COURT FILE NO.: 9288/09
DATE: 2012-12-07
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
HANSON HARDSCAPE PRODUCTS INC.
Francesca Maio, for the Plaintiff
Plaintiff
- and -
ELEMENTS STONE & PAVING INC. and SEBASTIAN DANNY CAPUTO
Megan Sanford, for the Defendant, Sebastian Danny Caputo (on May 11, 2011)
Defendants
HEARD: May 11, 2011, and April 16, 2012 at Brampton, Ontario
Price J.
Costs Endorsement
PURPOSE OF THESE REASONS
[1] Hanson, a supplier of construction material, and Mr. Caputo, a principal of Elements, a paving company and customer of Hanson’s, have not been able to agree on the costs of Hanson’s unsuccessful motion for summary judgment against Mr. Caputo for credit that Hanson had extended to Elements. The action turns on a personal guarantee that Hanson says Mr. Caputo signed, by which he is said to have guaranteed repayment of the credit that Hanson extended to Elements. Mr. Caputo says that he had no knowledge of the credit and denies having signed the personal guarantee.
[2] Hanson’s motion was dismissed, for reasons given on May 8, 2012, when Hanson failed to establish that there was no genuine issue for trial. The court held that a trial was needed to determine, among other issues, whether it was Mr. Caputo’s signature on the personal guarantee. These, then, are the reasons for the court’s disposition of costs in connection with that motion.
PARTIES’ POSITIONS
[3] Mr. Caputo asks the court to order Hanson to pay his costs on a substantial indemnity scale, in the sum of $39,396.56, or on a partial indemnity scale, in the sum of $33,290.00. He points out that his counsel maintained, from the outset, that it was Hanson’s obligation to prove the authenticity of his signature on the guarantee, which Mr. Caputo had consistently denied was his. He says that it was unreasonable for Hanson to have proceeded with the motion without having the handwriting on the guarantee analyzed, or even asking to adjourn the motion to cross-examine Mr. Caputo’s affiants on their affidavits.
[4] Hanson argues that each party should bear its own costs of the motion. It further argues that, if the Court exercises its discretion to award costs to Mr. Caputo, it should fix the costs on a partial indemnity scale, or refer them to the trial judge to be assessed only in the event that Mr. Caputo is successful at trial. Hanson argues that even though it was unsuccessful in its motion, it did not act unreasonably, or in bad faith, in bringing it, and therefore should not be required to pay Mr. Caputo’s costs on a substantial indemnity scale.
THE ISSUE
[5] The court must decide whether Hanson should be required to pay Mr. Caputo’s costs of the motion and, if so, on what scale. In making these determinations, it must consider what costs order would best achieve the lawful objectives of such an order, which are to indemnify the successful party, to promote the settlement of the dispute, to discourage unreasonable conduct by litigants, and to facilitate access to justice.
[6] To put the matter another way, the court must ask whether Hanson, if it had acted reasonably, should have refrained from bringing the motion, and thereby avoided costs being unnecessarily incurred by both parties. It must ask whether Hanson should fully indemnify Mr. Caputo, on the basis that it should have known that it could not succeed on its motion, or whether such an order would unfairly penalize Hanson for an outcome that was anybody’s guess when the motion was brought, and that was only obvious with hindsight?
[7] Hanson submitted that there was no genuine issue for trial, in that the only evidence establishing that Mr. Caputo had not submitted the Application for Credit on behalf of Elements, and signed the Personal Guarantee, was Mr. Caputo’s denial. Hanson argued, unsuccessfully, that Mr. Caputo’s onus to “put his best foot forward” required him to produce corroborating evidence supporting his denial of these facts. The court disagred, holding that Mr. Caputo’s denial, in itself, raised a genuine issue for trial, and that the onus was on Hanson to produce evidence that demonstrated that, in spite of Mr. Caputo’s denial, there was no genuine issue for trial.
[8] Hanson further submitted that Mr. Caputo’s acceptance of supplies from Hanson knowing, if they were not pre-paid, required credit arrangements, such as a personal guarantee, and signing a cheque for $10,000.00 in payment of an invoice for such supplies, proved that he had knowingly given a personal guarantee and was inconsistent with any other explanation and, accordingly, raised no genuine issue for trial. The Court disagreed, holding that Mr. Caputo may have signed the cheque that had been prepared for him, as he asserted, believing that it was a pre-payment for supplies from Hanson.
[9] A motion for summary judgment is a vehicle for avoiding an unnecessary trial. It should not be brought or, at the very least, should not be proceeded with, where a genuine issue for trial does exist. For the court to countenance such a motion in those circumstances would invite its improper use by a plaintiff to force a defendant’s capitulation to avoid the disproportionate costs of what amount to two trials, and thereby deprive defendants of their rights to a trial to resolve legitimate issues on their merits. In awarding the costs of such a motion, the court must therefore ask whether the outcome was a forgone conclusion which should have caused the unsuccessful party to refrain from proceeding, or whether the outcome became obvious only as the evidence unfolded.
[10] In the present case, Mr. Caputo put his best foot forward, as required, by explicitly denying the following:
a) That he had attended a meeting with Hanson’s staff to request that credit which Hanson had extended previously to a company, Bedrock, with which he had been associated, be transferred to Elements;
b) That he had any knowledge that an application for credit had been sent to Hanson on behalf of Elements;
c) That he had signed a personal guarantee for repayment of such credit.
[11] When Mr. Caputo delivered his affidavit denying these facts, it was incumbent upon Hanson either to abandon its motion or to obtain expert evidence to demonstrate that his denials were so unreliable as to raise no genuine issue for trial. Hanson did neither. Instead, it proceeded with its motion toward an outcome that, in the absence of evidence to the contrary, was a forgone conclusion. It then sought to justify its course by arguing that it was Mr. Caputo’s obligation in law to retain an expert to corroborate his own denial of the actions that Hanson sought to attribute to him.
ANALYSIS AND EVIDENCE
a) General Principles
[12] As a general principle, costs are in the absolute discretion of the court.[^1] The fixing of costs is not simply a mechanical exercise. The overall objective 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.”[^2] This is a “fundamental concept in fixing or assessing costs.”[^3]
[13] The Court of Appeal, in Boucher v. Public Accountants Council for the Province of Ontario,[^4] articulated the principles that govern costs assessments. In that case, Armstrong J.A. noted that Rule 57.01(3) provides: “When the court awards costs, it shall fix them in accordance with subrule (1) and the Tariffs.” He continued: “…Subrule (1) lists a broad range of factors that the court may consider in exercising its discretion to award costs under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C. 43.”[^5]
[14] The Court must, first and foremost, be fair and reasonable when exercising its discretion to award costs. At paragraphs 37 and 38 of the Boucher decision, Armstrong J.A. stated:
In deciding what is fair and reasonable, as suggested above, the expectation of the parties concerning the quantum of a costs award is a relevant factor. See City of Toronto v. First Ontario Realty Corporation 2002 49482 (ON S.C.), 59 O.R. (3d) 568 at 574 (S.C.). I refrain from attempting to articulate a more detailed or formulaic approach. The notions of fairness and reasonableness are embedded in the common law. Judges have been applying these notions for centuries to the factual matrix of particular cases
b) Factors to be Considered in Fixing Costs
[15] Rule 57.01(1) contains what amounts to a non-exhaustive checklist of factors that should guide the Court in its reasoning when awarding costs in the exercise of its discretion under section 131 of the Courts of Justice Act. Rule 57.01(1) provides, in part:
57.01(1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the Court may consider…
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(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;
(c) the complexity of the proceeding;
(d) the importance of the issue;
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(i) any other matter relevant to the question of costs. [Emphasis added]
[16] I will review the factors which I consider to be most relevant in arriving at the appropriate costs order in the present case.
i) Indemnity
[17] It is not in dispute that costs are normally awarded to the successful party in a motion for Summary Judgment. Mr. Caputo was successful in resisting Hanson’s motion. The issue with regard to his entitlement to costs is therefore whether it was reasonable for Hanson to bring its motion and, if it was not, whether there is any reason for the court not to require Hanson to indemnify Mr. Caputo for the costs he incurred in opposing it, having regard to the factors set out in Rule 57.01(1). It must also decide whether the costs of the motion are best left to the trial judge to determine based on the outcome of the trial.
[18] In its earlier reasons, the court noted that Hanson, as the moving party, had the ultimate burden of proving that there was no genuine issue for trial. This was the law before Rule 20 was amended, and it remains the law.
[19] Hanson submits that the outcome of the motion turned largely on the Court’s inference that a fraud might have been perpetrated against both Hanson and Mr. Caputo. As it points out, neither Mr. Caputo nor Hanson had alleged fraud. Hanson argues that as this inference made by the Court will be tested and determined at trial, that the court should reserve the costs of the motion to the trial judge or award Mr. Caputo his costs in the cause.
[20] Hanson is mistaken in its view that the outcome of the motion turned largely on the possibility of fraud. While the Court raised the possibility of fraud in examining whether the evidence that Hanson relied on was, as it argued, consistent with Mr. Caputo’s liability and inconsistent with any other explanation, the outcome of the motion turned principally on Mr. Caputo’s denial that he had signed the application for credit that Hanson had received, or the personal guarantee that Hanson relied on, to prove his personal liability. Hanson misapprehended the onus on it, as a plaintiff moving for summary judgment, to establish that there was no genuine issue for trial, when it mistakenly sought to cast the obligation on Mr. Caputo to adduce evidence of a handwriting expert to disprove its assertion that the signatures on the documents were his, and to support his own assertion that they were not.
[21] Hanson’s position was that Mr. Caputo, having signed Elements’ application for credit and personal guarantee and faxed them to Hanson, was personally liable for the credit that Hanson extended to Elements. Mr. Caputo explicitly denied having signed these documents or faxed them to Hanson.
[22] Mr. Caputo’s denial raised the central issue of fact that must be determined with regard to his liability. Hanson chose not to pursue the avenues available to it, even in an action under Rule 76, to secure the evidence necessary to prove the disputed fact. Instead, it chose to bring the present motion, and to assert in both its written and oral argument, that the onus was on Mr. Caputo to tender evidence of a hand-writing expert to corroborate his own assertion that the signature on the Personal Guarantee was not his. Hanson’s position in this regard was plainly wrong in law and Hanson was in error in maintaining it. Mr. Caputo’s counsel pointed out the error from the outset and Hanson’s counsel chose to proceed with the motion anyway. Hanson’s counsel did so at her client’s peril.
[23] Instead of securing the evidence of a handwriting analyst to prove that it was Mr. Caputo’s signature on the personal guarantee, Hanson chose to rely on the fact that Mr. Caputo had signed a previous application for credit that had been submitted to another supplier, Unilock. As the court noted in its earlier reasons, the court, on comparing the signature on the Unilock Credit Application and the signature on the Personal Guarantee that Hanson had received, found that the signatures were not at all similar.
[24] Additionally, Hanson alleged that Mr. Caputo had met with its employee, Mr. Corrado, in June 2009, and requested credit for Elements. This fact, even if established, would not prove that Mr. Caputo later signed the personal guarantee or faxed it to Hanson. The court addressed Hanson’s evidence concerning the meeting only to point out that, if Hanson failed to prove that Mr. Caputo signed the personal guarantee, it lacked the necessary evidence to establish his liability by other means. Hanson apparently misread this aspect of the reasons as suggesting that the outcome of the motion turned mainly on the theory that someone else had defrauded Hanson by personating Mr. Caputo or forging his signature on the personal guarantee, and that the outcome of the trial would depend on whether this theory was proved. It would not, because it is Hanson that bears the onus of proving Mr. Caputo’s liable. If it fails to prove that he signed the personal guarantee, it may fail to discharge its onus at trial, even if an alternative theory is not proved.
[25] As the court pointed out in its earlier reasons, Hanson’s evidence regarding the meeting was unconvincing for the following reasons:
a) Mr. Caputo did not have any apparent reason to apply to Hanson for credit or to deputize Mr. Girimonte to submit an application on Elements’ behalf. Mr. Caputo derived the ten percent deposit paid by customers as his commission but derived no benefit from the work done by his sub-contractors, who retained the balance of the customers’ payment for the work they performed, and therefore derived the sole benefit from the credit Elements extended for the supplies it delivered to them.
b) The meeting Mr. Girimonte and the person accompanying him had with Mr. Corrado was with Hanson’s sales manager, not its credit manager, Ms. Deganis.
c) Mr. Corrado has no record of the meeting with Mr. Girimonte and the person accompanying him. He testified that he kept notebooks of his appointments for only a year and therefore was unable to produce the one for the period when the meeting in June 2009 had taken place. In any event, he says, the meeting was not important enough for him to have recorded it in his notebook.
d) Mr. Corrado states that at the meeting, he discussed with Mr. Girimonte and the person accompanying him what Hanson required in order to transfer Bedrock’s credit account to Elements. Yet, he later stated that he would not have had anything to do with Hanson’s decision to grant credit to Elements. This decision, he said, would be made by someone in Hanson’s credit department.
e) While stating that Mr. Girimonte introduced the person who attended the meeting as Mr. Caputo, Mr. Corrado admitted that he did not know the person to whom he was introduced. He stated that he may have met the person on one prior occasion but had not seen him since. He was unable to describe him and could not remember what he looked like. Hanson’s solicitor never asked him to identify Mr. Caputo, or a photograph of him, as the person who had attended the meeting.
[26] Despite its allegations that it grandfathered certain accounts to a company, Bedrock, of which Mr. Caputo was at one time the principal, the evidence disclosed that Hanson had not followed its normal requirements for “grandfathering” an application for credit from an established customer. As the court noted in its earlier reasons, Hanson also did not follow its usual protocol in relation to a new customer’s application for credit.
[27] Just as Hanson had misunderstood the onus on it in relation to the factual issue of Mr. Caputo’s signature on the personal guarantee, it also misunderstood the onus on it in relation to whether Mr. Caputo had attended the meeting with Mr. Corrado. Hanson apparently believed that the onus was on Mr. Caputo to adduce the evidence of Mr. Girimonte, who Hanson alleged had introduced Mr. Caputo to Mr. Corrado. This was plainly incorrect in law. It was Hanson who relied on its assertion that Mr. Caputo had attended the meeting. Mr. Caputo denied that he had attended any such meeting. The onus was therefore on Hanson to prove the fact, once Mr. Caputo had placed it in issue by his denial. It was for Hanson, not Mr. Caputo, to submit an affidavit from Girimonte or to call him as a witness at the hearing, to substantiate its assertion and to disprove Mr. Caputo’s denial. The court therefore declined to draw an adverse inference from Mr. Caputo’s failure to tender an affidavit from Mr. Girimonte.
ii) Hourly Rates and Experience
[28] Mr. Caputo’s counsel, Megan Sanford, was called to the Bar in 2008. She had four years of experience as a litigator when she argued the present motion. She had the same level of experience as Hanson’s counsel, Francesca Maio, who was also called to the Bar in 2008, and who charges the same hourly rate as Ms. Sanford. Anna Esposito, who performed an advisory role to Ms. Maio, had twenty-four years of experience, having been called to the Bar in 1987.
[29] Ms. Sanford initially charged Mr. Caputo an actual rate of $225.00 per hour, which she increased to $275.00 per hour in 2012. The “Information for the Profession” bulletin from the Costs Sub-Committee of the Rules Committee (“the Costs Bulletin”)[^6] suggests maximum hourly rates (on a partial indemnity scale) of $225.00 for lawyers of less than 10 years experience, $300.00 for lawyers between 10 and 20 years experience, and $350.00 for lawyers with 20 years experience or more. These limits are generally intended for the most complex and important of cases. I find the actual and partial indemnity hourly rates claimed by Ms. Sanford to be reasonable, having regard to her experience and the guidelines in the Costs Bulletin.
iii) Hours Spent
[30] In reviewing a claim for costs, I need not undertake a line by line analysis of the hours claimed, nor should I second guess the amount claimed unless it is clearly excessive or overreaching. I must consider what is reasonable in the circumstances and, after taking into account all of the relevant factors, award costs in a global fashion: see the cases referenced in Fazio v. Cusumano.[^7]
[31] Mr. Caputo claims that his lawyer, Ms. Sandford, spent 147.8 hours on the motion. He claims $43, 467.77 on a full indemnity basis, made up of fees for the 147.8 hours at $36,027.50, plus taxes at 13%, or $4,683.58, plus disbursements in the amount of $2,439.55.
[32] Mr. Caputo claims $39,396.06 on a substantial indemnity scale, made up of $36,630.06 for fees, being 90% of his lawyer’s actual fees of $40,711.08, plus $2,439.55 for disbursements. On a partial indemnity scale, he claims $33,290.00, made up of $30,533.31 for fees, being 75% of his lawyer’s actual fees, plus $2,439.55 for disbursements.
[33] Hanson submits that at least $735.00 of Ms. Sanford’s time was erroneously claimed, consisting of a half hour referable to February 3, 2011, for reviewing documents for an Appeal Book and 2 hours referable to April 29, 2011, for preparing case law for a compendium, neither of which were filed. Based on the fact that Mr. Caputo’s Costs Outline does not include any time spent preparing a respondent’s motion record or brief of authorities, I conclude that his references to an Appeal Book and Compendium were misnomers for the time spent reviewing documents for the respondent’s motion record, not appeal book, and preparing case law for Mr. Caputo’s brief of authorities, not compendium.
[34] Ms. Sandford sent two letters to Ms. Maio (for which she claims $55.00 in total), and Ms. Maio sent two to Ms. Sanford (for which the claim is also $55.00). One of the latter dealt with enforcement of the judgment against Elements and therefore was not part of the motion itself, with the result that $27.50 should be deducted for this correspondence.
[35] Hanson argues that in several instances, Mr. Caputo’s counsel docketed more time than Hanson’s counsel for the same or a comparable task. The differences are not significant, consisting of .2 hours, which Ms. Sanford docketed for a letter or e-mail, against .1 hours, docketed by Ms. Maio, and no details are provided to enable the court to determine whether the correspondence differed in length or complexity, which might account for the difference.
[36] Hanson notes that while each party incurred similar costs, its own Costs Outline includes costs that Mr. Caputo did not incur, such as for locating lost files, coordinating adjournments, and attending for the final hearing of the motion on April 16, 2012, when Mr. Caputo was self-represented. It argues that the costs which Mr. Caputo seeks to recover are not comparable to its own, and include time for administrative tasks such as preparing documents for delivery, assembling the factum, and assembling case law/authorities.
[37] Hanson’s counsel spent a total of 138.1 hours, or 7% less than the 147.8 hours claimed by Mr. Caputo’s counsel. Hanson argues that Mr. Caputo should have kept his costs lower, in proportionate to the amount at stake in the proceeding. However, Hanson’s own lawyers’s fees were only 19% less than those of Mr. Caputo’s lawyer ($30,237.50 compared to $36,027.50, excluding taxes).
[38] The fees allowed for Mr. Caputo’s lawyers will be reduced to $32,354.41, that is, by an amount representing the 7% difference between the time spent by Hanson’s lawyers and the time spent by Mr. Caputo’s lawyer. This is a minimum reduction, having regard to the fact that Mr. Caputo was self-represented at the final hearing of the motion.
[39] Hanson has pointed out that some of the $2,439.55 disbursements claimed by Mr. Caputo do not accord with Rule 57.01 and the Tariffs. It cites the $1/page which Mr. Caputo has claimed for fax correspondence, the cost of photocopies beyond those required for court, and the amounts claimed for car rentals. It argues that it would be reasonable to allow $1,325.95 for disbursements, consisting of $1,200.70 paid for transcripts of cross-examinations, and $125.25 for photocopies of the responding motion record (12 pages), supplemental responding motion record (28 pages), factum (14 pages), supplemental factum (17 pages), and book of authorities (96 pages), at a rate of $0.25/page = $41.75 x 3 copies = $125.25.
[40] Hanson’s counsel incurred $1,631.75 for disbursements. When HST is added, the total amount which Hanson’s lawyers inclurred for disbursements was $1,827.37. The amount allowed for Mr. Caputo’s disbursements will be reduced to $1,325.95, as proposed by Hanson, plus 13% for HST, for a total of $1,498.32.
[41] Hanson notes that Orkin on Costs suggests that calculation of partial indemnity costs range between 50% to 75% of full indemnity, but that the Court generally applies a rule of thumb whereby 60% of full indemnity costs are allowed for costs on a partial indemnity scale. Hanson therefore submits that costs, if awarded on a partial indemnity scale, be calculated at 60%, not 75%, as Mr. Caputo has claimed. I will address the scale of costs below, when discussing the conduct of the parties and the costs that each should reasonably have expected in the event they were unsuccessful.
iv) Complexity
[42] The motion was moderately complex. This action was brought in accordance with the simplified procedure set out in Rule 76, designed to facilitate the summary disposition of actions involving between $25,000.00 and $100,000.00. The motion for summary judgment was brought under the amended Rule 20, whose interpretation was the subject matter of a ruling by the Court of Appeal while the motion was pending. The Court of Appeal’s decision in Combined Air Mechanical Services Inc. v. Flesch[^8] clarified the test that the court is required to apply in disposing of motions for summary judgmnet. The motion was adjourned to await the Court of Appeal’s decision, after which both parties tendered additional case law and made submissions as to the effect of the decision. The proceeding was therefore rendered more complex by the change in Rule 20 and its later interpretation by the Court of Appeal.
[43] The motion was factually somewhat complex. Hanson argued that Mr. Caputo had been the principal of a company that had done business with it in the past and that Mr. Caputo had asked it to transfer that company’s credit to Elements. Mr. Caputo denied that he made the request. It was therefore necessary to examine the history of Hanson’s and its predecessor’s dealings with the company Mr. Caputo was associated with in the past and the company he was associated with when Hanson extended the credit for which it seeks to hold him responsible.
[44] The motion was originally returnable in December 2010. At that time, the court concluded that the motion was not ready to proceed and adjourned it to allow the parties to cross-examine the affiants on their affidavits. The transcripts from those cross-examinations had to be reviewed and supplementary factums prepared. The motion was then adjourned to May 2011, when oral argument began. The motion was not reached until late in the day, with the result that it was necessary to complete argument on a later date. This increased the costs associated with the motion.
v) Importance of the Matter
[45] The issues in the motion were not ones of public interest. The outcome of the motion affected only Hanson’s recovery from Mr. Caputo the credit it extended to Elements, the corporate defendant. Elements is no longer in operation, so Hanson was unable to recover on its judgment against it.
[46] Hanson claimed $74,615.73 against Mr. Caputo. Hanson’s motion for summary judgment against Mr. Caputo was important to the parties as judgment in the action would have ensued had Hanson been successful. Mr. Caputo’s costs of the motion, on a substantial indemnity scale, amount to somewhat less than half the amount at stake in the action.
vi) Reasonable Expectation of Unsuccessful Parties
[47] A costs award must be within the reasonable expectation of the unsuccessful parties in order to preserve access to justice. Armstrong J.A. explained the rationale for the principle in Boucher:[^9]
[37] The failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice. The costs system is incorporated into the Rules of Civil Procedure, which exist to facilitate access to justice….
[38] In deciding what is fair and reasonable, as suggested above, the expectation of the parties concerning the quantum of a costs award is a relevant factor.
[48] The Court’s practice as to the scale of costs in motions for Summary Judgment should reasonably have informed Hanson’s expectation as to the costs it would face if it were unsuccessful.
[49] As Mr. Caputo points out, Hanson could reasonably have forseen the approximate time Mr. Caputo’s lawyer would be spending opposing the motion, based on the time its own lawyers were spending. Hanson’s expectations should also be informed by the fact that the court, on a motion of this kind, considers whether costs should be awarded on a substantial indemnity scale, depending on whether it finds it was unreasonable for the motion to have been brought.
vii) Proportionality
[50] I must have regard to the principle of proportionality, which has been incorporated into the Rules by the express provisions of Rule 1.04 (1.1):
INTERPRETATION
General Principle
1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. R.R.O. 1990, Reg. 194, r. 1.04 (1).
Proportionality
(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding. O. Reg. 438/08, s. 2.
[51] In Gale v. Gale,[^10] G.B. Smith J., in reducing the partial indemnity costs of a motion for leave to appeal in a family law action, the costs of which are governed by similar principles, set out in Rule 24 of the Family Law Rules, stated:
[12] Proportionality must be kept in mind when considering the issue of costs. This principle was considered in the case of Buchanan v. Goetel Communications Corp.[^11] where Ferguson J. had this to say at paragraphs 10 and 11 of that judgment:
…the bottom line is that the proposed costs are excessive. They are excessive from two perspectives: costs of this magnitude will make litigation inaccessible as a method of dispute resolution; costs of this magnitude are also disproportionate to the value of the legal work necessary to represent a client in this dispute. If counsel do not use more restraint in deciding how much to invest in litigation, they will put both the bar and the Courts out of business which will profoundly harm the public whom we both serve. [Emphasis added]
[52] In Patene Building v. Niagara Home,[^12] Parayeski J. fixed costs at one-third the amount of damages awarded. He stated:
[1] …The plaintiff was successful, and should be paid its costs. Those costs should be on the partial indemnity scale. They should also bear some reasonable proportionality to the amount of money awarded to the plaintiff as damages. Those damages were for less than $15,000.00. Accordingly, the plaintiff’s request for $8,977.55, plus GST, is excessive. This was a short and simple trial. The plaintiff is entitled to judgment for costs fixed at $5,000.00, inclusive of GST and disbursements, as against both defendants, that liability being joint and several. [Emphasis added]
[53] Hanson sought summary judgment against Mr. Caputo in the amount of $74,615.73. Mr. Caputo requests costs of approximately half that amount for successfully opposing Hanson’s motion. I will discuss the scale of costs below, but I do not find that the amount of time Mr. Caputo’s lawyer spent, which was only 7% more than Hanson’s own lawyer spent, to be disproportionate to the amount at stake.
viii) Improper or Unnecessary: The Scale of Costs
[54] I must consider whether there was some fault on the part of Hanson or other factor that justifies imposing costs against it on a substantial indemnity scale. In the normal course, costs are awarded to a successful party on a partial indemnity scale; however, the court has the discretion to order costs to be paid on a substantial indemnity scale in exceptional cases.[^13]
[55] The 2010 amendment of Rule 20.06 shifted the burden of persuasion from the party who has unsuccessfully applied for summary judgment. Before the Rule was amended, the moving party faced a presumption that the party successfully resisting the motion is entitled to costs on a substantial indemnity scale. Prior to the amendment, Rule 20.06(1) provided:
20.06(1) Where, on a motion for summary judgment, the moving party obtains no relief, the court shall fix the opposite party’s costs of the motion on a substantial indemnity basis and order the moving party to pay them forthwith unless the court is satisfied that the making of the motion, although unsuccessful, was nevertheless reasonable.
[56] The amendment of the Rule shifted the burden to the successful party (whether it be the moving party or the party resisting the motion), who now must demonstrate that costs on a substantial indemnity scale are justified. Rule 20.06 now provides:
20.06 The court may fix and order payment of the costs of a motion for summary judgment by a party on a substantial indemnity basis if,
(a) the party acted unreasonably by making or responding to the motion; or
(b) the party acted in bad faith for the purpose of delay. [Emphasis added]
[57] Mr. Caputo says that Hanson acted unreasonably in bringing the motion. He says that Hanson also acted unreasonably by refusing to consent to adjourn the motion to secure evidence from a handwriting analyst as to whether Mr. Caputo had signed the personal guarantee or, at the very least, to permit the affiants to be cross-examined.
[58] The motion could not be determined based solely on the Claim and Hanson’s productions. It had to be adjourned to December 2010 for cross-examinations. The attendance in court in December 2010 could have been avoided had the parties acknowledged the need for cross-examinations.
[59] Mr. Caputo maintained from the outset that the action could not be determined summarily and that a trial was required to resolve the issue of whether he had signed the personal guarantee and faxed an application for credit on behalf of Elements, which were fundamentally issues of credibility.
[60] Hanson maintains that it was reasonable for it to have moved for summary judgment, having regard to Mr. Caputo’s bald denials in his Statement of Defence. Hanson submits that, in light of the then recent amendments to Rule 20, which now allow a motion judge to weigh evidence, resolve issues of credibility, and draw inferences, it was reasonable for it to have sought to have the claim disposed of summarily.
[61] Hanson submits that it could not have anticipated that the motion would require multiple attendances, or that circumstances would arise outside of the parties’ control that would significantly increase the costs. The motion was originally scheduled on December 7, 2010, in Milton. Rule 76 prohibits cross-examination on affidavits, so the first attendance served the purpose of obtaining leave to cross-examine and having the motion adjourned to February 16, 2011. According to Hanson, the court office then lost the motion material, which required calls by counsel to the court staff in Milton and Brampton, and attendances by process servers to locate the material, the cost of which also could not have been anticipated.
[62] With respect to Hanson’s submission that Rule 76 precluded cross-examinations, Mr. Caputo responds that Hanson never sought his consent to conduct cross-examinations, or leave from the court to do so. Rather, Hanson took the position that cross-examinations were unnecessary. Mr. Caputo submits that Hanson could have sought leave in writing, had it consented, which would have avoided the parties’ first attendance in court.
[63] Hanson submits that after the motion was adjourned from December 7, 2010, to February 16, 2011, Mr. Caputo advised that he would not be available for cross-examinations until the spring of 2011. This required a telephone conference to adjourn the return date of the motion. Hanson submits that Mr. Caputo should bear the costs of the telephone conference. A new timetable was set, requiring cross-examinations by April 15 (Hanson’s affiants were available in March but Mr. Caputo’s affiants were not), and the motion was then to be heard on May 11, 2011, in Milton. Cross-examinations were conducted on April 8 and 13, with the result, Hanson argues, that transcripts had to be ordered at increased cost on an expedited basis. Mr. Caputo notes that there is no evidence that this was necessary.
[64] Both parties attended by special appointment on May 11, 2011, in Milton, but because other matters were scheduled that day and continued longer than expected, the motion was not reached until late in the day and had to be adjourned for further argument on a later date. Additionally, the Court of Appeal was about to hear five appeals in June 2011 involving the interpretation of the amended Rule 20, the outcome of which was relevant to the court’s use of its discretionary powers. The motion was therefore further adjourned to August 2011. As the awaited decisions had not yet been released, the motion was further adjourned on consent to December 14, 2011. Despite having confirmed the motion, the parties were advised by the Court of a scheduling issue, and the motion was further adjourned to April 16, 2012, when it was finally completed.
[65] In October 2011, Mr. Caputo delivered a Notice of Intention to Act in Person. Hanson tried to communicate with him, without success, in order to serve him with a supplemental factum. It was then discovered that the address given on his Notice of Intention to Act in Person was a Post Office Box at a local UPS store. At the hearing, Mr. Caputo confirmed that he had not been checking his mail at the post office box. Hanson incurred additional costs by dealing with an unrepresented party, which Mr. Caputo did not incur.
[66] Neither party made an Offer to Settle pursuant to Rule 49.10. It might be argued that the nature of a motion for summary judgment, in which one party seeks judgment and the other seeks to have the action continue, creates a “zero sum” contest that does not lend itself to a compromise of a kind contemplated by Rule 49.10. As Whitten J. noted in Intercity Transport Ltd. v. GTI Roll Transportation Services (Canada) Inc.[^14], there is precedent for the Court, in the face of an Offer to Settle, exercising its discretion “to order otherwise” under Rule 49.10, where it finds “an absence of compromise” in an Offer.” See Walker Estate v. York-Finch General Hospital[^15] and Independent Multi-Funds Inc. v. Bank of Nova Scotia.[^16] As Whitten J. noted in Intercity, there may be “all or nothing” situations in which compromise is not possible.
[67] Still, an Offer to Settle a motion for summary judgment does not preclude efforts to settle the motion or the action. Such was the offer in 1019330 Ontario Limited (Direct Diamond Promotions) v. Bach-Vu (Dorothy Jewellery),[^17] in which the plaintiff, in addition to offering to have the defendant’s motion for summary judgment dismissed, offered to accept a reduced amount of damages. In order for such an Offer to attract the costs consequences of Rule 49.10, it must, of course, be open for acceptance until the commencement of the trial, not simply until the commencement of the hearing of the motion.
[68] The objective of Rule 49.10 is to promote settlement by giving litigants an incentive to make and accept reasonable Offers to Settle. Its premise is that the outcome of the litigation is sufficiently predictable to permit a litigant to assess whether the result of accepting an Offer will be at least as favourable as a litigated outcome and that, when compared with what was offered, the actual outcome is a measure of the recipient’s reasonableness or unreasonableness in not accepting the Offer.
[69] If the outcome of the present action was not sufficiently predictable at the time the motion was brought to enable counsel to assess the risks of proceeding, it was more predictable after the affidavits were delivered. It might be hoped that the outcome of a trial was more predictable still after the decision on the motion was delivered. The fact that the parties were unable to agree even on the costs of the motion is not an encouraging sign as to the prospects of the action being settled without the need for a trial.
[70] Even if it was not evident to the parties after the motion was decided that one or the other was likely to prevail at trial, at least it may have been evident to them that the outcome was completely unpredictable, and that proceeding to trial amounted to a throw of the dice. Even in that event, it was incumbent upon the parties to consider the desirability of making serious efforts to resolve the action rather than proceeding, at greater expense, toward an uncertain and, perhaps, entirely unpredictable outcome.
[71] Even an Offer which brings certainty to an otherwise uncertain amount of costs encourages settlement. In Reischer v. I.C.B.C.,[^18] the B.C. Supreme Court held that this was the effect of a rule of civil procedure in that Province, which provided that there would be no costs when an Offer to Settle was accepted in that Court for an amount that was within the jurisdiction of the Small Claims Court:
[12] Because the costs outcome can be ascertained with certainty by both sides at the time the Offer to Settle is accepted, the subrule also furthers the policy goal of encouraging settlement. Pre-trial settlement is less likely to be achieved if there is uncertainty as to the cost consequence of accepting the offer. [Emphasis added]
[72] In the Reischer case, it was only the reasonableness of the amount claimed, in relation to the limits of the Court’s jurisdiction, and not the reasonableness of the motion itself, which was in issue. The Court stated:
[13] I find it unnecessary to address the question whether the plaintiff had sufficient reason for bringing the action in Supreme Court or to review the authorities referred to by counsel that address that issue. Even if the plaintiff had sufficient reason, the cost consequence is as set out in Rule 37(37) for the simple reasons that she decided to accept an offer for an amount within the jurisdiction of the Provincial Court with respect to a proceeding that could have been brought in that court. If the plaintiff had not accepted the offer, then proceeded to trial and obtained judgment for an amount within the jurisdiction of the Provincial Court, then and only then would the question of whether she had sufficient reason for bringing the action in Supreme Court arise (Rule 37(38). [Emphasis added]
[73] Under Rule 49.10, it is the reasonableness of the motion itself, and not the reasonableness of the action or the amount claimed, that is in issue. In the present case, however, either party could have offered (and still can offer) to pay or accept an amount in settlement of the action in respect of which the motion for summary judgment was brought. They could also offer to agree to the abandonment of the action without costs, or provide a quantification of the costs that would be payable if the action were abandoned.
[74] In the absence of Offers to Settle by either party, I do not find that the conduct of either of them, in failing to make an Offer, was unreasonable. However, I find that the outcome of the motion was a forgone conclusion and that it should have been obvious to Hanson, at least after the affidavits were exchanged, that there was no prospect of its success if it proceeded. Hanson must be found to have acted unreasonably by proceeding in these circumstances.
[75] In determining whether a motion for Summary Judgment was reasonably brought, the court must focus on whether it reasonably appeared to the moving party that there was a genuine issue for trial at the time that the motion was brought, and on the basis of the information known.[^19] That said, the Court of Appeal for Ontario in Smyth v. Waterfall[^20] held that solicitor and client costs (i.e. substantial indemnity costs) ought to be awarded where it should have been obvious to the moving party at the time when the motion was brought that it stood virtually no chance of success.
[76] The Court, in dealing with Hanson’s motion, noted that suppliers of construction material, such as Hanson, typically supply materials to paving companies on credit, supported by personal guarantees from the paving companies’ principals. Principals of one paving company routinely wind up their company at the end of one paving season and open another company at the beginning of the next season. The suppliers of construction material are therefore often dealing with the same individuals, acting on behalf of different companies, from season to season. In this environment, such suppliers must ensure that, at any given time, they have secured personal guarantees from the individuals operating the companies to which they are currently supplying material on credit. Hanson’s motion represents an effort to avoid the standard of care that must remain on suppliers of construction material to ensure that they have secured personal guarantees from the individuals whom they intend to look to for security for the payment for the goods they have supplied.
[77] The pleadings disclosed that the outcome of a motion of this kind was “virtually certain” or a foregone conclusion. I find, for the purposes of Rule 20.06(1) that, beyond the fact that Hanson was unsuccessful in its motion, it was also unreasonable for it to have brought it. It should therefore be required to pay Mr. Caputo’s costs on a substantial indemnity scale. This is not a case where it would be appropriate to deprive Mr. Caputo of intemnification for the costs that follow from success in the motion.
[78] I must, at this point, “step back and examine the overall award with a view to determining whether it is ‘fair and reasonable’ for the kind of matter involved.” In determining what is fair and reasonable, I must take into account the reasonable expectation of the parties concerning the amount of costs.[^21]
[79] The amount of costs on a motion for summary judgment varies widely depending on the circumstances, including the complexity of the issue, the complexity of facts, and the witnesses from whom evidence is required. There are no “standard costs” in motions for Summary Judgment.
[80] In Howden Power v. Swent,[^22] a motion for summary judgment involving discoverability, Brown J., in allowing substantial indemnity costs of $22,500.00 to one counsel and $17,500 to another, stated:
[11] The motion basically took a full day to argue. The motion materials were not voluminous, but they did provide an extensive history of the dealings between the parties. The issues were of medium complexity, including the discoverability of claims and whether a judge could grant summary judgment if discoverability was in issue….
[12] I do agree, however, that the total amounts sought by Aker and Swent for a full day summary judgment motion, of modest complexity, few pre-hearing cross-examinations, and a modest-sized record are excessive. Taking all the required factors into account, I conclude that a fair and reasonable award of substantial indemnity costs to Aker would be $22,500.00, and to Swent, $17,500.00.
[81] Having regard to the costs awarded to the successful party in Howden Power v. Swent, a case which required a single day to argue, the multiple attendances that the parties were required to make in the present case, and the amount Hanson was paying to its own lawyers for the motion, Hanson could reasonably have expected to indemnify Mr. Caputo for $32,354.41 of the fees which his lawyer charged him.
[82] In all of the circumstances, Hanson shall be required to pay Mr. Caputo his costs on a substantial indemnity scale. I fix these, for the reasons stated above, at $32,354.41 for fees, plus 13%, or $4,206.07, for HST on fees, plus $1,325.95 for disbursements, plus 13%, or $172.37 for HST on disbursements.
[83] The total of $38,058.80 which these amounts represent, when added to the similar amount that Hanson must pay its own lawyers in connection with the motion, exceeds the total amount of $74,615.73 that Hanson seeks to recover in the action, and the parties still face the costs that the trial itself will entail. The resulting disproportionality of the resulting costs to the amount at stake should not be surprising. In 1994, the Committee conducting the Civil Justice Review reported that its analysis of the cases tried by the Superior Court in Toronto had disclosed that in an average case, involving $70,000.00 at stake, each of the parties incurred lawyers’ fees which, on average, amounted to $32,800.00. When taxes and disbursements were added, the collective costs of both parties roughly equalled the amount at stake in the action.
[84] The Committee, having regard to the fact that parties, collectively, were incurring costs equal to the total amount at stake to resolve their disputes, and having regard also to the fact that 98% of all civil actions settled before final judgment at trial, concluded that access to justice would be improved by moving settlement discussions to an earlier stage of the proceeding, before costs became a major issue, and a major obstacle to settlement. This led to the recommendation that mediation be made mandatory before litigants could proceed to trial. While that recommendation was implemented for Toronto, Ottawa, and Windsor, it has yet to be implemented in the rest of the Province, including Central West Region, where the present proceeding is being conducted.
[85] The fact that the present motion has added to the costs of the action, causing the overall costs, in all likelihood, to exceed by far the amount at issue in the action, highlights the impact that motions of this kind often have on the proportionality of costs to the amounts at stake in the actions in which the motions are brought. The resulting disproportionality undermines access to justice and is an important reason why the court must, in appropriate cases, impose costs on a substantial indemnity scale, where appropriate, to ensure that litigants will be prudent in their use of such motions.
c) Deferring the Payment of Costs
[86] The question of whether the costs of the motion should be dealt with now or be left to the trial judge, likewise, depends on whether the outcome of the motion should have been a foregone conclusion, whether it was a “close call”, and whether the evidence heard at trial may shed light on the reasonableness of the motion. In the latter case, it may be best to leave the disposition of costs to the trial judge.
[87] In Marini v. Muller, Nordheimer J. ordered costs to be payable in the cause. The basis for his decision can be found in the following passage:
[6] In my view, in a case such as this where the result of the summary judgment motion was what might fairly be referred to as a “close call”, the appropriate result is to leave the costs in the cause.[^23] [Emphasis added]
[88] I interpret Justice Nordheimer’s statement to be that where the result of the summary judgment motion is a close call, in circumstances where the evidence heard at trial is likely to shed some light on whether it was reasonable for the moving party to have brought it, then it may be best to leave the disposition of the costs of the motion to the trial judge. That is not the case here. In the present case, the outcome of the motion was a foregone conclusion, and it is not likely that the evidence heard at trial will shed light on the reasonableness of the motion. The latter issue must be assessed with reference to the time when the motion was brought. In these circumstances, I believe that it is incumbent on me to deal with costs now, as I have, rather than deferring them to the trial judge.
[89] In the present case, a trial is needed to determine whether Mr. Caputo submitted the application for credit and signed the personal guarantee, and whether he knew that the application and guarantee had been prepared in his name and faxed to Hanson.
[90] The findings as to these facts depend on the credibility of Mr. Caputo, Mr. Corrado, and others. It is true that the trial judge will be better equipped to make determinations as to the credibility of these witnesses, after hearing them examined and cross-examined. However, the very fact that these determinations require a trial should have made it clear to Hanson that a motion of this kind was inappropriate.
[91] Hanson brought its motion under Rule 20 as amended in 2010. During the course of the proceeding, the amendment was the subject of litigation and, ultimately, the test to be applied was altered somewhat by the Combined Air decision. While it is true that these changes rendered the present motion more complex, since it involved an early application of the test which the Court of Appeal articulated in its decision in Combined Air, that interpretation did not significantly affect the onus a moving party bears when applying for summary judgment, or the costs consequences that should fillow if the party is unsuccessful.
[92] It would not be fair in these circumstances for the court to defer Mr. Caputo’s recovery of his costs of the motion until trial. To do so would make Hanson’s liability for costs contingent on Mr. Caputo’s success at trial, when the parties may have more evidence than when Hanson decided to proceed with its motion and Mr. Caputo decided to oppose it. This would relieve Hanson of its responsibility for bringing the motion when the evidence the court needed to resolve the issues was not yet available.
ORDER
[93] Having regard to the foregoing, it is ordered that:
- Hanson shall pay Mr. Caputo’s costs of the motion, on a substantial indemnity scale, fixed at $38,058.80, consisting of the following:
(a) $32,354.41 for fees;
(b) $4,206.07 for HST on fees;
(c) $1,325.95 for disbursements;
(d) $172.37 for HST on disbursements;
the said amount to be paid within thirty days.
- The parties shall consult with each other and agree on a timetable for the remaining steps in the action. In the event of disagreement, they may arrange for a telephone case conference at 9 a.m. on a mutually agreeable date by consultation with the Trial Office in Milton and my secretary.
D.G. Price J.
Released: December 7, 2012
COURT FILE NO.: 9288/09
DATE: 2012-12-07
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
HANSON HARDSCAPE PRODUCTS INC.
Plaintiff
- and –
ELEMENTS STONE & PAVING INC. and SEBASTIAN DANNY CAPUTO
Defendants
REASONS FOR COSTS ORDER
Price J.
Released: December 7, 2012
[^1]: Courts of Justice Act, Act, R.S.O. 1990, c. C.43, s. 131.
[^2]: Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA), [2004] O.J. No. 2634 (C.A.), paragraphs 24 and 26.
[^3]: Gratton-Masuy Environmental Technologies Inc. v. Building Materials Evaluation Commission, 2003 8279 (ON SCDC), [2003] O.J. No. 1658 (Ont. S.C.J. Div. Ct.) at para. 16. See also Boucher. v. Public Accountants Council for the Province of Ontario 2004 14579 (ON C.A.), (2004), 71 O.R. (3d) 291 (C.A.) at para. 38; Davies v. Clarington (Municipality), 2009 ONCA 722, [2009] O.J. No. 4236.
[^4]: Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON C.A.).
[^5]: Boucher, above, para. 26.
[^6]: “Information for the Profession” bulletin (“the Costs Bulletin”) from the Costs Sub-Committee of the Rules Committee (that the Costs Sub-Committee of the Rules Committee issued to replace the Costs Grid, which it repealed in 2005). The Costs Bulletin has advisory status only and not statutory authority, as it was not included in the Regulation that repealed the Costs Grid.
[^7]: Fazio v. Cusumano 2005 33782 (ON SC), 2005 CarswellOnt 4518 (S.C.J.), at para. 8.
[^8]: Combined Air Mechanical Services Inc. v. Flesch, 2011 764 (ONCA)
[^9]: Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON C.A.) See also: Moon v. Sher 2004 39005, 246 D.L.R. (4th) 440 (ON C.A.), per Borins J.A., at para. 28.
[^10]: Gale v. Gale, 2006 34428 (ON S.C.D.C.).
[^11]: Buchanan v. Goetel Communications Corp [2002] O.J. No. 3063 (ON S.C.).
[^12]: Patene Building v. Niagara Home, 2010 468 (ON S.C.).
[^13]: 131843 Canada Inc. v. Double “R” Toronto Ltd. (1992), 7 C.P.C. (3d) 15 (Ont. Gen. Div., per Blair J., as he then was) at p. 17, approved in Murano v. Bank of Montreal 1998 5633, (1998) 41 O.R. (3d) 222 (C.A.) at p. 244.
[^14]: Intercity Transport Ltd. v. GTI Roll Transportation Services (Canada) Inc., 2007 411 (ON S.C.).
[^15]: Walker Estate v. York-Finch General Hospital (1999), 1999 2158 (ON CA), 86 A.C.W.S. (3d) 823 (Ont. C.A.).
[^16]: Independent Multi-Funds Inc. v. Bank of Nova Scotia, [2004] O.J. No. 1885 (Ont. Sup. Ct.)
[^17]: 1019330 Ontario Limited (Direct Diamond Promotions) v. Bach-Vu (Dorothy Jewellery), 2008 41819 (ON S.C.).
[^18]: Reischer v. I.C.B.C., 2006 198 (BCSC).
[^19]: Smyth v. Waterfall et al., 2000 16880 (ON CA), [2000] O.J. No. 3494 (C.A.).
[^20]: Smyth v. Waterfall, 2000 16880 (ON CA), [2000] O.J. No. 3494; 50 O.R. (3d) 481 (ON C.A.), para. 23.
[^21]: Referring to: Boucher v. Public Accountants Council for the Province of Ontario,2004 14579 (ON CA), [2004] O.J. No. 2634 (C.A.) (released June 22, 2004); Moon v. Sher, [2002] O.J. No. 4651 (C.A.) (released November 16, 2004); and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC, 2005 1042 (ON CA), [2005] O.J. No. 160 (C.A.) (released January 24, 2005).
[^22]: Howden Power v. Swent, 2010 1807 (ONSC).
[^23]: Marini v. Muller, 2001 28435 (ON SC), [2001] O.J. No. 251, (ON S.C.), at para. 23.