SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: 08-02364 (Hamilton)
DATE: 2012/12/11

RE: 1709451 Ontario Inc. (Plaintiff) v. 1718541 Ontario Inc. and Margarida Pacheco (Defendants)

1718541 Ontario Inc. and Margarida Pacheco (Plaintiffs by Counterclaim) v. 1709451 Ontario Inc. and Resham Kang (Defendants by Counterclaim)

BEFORE: The Honourable Mr. Justice R.A. Lococo

COUNSEL:
Michael Courneyea, for the Plaintiff/ Defendants by Counterclaim
Patrick Summers, for the Defendants/ Plaintiffs by Counterclaim

HEARD: By written submissions

E N D O R S E M E N T – C O S T S

[ 1 ] 1709451 Ontario Inc. was the Plaintiff in an action against the Defendants, 1718541 Ontario Limited (171) and Margarida Pacheco, to enforce a vendor-take-back mortgage, a promissory note and related guarantees. The Plaintiff and 171 entered into the mortgage, promissory note and guarantees on closing of the Plaintiff’s sale of a gasoline station to 171. The Defendants counterclaimed, seeking damages for breach of contract and misrepresentation. After a seven day trial, the Plaintiff recovered judgment against the Defendants. [1] As provided for in the mortgage, the amount awarded to the Plaintiff was reduced by an amount attributable to the Plaintiff’s breach of an undertaking to complete a coffee drive-through on the property. The Defendants’ counterclaim was otherwise dismissed. Costs were left to be determined based on written submissions.

[ 2 ] In its costs submissions, the Plaintiff submitted that it should recover its costs, based on its success at trial. The Plaintiff submitted a Bill of Costs, which calculated its costs at $60,454 on a partial indemnity basis, $77,801 on a substantial indemnity basis and $84,550 on a full indemnity basis, in each case including disbursements of $7,147. The Plaintiff’s Bill of Costs also included a further alternative calculation of costs in the amount of $69,866. This alternative was based on partial indemnity costs to January 5, 2012, the date of an offer to settle by the Plaintiff, and substantial indemnity costs thereafter.

[ 3 ] The Defendants did not dispute that there should be an award of costs to the Plaintiff. The parties differed, however, as to the appropriate basis and quantum of costs.

[ 4 ] The Plaintiff argued that it should be awarded costs on a full indemnity basis. The Plaintiff relied on the terms of the mortgage and the promissory note, which provided for recovery of solicitor and client costs for actions taken by the lender to enforce its rights under those agreements.

[ 5 ] Alternatively, the Plaintiff claimed costs on a partial indemnity basis to January 5, 2012 and substantial indemnity costs thereafter. In 171’s submission, such an award of costs was appropriate since 171 obtained a judgment more favourable than the terms of the offer to settle (see subrule 49.10(1) of the Rules of Civil Procedure [2] ).

[ 6 ] I have concluded that in the circumstances of this case, the appropriate scale for awarding costs to the Plaintiff is partial indemnity costs throughout.

[ 7 ] I agree with the Plaintiff that in an action to enforce a debt, the presumptive result that the successful lender should recover partial indemnity costs may be displaced by plain and unambiguous language in the loan agreement. [3] I also agree with the Plaintiff that, in the absence of other considerations, the fact that the mortgage and the promissory note in this case provided for solicitor and client costs would justify a more generous costs award with respect to a successful enforcement action by the lender.

[ 8 ] In my view, however, it was appropriate in this case to take into account the degree of success achieved by the parties in determining the appropriate basis for awarding costs to the Plaintiff. In this regard, the Defendants achieved a limited measure of success with respect to one of the issues raised in their defence and counterclaim. In particular, the principal amount recovered by the Plaintiff under the mortgage was reduced by $80,000 to $220,000 because the Plaintiff was found to have breached its undertaking to complete a coffee drive-through on the property, as alleged by the Defendants. The degree of success achieved by the parties was therefore mixed, although there is no doubt that the Plaintiff achieved a greater measure of success. In these circumstances, in my view, a partial indemnity costs award in favour of the Plaintiff is appropriate to reflect the degree of success achieved by the Plaintiff.

[ 9 ] In reaching this conclusion, I also considered the Plaintiff’s offer to settle dated January 5, 2012. In this regard, I agree with the Defendants that rule 49.10 of the Rules of Civil Procedure did not apply to this offer. In particular, that offer included a requirement that Defendants pay the Plaintiff’s substantial indemnity costs after the date of the offer in an amount to be settled or fixed by the court. In Rooney (Litigation Guardian of) v. Graham , [4] the Ontario Court of Appeal considered an offer of this nature (referred to as an “escalating offer”) and decided that failure to accept such an offer did not attract costs consequences under rule 49.10. Accordingly, an award of substantial indemnity costs after the date of the offer to settle in this case was not warranted.

[ 10 ] The Defendants argued that there should be a 50 per cent reduction in the amount of partial indemnity costs awarded to the Plaintiff, based on the Defendants’ assessment of the degree of success achieved by the parties on an issue-by-issue basis. I agree with the Plaintiff, however, that a distributive approach to assessment of costs is not warranted in this case. [5] In any case, as previously indicated, I have already taken into account the relative degrees of success of the parties in this case in determining the appropriate scale of costs to be assessed. In my view, a further reduction in the amount of costs awarded to the extent proposed by the Defendants would not be appropriate.

[ 11 ] I also considered the Defendants’ argument in favour of a further reduction to take into account, for example, relatively modest amounts claimed for travel time between Toronto and Hamilton by Plaintiff’s counsel. I did not find analysis of this nature to be helpful in establishing an appropriate costs award. In any case , in the fixing of costs, I am not bound by the calculation of hours and time rates. [6] In order to arrive at a result that is fair and reasonable to all parties, I am entitled to take into account other factors set out in subrule 57.01(1) of the Rules of Civil Procedure , including the reasonable costs expectations of the unsuccessful party [7] .

[ 12 ] In all the circumstances, I have concluded that the Plaintiff’s costs payable by the Defendants shall be fixed at $45,000, inclusive of disbursements and tax. I have filled in this amount and signed the agreed form of Judgment provided by counsel.

The Honourable Mr. Justice R.A. Lococo

Released: December 11, 2012

COURT FILE NO.: 08-02364 (Hamilton)

DATE: 2012/12/11

SUPERIOR COURT OF JUSTICE - ONTARIO BETWEE N: 1709451 Ontario Inc. (Plaintiff) - and - 1718541 Ontario Inc. and Margarida Pacheco (Defendants/ Plaintiffs by Counterclaim) - and - 1709451 Ontario Inc. and Resham Kang (Defendants by Counterclaim) BEFORE: The Honourable Mr. Justice R.A. Lococo COUNSEL: Michael Courneyea, for the Plaintiff/ Defendants by Counterclaim Patrick Summers, for the Defendants/ Plaintiffs by Counterclaim ENDORSEMENT – COSTS Lococo J.

Released: December 11, 2012

[1] 1709451 Ontario Inc. v. 1718541 Ontario Inc. , 2012 ONSC 4565 .

[2] R.R.O. 1990, Reg. 194 .

[3] Guaranty Trust Co. of Canada v. Celenza , 1967 244 (ON SC) , [1967] 2 O.R. 236 (H.C.) at 241.

[4] 2001 24064 (ON CA) , [2001] O.J. No. 1055 (C.A.) at para. 23-35 .

[5] See Armak Chemicals Ltd. v. Canadian National Railway Co. (1991), 1991 7060 (ON CA) , 5 O.R. (3d) 1 (C.A.) 8-9, which referred to reservations about distributive costs orders.

[6] See Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA) , 71 OR (3d) 291 (C.A.) at para 26 .

[7] See in particular paragraph 57.01(1) (0.b) of the Rules of Civil Procedure .