SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 07-CV-330817 PD2
DATE: 20130214

RE: Sobeys Capital Incorporated, c.o.b. Price Chopper, Applicant

– AND –

Bayview Summit Development Limited, Respondent

BEFORE: Justice E.M. Morgan

COUNSEL: Jennifer McAleer, for the Applicant

Stephen Longo, for the Respondent

HEARD: January 9, 2013

COSTS ENDORSEMENT

[1] At the end of my judgment dated January 23, 2013, I invited counsel to make written submissions on costs. I have now received materials from both counsel.

[2] Article 22.3 of the lease between the parties provides that in the event of a dispute, “the prevailing party…will be entitled to recover from the other reasonable and necessary solicitor’s and counsel fees on a solicitor and client basis.”

[3] Ms. McAleer submits that this provision is an agreement that the winner be awarded costs on a substantial indemnity basis. Mr. Longo submits that this provision is an agreement that the winner be awarded costs limited to reasonable fees.

[4] Court awarded costs are typically on a partial indemnity scale. One would think that, as the standard measure of costs, that scale is “reasonable”. On the other hand, the article speaks of “solicitor and client” costs, which is the old term for the substantial indemnity scale. In addition, the article also speaks of “necessary solicitor’s and counsel fees”, suggesting that a full indemnity scale might even have been contemplated. In other words, article 22.3 makes reference to every scale of costs at once.

[5] I hesitate to say that a provision in a lease appears full of sound and fury, signifying nothing. Macbeth (5.5.26-27).

[6] Article 22.3 is not clear enough to do anything but suggest that I should use the usual principles that guide the court’s discretion in fixing the costs of this matter.

[7] Ms. McAleer’s has also indicated that the Applicant served an offer to settle on the Respondent on March 11, 2010. That offer would have settled the Application with the Respondent paying the Applicant $200,000 for the 2001-08 tax years and using the Working Paper method of calculation from 2009 forward. She submits that this offer would have been more generous to the Respondent than the result of my judgment will be, once the two experts set their minds to calculating what is owing to the Applicant. On the basis of Rule 49, this would generally lead to an award of costs on a partial indemnity basis up until the date of the offer and an award on a substantial indemnity bases after the date of the offer.

[8] Mr. Longo advises that there were a number of offers going back and forth between the parties, including a lump sum offered by the Respondent for the entire 2001-12 period. In any case, he submits that my judgment does not set the final amount of taxes to be reimbursed to the Applicant, as the precise quantum has yet to be determined by the parties and their experts.

[9] As requested by the parties, my judgment of January 23rd was a statement of principles to be applied by the parties rather than an award of a specific monetary amount. It is therefore difficult for me to determine whether any given offer to settle is higher or lower than the ultimate reimbursement that will flow from my judgment.

[10] Finally, Ms. McAleer submits that the Applicant was completely successful in this Application and should therefore recover a significant portion of its costs. Mr. Longo’s reply is, quite simply, that the costs submitted by the Applicant are too high – over $250,000.00, or more than half of what the Applicant itself estimates it is owed by the Respondent as reimbursement of taxes paid.

[11] Both counsel are right.

[12] The Applicant was entirely successful. Ms McAleer and her legal team did a very effective job in putting the case together and in advocating their client’s cause. The time and effort they put into this Application was well invested.

[13] While I do not think that the Applicant’s case was “over-lawyered” in any pejorative sense – after all, one should not argue with success – the Applicant’s Bill of Costs shows an enormous amount of resources brought to bear on this case. The Applicant’s law firm employed no less than 18 timekeepers (lawyers, students, clerks) on this file, and its costs submission claims for 5 of them.

[14] The amount requested by the Applicant does seem to be proportionately higher with respect to the size of the dispute than one generally sees in cost submissions. Costs should be within the expectation of the parties, and proportionality is an important governing principle in determining those expectations. Boucher v Public Accountants Council for the Province of Ontario (2001), 2004 14579 (ON CA), 71 OR (3d) 291 (Ont CA).

[15] Mr. Longo suggests that I use the Respondent’s Bill of Costs as a guide to fixing the Applicant’s reasonable costs. The Respondent’s Bill comes to just short of $80,000.00 on a partial indemnity basis. This figure does not include the cost of retaining an expert, as Mr. Longo submits that the expert reports played little role in the ultimate outcome of the Application.

[16] I commend the thrift with which the Respondent’s law firm approached this Application. Mr. Longo apparently handled this case on his own, without the participation of anyone else in his firm. While a comparison of the two parties’ fees is relevant in determining a reasonable level of costs, Canadian National Railway Corp. v Royal and SunAlliance Insurance Co. (2005), 2005 33041 (ON SC), 77 OR (3d) 612 (SCJ), I do not think that the successful party necessarily needs to match the modesty of the unsuccessful party’s legal bill. Comparison of the Applicant’s Bill of Costs with the Respondent’s Bill of Costs is one of a number of factors to be taken into account.

[17] On the question of expert fees, I am of the view that the cost of retaining an expert was indeed a necessary disbursement for the parties to have incurred. Much of the affidavit evidence and cross-examinations in the record were of the two experts. Each of the experts commented on the other’s report, and counsel spent a significant amount of time going over and responding to the expert reports. The experts were an integral part both sides’ case.

[18] The Applicant’s Bill of Costs does not contain a figure for costs on a partial indemnity scale throughout the litigation. The closest it comes to this is the partial indemnity up until its offer to settle and substantial indemnity thereafter. This figure comes to just over $209,000.00, including disbursements and HST.

[19] As I am of the view that the cost of the expert is recoverable as a disbursement, this should be added to the Respondent’s proposed level of costs if there is to be a meaningful comparison between the two sides. Assuming that the Respondent’s expert cost the same as the Applicant’s expert (which, according to the Applicant’s Bill of Costs is $60,000.00), the Respondent’s partial indemnity proposal is $80,000.00 + $60,000.00 = $140,000.00. The difference between the Applicant’s figure of $209,000.00 and the Respondent’s figure of $140,000.00 is $69,000.00.

[20] Section 131 of the Courts of Justice Act grants some latitude in the court’s discretion to award costs, and Rule 57.01(3) makes it clear that fixing costs is not a mechanical exercise based strictly on the typical ‘hours x rates’ formula. Certainly, the role of the court in fixing costs is not to engage in an assessment, inspecting each docket entry or second guessing the time and expenses incurred.

[21] Rather than use a precise tariff or exact measure of costs, courts have been directed to arrive at a fair and reasonable amount that should be paid by the unsuccessful party. Andersen v St. Jude Medical, Inc. (2006), 2006 85158 (ON SCDC), 264 DLR (4th) 557, at para 18 (Div Ct); Zesta Engineering Ltd. v Cloutier, 2002 25577 (ON CA), [2002] OJ No 4495 (Ont CA). Accordingly, the fixing of costs can be an exercise in either rough justice or Solomonic wisdom, depending on whether one wants to put a negative or positive gloss on it.

[22] Under the circumstances, I will take ½ of the $69,000.00 difference between the parties’ respective proposals, or $34,500.00, and will subtract that from the Applicant’s proposal: $209,000.00 – 34,500.00 = $174,500. In my view, this is a reasonable reflection of the parties’ expectations, as it is a mid-point between them.

[23] As a final matter, the Applicant has requested that interest at the Designated Interest Rate under the lease (3 points over prime) be ordered payable on all overpayments to be reimbursed to the Applicant. This is the rate at which moneys owing by the Applicant as tenant would be charged, and Ms. McAleer submits that by analogy this rate should be used for reimbursement of the Applicant pursuant to this judgment.

[24] The short answer to this request is that the lease does not call for the Designated Interest Rate to apply to this payment by the Respondent as landlord to the Applicant as tenant. I do not think that one can imply an interest rate that is not specified in the lease by analogizing the payment to one for which the interest rate is specified.

[25] In my view, all amounts to be reimbursed to the Applicant or paid by the Respondent to the Applicant pursuant to the judgment herein are to be at the relevant Courts of Justice Act rate. This rate will varies from time to time, and the parties will have to calculate the interest applicable on any payment from the date that the given overpayment was originally made by the Applicant.

[26] The Respondent shall pay costs to the Applicant in the amount of $174,500.00, inclusive of disbursements and HST.

Date: February 14, 20103 Morgan J.