ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO. : CV-09-382505
DATE : 20121204

RE: Dentec Safety Specialists Inc. v. Degil Safety Products Inc.

BEFORE: Mr. Justice Kenneth L. Campbell

COUNSEL: Leo Klug , for the Plaintiff, Dentec Safety Specialists Inc.

John O’Sullivan , for the Defendant, Degil Safety Products Inc.

ENDORSEMENT (COSTS)

A. Introduction

[ 1 ] On August 16, 2012, I released Reasons for Judgment in this simplified procedure case, concluding that the defendant was liable to the plaintiff for the tort of passing-off, and ordering the defendant to pay the plaintiff $10,000 in compensatory damages. I declined to award any punitive damages. See: Dentec Safety Specialists Inc. v. Degil Safety Products Inc. , 2012 ONSC 4721 .

[ 2 ] The only remaining issue is costs. Following the release of the Reasons for Judgment , I received and considered written submissions and other accompanying materials from the parties on this outstanding issue pursuant to Rule 57.01(7) of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194. The parties have advanced markedly contrasting positions in relation to the issue of costs.

B. The Positions of the Parties

[ 3 ] The plaintiff seeks a costs order in its favour totaling $40,452.22. More particularly, the plaintiff seeks partial indemnity costs of $35,194.42 and total disbursements of $5,257.80, all taxes included. The plaintiff contends that it is entitled to these costs by virtue of its overall success on the action, notwithstanding the fact that it was not successful in its claim for punitive damages.

[ 4 ] The defendant seeks a costs order in its favour totaling $21.622.39. More particularly, the defendant seeks reduced partial indemnity costs of $18,000 to reflect that this was a simplified procedure case, plus HST of $2,340 on those legal costs and $1,282.39 in disbursements, including taxes. The defendant argues that the main thrust of the plaintiff’s action at trial was the pursuit of substantial punitive damages and, as the defendant was successful in defending against this claim, the defendant is entitled to a fair apportionment of the costs associated with that aspect of the litigation.

C. Reduced Costs Under the Simplified Procedure

[ 5 ] The “simplified procedure” prescribed in Rule 76 of the Rules of Civil Procedure was introduced to provide and promote more affordable access to justice. Not surprisingly, cost awards in simplified procedure cases have historically been significantly lower than costs awards in ordinary procedure cases. Such reduced costs awards permit parties to litigate smaller claims without fear of crippling costs consequences, while still providing an effective settlement incentive. Accordingly, legal costs that are incurred in simplified procedure cases must remain reasonable and proportionate to the amounts recovered. This places an obligation on counsel to be sensitive and proactive with respect to cost issues. See: Trafalgar Industries of Canada Ltd. v. Pharmax Ltd. (2003), 64 O.R. (3d) 288 (S.C.J.) at para. 5-17 ; Budnarain v. Budnarain , [2003] O.J. No. 3560 (S.C.J.) at para. 5 ; Sugar v. Megawheels Technologies Inc. , [2006] O.J. No. 4657 (S.C.J.) ; Culligan Springs Ltd. v. Dunlop Lift Truck (1994) Inc. (2006), 211 O.A.C. 65 (Div.Ct.) at para. 13-23 ; Gianopoulos v. Kranias , 2007 19794 (Ont.S.C.J.) at para. 5 ; Moberg v. Patafie , 2012 ONSC 902 , at para. 32-37 .

D. The Offers to Settle

[ 6 ] There were a number of offers to settle, formal and informal, that were made by the respective parties in this case.

[ 7 ] On August 18, 2009, the plaintiff offered to settle the action in return for an assignment of the dentecsafety.ca domain name and payment of $10,000 in legal fees “all inclusive.” On August 19, 2009, the defendant offered to settle the action by transferring the dentecsafety.ca domain name to the plaintiff, without any financial compensation. The plaintiff rejected this offer on the basis that the plaintiff was “entitled to costs.”

[ 8 ] On March 28, 2012, some three months prior to the scheduled trial proceedings, the plaintiff offered to settle this action for $10,000 in punitive damages, an additional $1.00 in general damages, and the plaintiff’s costs on a partial indemnity basis as agreed on by the parties or fixed by the court. In other words, the plaintiff was willing to settle this matter, just prior to trial, for just one dollar more than the damages award ultimately made at the conclusion of the trial, plus its partial indemnity costs. On April 2, 2012, the defendant countered this proposal, by offering to settle this action for the sum of $10,000 including “all damages, costs, interest and taxes.”

[ 9 ] It is perhaps ironic that both parties seemed willing to settle the case for, essentially, the sum of $10,000, the amount ultimately determined to be the compensatory damages owed to the plaintiff, but the matter went to trial over the fact that the plaintiff insisted on its partial indemnity costs of the action, while the defendant insisted that the proposed settlement amount be considered an all-inclusive figure.

E. Analysis

[ 10 ] The plaintiff was ultimately successful in this action. While the plaintiff did not recover any punitive damages, it recovered $10,000 in compensatory damages. Accordingly, given this overall success, the plaintiff (not the defendant) is entitled to a reduced proportion of its partial indemnity costs. The exchange of settlement offers also suggests that the plaintiff should be entitled to at least some proportion of partial indemnity costs.

[ 11 ] The plaintiff’s request for partial indemnity costs totaling $40,452.22, however, makes no allowance whatsoever for the reality that this was a simplified procedure case. Further, a costs award of that size would dwarf the $10,000 in compensatory damages actually recovered by the plaintiff for the tort of passing-off. Accordingly, in my view this costs claim is disproportionate and excessive. In seeking a costs order in its favour, the defendant suggests that partial indemnity costs totaling $21.622.39, including all taxes and disbursements, would properly reflect the fact that this was a simplified procedure case. While this costs proposal is much more realistic and better reflects the need to try to restrain mounting costs in simplified procedure cases, in my view, it too is somewhat excessive. Even this proposed costs order would still be more than twice the amount recovered by the plaintiff.

[ 12 ] In my view, taking into account all of the circumstances of this case, including the fact that the plaintiff was only successful in securing a $10,000 compensatory damages award, I fix the plaintiff’s costs at $15,000, including all taxes and disbursements. I appreciate that the money actually spent by the parties on this litigation totals many multiples of this costs award. However, it is important to recall, when the litigation is all over, that this was a relatively simple case. It was prosecuted and defended according to the simplified procedure rules. The trial itself spanned only four days, and the evidence led was largely uncontroversial. The parties could have elected to conduct the litigation in a less adversarial manner in an effort to contain or cap their spiraling costs. Moreover, costs should be fixed in an amount that is fair and reasonable for the unsuccessful party, regardless of the actual costs incurred by the successful party. See: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.); Davies v. Municipality of Clarington (2009), 100 O.R. (3d) 66 (C.A.).

[ 13 ] In any event, in these kinds of cases the parties cannot reasonably expect that, even if they are successful, they will recover an amount even close to the partial indemnity costs that might have been permitted in in an ordinary procedure case. As Wilson J. suggested in Trafalgar Industries of Canada Ltd. v. Pharmax Ltd. , at para. 6 , in order to ensure that Rule 76 fulfills its admirable goal of providing and promoting more affordable access to justice, simplified procedure costs awards must remain “significantly lower” than costs awards in ordinary procedure cases.

[ 14 ] In fixing the plaintiff’s all-inclusive costs at $15,000, I have considered the factors outlined in Rule 57.01 of the Rules of Civil Procedure , including the level of experience of the lawyers for the plaintiff, the time they actually spent on the case, the rates they billed their client, the result achieved by the plaintiff, the amount of the plaintiff’s claim, and the importance and complexity of the proceedings. Of course, any costs award should reflect “the amount of costs that an unsuccessful party could reasonably expect to pay” for the proceedings. In my opinion, this total costs award of $15,000 is an amount that the unsuccessful defendant could reasonably have expected to pay for these simplified proceedings.

F. Conclusion

[ 15 ] In the result, the defendant shall pay the plaintiff’s proportional partial indemnity costs of this action in the total amount of $15,000, inclusive of all taxes and disbursements. An order shall issue accordingly.

Kenneth L. Campbell J.

DATE: December 4, 2012