree of complexity is to be considered with respect to the time devoted by the applicants’ lawyer in preparing for and arguing the motion.

Conduct of the Parties

[ 13 ] One of the arguments raised by the respondent at the hearing was that the applicants were disentitled to the arbitration process given their oppressive conduct. In raising the issue of oppressive conduct the respondent did not file an affidavit sworn by him personally, but instead he relied on an affidavit of an administrative assistant in the offices of his lawyer’s office, thereby protecting himself from cross examination on the issue of the alleged oppressive conduct.

[ 14 ] The respondent argues that the purpose of the affidavit sworn by the administrative assistant was to provide the court with information on the context of the dispute only.

[ 15 ] Clearly, the allegations of oppressive conduct were intended to provide support for the respondent’s argument that the underpinning of the arbitration structure has been destroyed. In my view, if a court is to consider such a serious charge in support of a party’s position, the court requires direct and informed evidence, and an opposing party requires an opportunity to cross-examine an informed person. The failure by the responding party to provide credible and informed affidavit evidence in support of this allegation was improper.

Expectations of the Parties

[ 16 ] The applicants submit that the respondent, given his legal background, is well aware of the costs associated with an application of this sort, and should be well aware of the costs consequences of failing to accept the offer. I agree that the costs claimed by the applicant are in amount which the respondent should reasonably be expected to pay in relation to this proceeding. I point out however that in my view, this question is not to be determined on a subjective basis, but on an objective basis; in other words, a litigant such as the respondent should not be held to a higher standard than a less knowledgeable litigant, and I have not held him to higher standard.

Hourly Rate

[ 17 ] The respondent does not take issue with the hourly rate ($300 on a partial indemnity basis) put forth by the applicant. In my view, this is reasonable hourly rate given the experience of the applicants’ counsel.

Hours Devoted to the Matter by Applicants’ counsel

[ 18 ] The respondent argues that the suggestion that the matter consumed 57 hours time of experienced counsel is excessive. The respondent points out there were no cross examinations held or other steps taken and the matter took only one half day to argue. The respondent also points out that some time was docketed for communicating with arbitrators and rescheduling the matter when a number of judges declined to hear the matter due to their prior connections with the respondent.

[ 19 ] In my view, there is merit to the respondents’ argument that some of the time included in the applicants’ bill of costs should not have been included, because it was not directly related to the application.

[ 20 ] I also find that there is merit to the respondent’s argument that the matter should not have consumed 57 hours of time by experienced counsel. When counsel submits that a higher hourly rate is justified on the basis of experience and number of years of practice, certain efficiencies are also to be expected. In this case, I note that counsel for the applicants relied in argument on a case in which he had previously participated as counsel. He was obviously familiar with the legal issues before the court, due to his previous involvement in similar cases.

Decision

[ 21 ] The applicants are entitled to their costs assessed on a partial indemnity basis. I am reducing the number of hours by counsel for the applicants from 56.30 hours to 45 hours (approximately 40 hours preparation and 5 hours for attendance). This represents a reduction in fees of $3,390 (11.3 hours x $300). The applicants are therefore entitled to the sum of $17,202.78 for costs which is comprised of $13,653 for fees, $1,774.89 for HST and $1194.89 for disbursements.

E.J. Koke J.

Date: November 26, 2012

[^1]: See Walker Estate v. York Finch General Hospital, 1999 O.J. No. 644, 43 O.R. (3d) 461 (Ont. C.A.), affd 2001 SCC 23, [2001] 1 S.C.R. 647 (S.C.C.).