ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 47754/06

DATE: 2013-03-19

BETWEEN:

RANKIN CONSTRUCTION INC.

Plaintiff

• and -

HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO

Defendant

P. Mahoney and M. Armitage, for the Plaintiff
R. Carr and J. Glick, for the Defendant

The Honourable Mr. Justice D.A. BROAD

COSTS ENDORSMENT

Background

[1] The Parties have now filed their written submissions on costs, as directed in my Reasons for Judgment released January 7, 2013. The following is my ruling on the question of costs.

[2] The Defendant (the “MTO”) submits that, being entirely successful in the action, the costs should follow the event entitling it at least to partial indemnity costs of the action.

[3] However, it submits that partial indemnity costs should be awarded to it to January 22, 2010, being the date that it delivered a written Offer to Settle, proposing dismissal of the action without costs, and substantial indemnity costs thereafter. The MTO submits that, although the provisions of sub-rule 49.10(1) do not support an award of substantial indemnity costs in favour of a defendant where the action is dismissed, the Court has the discretion, pursuant to the combined effect of sub-rules 49.13 and 57.01, to award substantial indemnity costs from the date of the its Offer to Settle, and it should do so, in keeping with the policy underlying Rule 49, which is to encourage parties to make, and to accept, reasonable Offers to Settle.

[4] The MTO relies upon a line of cases represented by S.A. Strasser Ltd. v. Richmond Hill (Town of) (1990), 1990 6856 (ON CA), 1 O.R. (3d) 243 (CA), Young Estate v. RBC Dominion Securities [2009] O.J. No. 734 (SCJ), H.L. Staebler Co. v. Allan (2008), 2008 64396 (ON SC), 92 O.R. (3d) 788 (SCJ) and Alie v. Bertrand & Frere Construction Co. (2002), 2002 31835 (ON CA), 62 O.R. (3d) 345 (CA) in support of it claim for substantial indemnity costs from and after the date of its Offer to Settle.

[5] In my view the cases cited by the MTO do not support the proposition that an Offer to Settle made by a Defendant in an insignificant or nominal amount, or calling, as in this case, for dismissal of the action without costs, would attract an award of substantial indemnity costs, absent some conduct of the Plaintiff in the prosecution of the action which would justify the imposition of a sanction by the Court through an award of costs.

[6] I adopt the reasoning of Justice Taylor in the case of Smith v. Hayden, [2009] O.J. No. 814 at para. 6, that, although defendants should be encouraged to make reasonable Offers to Settle and should be rewarded with an award of substantial indemnity costs following the date of the offer if the action is ultimately dismissed, the offer should be a substantial offer in order to attract such consideration.

[7] In addition to the foregoing, I would decline to award substantial indemnity costs to the MTO for any portion of the action for an additional reason. As indicated in the Reasons for Judgment, the facts were not largely in dispute. The outcome of the action therefore depended upon the application of applicable legal principles to those facts. The law of construction tendering is a complex area, as exemplified by the regular attention paid to it by the Supreme Court of Canada in a series of important cases spanning three decades since R. v. Ron Engineering & Construction (Eastern) Ltd. 1981 17 (SCC), [1981] 1 S.C.R. 111, many of which were referred to in the Reasons for Judgment. A major issue in this action related to the question of whether an owner is at liberty to investigate a bid to determine whether it is compliant with the terms of the call for tenders. This was an issue which was far from settled in the jurisprudence. The question of the applicability of the exculpatory clause in the MTO’s tender document fell into the same category. Moreover, it is unlikely that this case will be the last word on these subjects.

[8] Generally speaking, cases which deserve to be tried are those involving a legitimate dispute on the facts, a legitimate dispute on the law, or a legitimate dispute on both the facts and the law. This was a case that likely needed to be litigated given the continued uncertainty in the law touching on the issues. As such, the words of LaForme, J. (as he then was) in Radey v. Ogden [2001] O.J. No 4988 are apt, where he observed, at para 12, that the claim in the case before him was not frivolous, nor was it proceeded with for reasons that were inappropriate or improper, and that both parties came, regrettably, to require the assistance of the Court to resolve the issues between them.

[9] I therefore find that the MTO is entitled to costs on a partial indemnity scale.

[10] The MTO calculates its partial indemnity costs at $117,818.50, plus disbursements in the sum of $93,169.52 for a total of $210,988.02.

[11] The Court of Appeal in the case of Boucher v. Public Accountants Council for the Province of Ontario (2004) 2004 14579 (ON CA), 188 O.A.C. 201, at para. 26, reiterated the principle that, overall, the 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. As observed by the Court at para. 38, in deciding what is fair and reasonable, the expectation of the parties concerning the quantum of a costs award is a relevant factor.

[12] Counsel for the MTO has acknowledged that 4.2 of its docketed hours were entered in error and should be disregarded. This would result in a reduction of $1,470.00.

[13] The other adjustments I would make to the fee portion of the costs claim of the MTO would be to lower the partial indemnity rate for Mr. Glick to $200.00 per hour, resulting in a reduction of $2,170.00, to eliminate the attendances on pre-trial motions, resulting in a reduction of $4,690.00, and to apply a reduction in respect of travel time in the sum of $3,500.00.

[14] The foregoing adjustments result in a revised amount for fees in a rounded sum of $106,000.00.

[15] With respect to disbursements, I would reduce the expert fees of KPMG from $76,954.00 to $50,000.00, considered to be a reasonable amount as mandated by items 26 and 28 of the Tariff, given that, unlike the Plaintiff’s expert PriceWaterhouseCoopers, KPMG did not prepare a full independent damage analysis and calculation and, but rather prepared a critique of the PWC analysis. In contrast to KPMG’s accounts, PWC’s accounts to the Plaintiff totalled $61,981.44 and included the preparation of a reply report responding to the KPMG report.

[16] I would also disallow the “consulting fees” claimed for three witnesses called by the MTO, being retired MTO staff members, as there is no provision for these fees in the applicable Tariff. I have not been provided with any authority supporting the recovery of these types of fees for non-expert witnesses. Witness fees as prescribed by the Tariff in the sum of $196.32 would be allowable for the attendance of these three witnesses.

[17] I would allow the disbursements for Process Servers, Court Reporters’ fees and Court Reporter Transcripts in the sum of $915.54, but would disallow the balance of the claimed expenses for car rental, gas, parking, meals and hotel accommodations, for which there is no support in the Tariff.

[18] In accordance with the foregoing it is ordered that the Plaintiff pay costs to the Defendant fixed on a partial indemnity basis as follows:

Fees - $106,000.00
Disbursements - $51,111.86
TOTAL - $157,111.86

D.A. Broad J.

Released: March 19, 2013