ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-12-0056-00
DATE: 2013-04-04
B E T W E E N:
1188710 ONTARIO LIMITED trading as BURNETT CONSTRUCTION
Mr. D. Shanks, for the Plaintiff
Plaintiff
- and -
GREGORY GARTNER and SUZANNE GARTNER
Mr. J. Garofalo for the Defendants at the Costs Hearing
Defendants
HEARD: February 27, 2013,
at Thunder Bay, Ontario
Regional Senior Justice H.M. Pierce
Reasons on Costs of the Trial
Introduction
[1] The plaintiff seeks its costs in a construction lien action that required seven days of trial. It claimed $111,865.86 plus interest and costs in the action. At trial, the plaintiff was awarded a declaration of lien and judgment against the defendants in the amount of $117,554.43. Thus, the plaintiff was wholly successful at trial.
[2] Mr. Garofalo, who argued the costs motion for the defendants, was not counsel at trial. The defence of this case was ably conducted by Ms. R. Clinker at trial. I am indebted to counsel for the quality of their arguments on the issue of costs.
[3] Trial commenced on August 15, 2012. On July 13, 2012, the plaintiff served an offer to settle the case at $111,865.86, plus costs of the action and costs of a motion heard the previous month. The offer remained open for acceptance until one minute after the commencement of trial.
[4] Costs of previous skirmishes for motions argued June 28, 2012 and August 9, 2012 have already been determined and form no part of these reasons. The defendants concede that the plaintiff is entitled to costs. The real issue is quantum.
[5] The defendants submit that costs should be on a partial indemnity scale in a range of $40,000 – 45,000. The plaintiff seeks costs on a “modified full indemnity scale” to include some secretarial time charged at a substantial indemnity rate, based on 90% of the rate. The amount claimed including fees, disbursements and HST is $90,953.63 plus a further sum for client expenses and HST in the amount of $5,435.04 for a total of $96,388.67. I note that this calculation is based on a scale of costs calculated at substantial indemnity, not full indemnity, as the plaintiff claims.
[6] If partial indemnity costs are awarded, the plaintiff submits the sum of $67,385.20 should be awarded including fees, disbursements, client expenses and tax.
The Plaintiff’s Arguments
[7] The plaintiff submits it is entitled to an elevated scale of costs because:
it served a Rule 49.10 offer that would entitle it to partial indemnity costs to July 13, 2012 and substantial indemnity costs thereafter;
the defendants behaved with reprehensible conduct;
the plaintiff prepared documentary disclosure at its own cost saving solicitor’s time by doing so.
The Defendants’ Arguments
[8] The defendants submit that partial indemnity costs should be ordered because:
a construction lien case is summary in nature and this case was fact-driven;
the reasonable expectations of the unsuccessful parties, as illustrated by the defendants’ bill of costs, should determine the level of costs;
the costs claimed are not proportional to the judgment granted;
the offer to settle did not constitute an offer within the meaning of Rule 49.10 as it did not compromise any claim;
the defendants’ conduct was not reprehensible; they were entitled to have their claim adjudicated and ought not to be penalized in costs for exercising that right;
the bill of costs is excessive with respect to:
- secretarial services billed as law clerk time;
- no necessity for a second lawyer on the file;
- excessive hours claimed, including for preparation of the bill of costs;
- the client’s costs for preparation and engagement of an expert to prepare a report should be disallowed.
Scale of Costs
[9] In Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330, para. 22, the Court of Appeal held there were three fundamental purposes for the modern costs rules:
to indemnify successful litigants for the cost of litigation;
to encourage settlement; and
to discourage and sanction inappropriate behaviour by litigants.
[10] It is settled law that the court has wide discretion to award costs, provided the discretion is exercised judicially: Toronto Star Newspapers Ltd. v. Fraleigh, (2011) 2011 ONCA 555, 107 O.R. (3d) 288 (C.A.), para. 32.
[11] Rule 57.01 of the Rules of Civil Procedure sets out the general principles to be considered in the exercise of the discretion to award costs. In addition to the outcome of the proceeding and any written offer to settle, these include:
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;
b) the apportionment of liability;
c) the complexity of the proceeding;
d) the importance of the issues;
e) the conduct of any party that tended to shorten or 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;
g) a party’s denial or refusal to admit anything that should have been admitted;
h) …
i) Any other matter relevant to the question of costs.
[12] A costs award must be fair and reasonable, and balance the objective of access to justice. It should also reflect the reasonable expectations of the parties: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), paras. 37 – 38. In Boucher, the court also noted:
…There are obviously cases where the prospect of an award of costs against the losing party will operate as a reality check for the litigant and assist in discouraging frivolous or unnecessary litigation….(para. 37)
[13] The lowest and most commonly awarded scale of costs is partial indemnity costs, which replaced the scale of costs known as party-and-party costs. The next level of costs is substantial indemnity costs, formerly called solicitor-and-client costs. Rule 1.03 (1) specifies that substantial indemnity costs are 1.5 times the amount of partial indemnity costs. Substantial indemnity costs are reserved for cases of reprehensible conduct, where the court wishes to show its displeasure with a party or where the rule regarding offers to settle is engaged. It is rare for a court to award this level of costs based on reprehensible conduct; invariably it is a punitive award.
[14] The highest scale of costs is full indemnity, formerly known as costs on a scale of a solicitor-and-his-own-client. This scale of costs is intended to be a complete recovery of a party’s costs. In Toronto Star Newspapers Ltd., para. 34, the court held that elevated costs are only justified in two circumstances: where there is a Rule 49.10 offer (as described below), or “on a clear finding of reprehensible conduct on the part of the party against which the cost award is being made.”
[15] Full indemnity costs were described by Madam Justice Warkentin in Marcus v. Cochrane, [2012] O.J. No. 1663 (S.C.J.) at para. 11:
Costs on a full indemnity basis represent complete indemnification at actual rates. Full indemnity costs have been held to be appropriate in circumstances still more exceptional than those justifying the application of the substantial indemnity scale. For example, where there are unsubstantiated allegations of dishonesty or where there is conduct of a party that is “reprehensible, scandalous or outrageous,” full indemnity costs may be appropriate.
[16] The Marcus case involved a client who sued her solicitor for negligence. The case was dismissed after eight days of trial. In Marcus, Madam Justice Warkentin awarded full indemnity costs of $160,706.99 because the plaintiff knew or ought to have known that she could not succeed at trial in either negligence or damages because of overwhelming evidence favouring the defendants. As well, the court held that the unfounded allegations of dishonesty against the solicitor were very serious and constituted reprehensible conduct. Although full indemnity costs were awarded, the plaintiff benefitted from a reduced rate charged by the defendants’ solicitor, which placed the costs claim in the range of partial indemnity costs.
Rule 49.10 Offers
[17] Rule 49.10 (1) of the Rules of Civil Procedure states:
Where an offer to settle,
a) is made by a plaintiff at least seven days before the commencement of the hearing;
b) is not withdrawn and does not expire before the commencement of the hearing; and
c) is not accepted by the defendant, and the plaintiff obtains a judgment as favourable as or more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer to settle was served and substantial indemnity costs from that date, unless the court orders otherwise.
[18] The plaintiff submits that if Rule 49.10 is applied, it is entitled to partial indemnity costs of $8,034.80 including tax to July 13, 2012 and a further $76,085.15 including tax, from July 14, 2012 to February 27, 2013, the date that costs were argued. If costs are awarded on this basis, the total claimed is $84,119.95.
[19] It is not contested that the judgment at trial was more favourable to the plaintiff than its offer to settle. The defendants’ argument is that the plaintiff’s offer did not fall within Rule 49.10 as it did not offer to compromise its claim.
[20] The Court of Appeal considered this argument in Data General (Canada) Ltd. v. Molnar Systems Group Inc. (1991), 1991 7326 (ON CA), 6 O.R. (3d) 409 when it held that an element of compromise is not an essential ingredient in an offer to settle but its absence may be a relevant factor when a court determines whether to “order otherwise:” para. 21.
[21] In this case, it is not necessary to rule on the point, as the offer delivered by the plaintiff did compromise its claim for approximately $17,000 in interest and late charges that had accrued in the two years after the completion of its contract.
[22] The purpose of Rule 49.10 is to encourage the parties to deliver their best offers prior to trial in order to explore settlement and avoid the cost of a trial. The scope of the rule is not limited to particular types of actions. A party who ignores an offer does so at the risk of its costs. The documentary evidence admitted at trial made it abundantly clear that the plaintiff made overtures to the defendants to settle the case before counsel were retained and the lien filed. To award a reduced scale of costs in the face of an offer to settle served a month before trial would undermine the policy implicit in the rule and reward the defendants for their failure to consider seriously that they might lose at trial.
[23] I find that the offer to settle delivered by the plaintiff constituted an offer within the meaning of Rule 49.10 and entitles the plaintiff at least to costs on a party and party scale to July 13, 2012 and on a solicitor and client scale thereafter. However, the court must still consider whether elevated costs are warranted and if so, in what amount.
The Reasonable Expectations of the Parties
[24] The defendants argue that costs ordered should reflect the reasonable expectations of the unsuccessful party: Rule 57.01 (1) (0.b). They note that construction lien litigation is a summary proceeding, without examinations for discovery or a pretrial.
[25] In this case, the defendants filed a bill of costs on a partial indemnity scale totalling $29,959.07. They submit that is the true measure of the expectation of the parties for costs.
[26] The final tally does not, however, tell the whole story. Ms. Clinker, trial counsel, is much junior to Mr. Shanks, with an hourly rate of $140 on a partial indemnity scale. Mr. Shanks’ partial indemnity rate is $267 per hour. When the hours of counsel are considered, they are very similar. Plaintiff’s counsel logged 183.7 hours whereas the defendant’s counsel claimed 179.8 hours.
[27] The plaintiff’s bill includes initial attendances to claim and file a construction lien, costs that the defendants did not incur. As well, Mr. Gartner was ordered, in the midst of his cross-examination, to produce documentation which he had not seen fit to disclose to his own counsel previously. I accept that Mr. Shanks spent additional time to review these documents and prepare for cross-examination the next day when they were used to destroy Mr. Gartner’s credibility. It is therefore reasonable that the plaintiff’s bill of costs is greater than that of the defendants.
[28] The defendants also submit that the plaintiff’s bill of costs is out of proportion to what was sought in the proceeding. There is some irony in this submission. First, there is no evidence that the defendants served an offer to settle, or if they did, it was not an offer that came near to the judgment at trial. The conduct of the trial shows that the defendants refused to admit facts that were obvious and failed to concede points that which they should have, forcing the plaintiff to call evidence on the issues which prolonged the trial. The defendants’ allegation of deficiencies that were never proven was one example. The trial could have and should have been much shorter, but for the stubborn refusal of the defendants to admit the obvious. If the bill of costs is out of proportion to the claims in issue, it is because the defendants left the plaintiff no option but to prove all the issues.
Reprehensible Conduct by the Defendants
[29] Reprehensible conduct is that which is blameworthy, or deserving of censure or rebuke: Oxford Canadian Dictionary (Toronto: Oxford University Press Canada, 2001), at page 1224. Mr. Gartner’s wife, Suzanne Gartner, is named as a defendant land-owner in the action; however, she did not participate in the contractual relationship between the parties and no allegations of reprehensible conduct are made against her.
[30] In Hunt v. TD Securities Inc. (c.o.b. TD Evergreen), 2003 3649 (ON CA), 66 O.R. (3d) 481, para 133, the Ontario Court of Appeal adopted the reasoning of Dubin J.A. in Foulis v. Robinson, (1978), 1978 1307 (ON CA), 21 O.R. (2d) 769 (C.A.), emphasizing the exceptional nature of solicitor-and-client costs, based on the following principles:
Solicitor-and-client costs as opposed to party-and-party costs will only be awarded in rare and exceptional cases.
A defendant is entitled to defend an action and to put the plaintiff to the proof of his case.
Where a defendant’s acts are a deliberate attempt to frustrate the proceedings by fraud or deception, where the conduct of the defendant is calculated to harm the plaintiff, or where the unreasonable conduct of the defendant compounds the complexity of the proceedings, there are proper grounds to order solicitor-and-client costs.
The fact that the issue of liability was not contested at trial and that the defendant did not give evidence at trial are not factors which, by themselves, should result in an award of solicitor-and-client costs.
[31] Smith Estate v. Rotstein, (2010) 2010 ONSC 4487, O.J. No. 3266 (S.C.J.) involved estate litigation where a beneficiary challenged the validity of a will and two codicils without any evidentiary basis and made serious allegations against the trustee that were without merit. The court noted that her allegations unnecessarily lengthened the proceedings. At para. 30, Mr. Justice David Brown held that full indemnity costs could be awarded when:
one party was an innocent party to the proceeding and the court concluded that she should not experience any loss as a result of the conduct and actions of the defendant which resulted in the litigation;
one party made baseless allegations of wrongdoing or meritless claims of fraud, deceit, and dishonesty based on pure speculation against the other; or
it was clear shortly after the event in question that the plaintiff was blameless, but was required to proceed to trial because of disputes amongst the defendants about their share of liability.
[32] As I indicated, the defendants submit that they are entitled to test the claims of the plaintiff at trial. They maintain that the court is responsible to make credibility findings and findings of fact at trial and that the circumstances of this case did not go beyond that. In the ordinary case, I would agree with this submission concerning the court’s obligation to make findings. However, this is not an ordinary case.
[33] There were a number of troubling findings in this case that go beyond differences of opinion, perception, recollection or observation by the witnesses, giving rise to ordinary credibility findings. To be clear: these findings do not arise from the conduct of the trial by the defendants’ solicitor, who conducted the trial professionally under difficult circumstances. Rather, they arise from the evidence given by Mr. Gartner and some of his witnesses, as detailed in the reasons for judgment. For example:
Mr. Gartner claimed that the work had not been completed within the agreed upon schedule and vigorously advocated that the plaintiff was aware of the schedule for the cottage renovation. In cross-examination he stated that there was a project schedule: it was in his mind.
Mr. Gartner refused to acknowledge that he received the plaintiff’s invoices in the spring of 2010 despite the plaintiff’s production of a registered mail postal receipt confirming that the invoices were delivered to Mr. Gartner’s home, pursuant to his instructions. He added, “I don’t look at my own mail unless someone thinks I should look at it.”
Mr. Gartner denied receiving the plaintiff’s invoices even though they were listed in Mr. Gartner’s own affidavit of documents; instead, he testified that he had no idea how he got them.
Mr. Gartner disputed statements in the agreed statement of fact, such as the hourly rate agreed for labourers on the project, and when the fireplace was completed.
Mr. Gartner was untruthful about other matters unrelated to the plaintiff’s claim, such as the amount of mortgage outstanding on his cottage; and whether payments to another contractor were timely.
Mr. Gartner failed to disclose relevant documents in the course of the litigation.
Mr. Gartner’s testimony was contradicted by documents made by his own staff which were ordered to be produced during his cross-examination. Mr. Gartner testified that payments to Mr. Hagen were not held back, but the e-mail exchanges between Mr. Hagen and Mr. Gartner’s staff clearly indicated that Hagens were not paid in full for many months after the completion of work, and that they were only paid sporadically as the defendants’ cash flow permitted.
At times, Mr. Gartner’s evidence was contradicted by his own witnesses. Mr. Gartner stated he was the general contractor on the project; his architect described Mr. Gartner’s brother-in-law, Mr. Shoumaker, as the general contractor and Mr. Shoumaker testified that the log builder, Mr. Hagen, was the general contractor.
Mr. Shoumaker testified that Mr. Gartner instructed the cabinet installers, who were crossing into Canada from the United States, to tell the Canadian border officials they were coming to Ontario to fish. Mr. Gartner hotly disputed this evidence.
Mr. Shoumaker testified that the defendants chose the bathroom tile, which Mr. Gartner disputed.
In cross-examination, Mr. Shoumaker admitted he made up evidence about a heated argument between Mr. Gartner and Mr. Burnett.
The first complaint about deficiencies was made two years after the plaintiff completed work, on the eve of trial. I conclude these complaints were largely concocted or related to complaints of minor value. Just prior to the filing of the lien, Mr. Gartner made no mention of deficiencies. At trial, the evidence of deficiencies offered by Mr. Shoumaker was contradictory and confused, and discredited in cross-examination.
The evidence was completed before Mr. Gartner agreed to accept some incidental credits of minor value proposed by the plaintiff before the trial began.
In final argument, Mr. Gartner withdrew his accusation that Mr. Burnett stole groceries that belonged to the defendants. Mr. Burnett’s testimony that Mr. Gartner told him to take unused groceries with him when he left the job site was not even challenged in cross-examination.
Mr. Gartner also accused the plaintiff of over-billing for hours worked. These allegations were abandoned in final submissions.
Mr. Gartner failed to reimburse the plaintiff for items picked up and paid for at his request to permit other tradesmen to carry on their work.
Mr. Gartner was caught in a lie about re-financing of his corporation leading to cash flow shortages for the cottage renovation.
[34] I found that “Generally, Mr. Gartner’s testimony was characterized by arrogance and obfuscation.” I also concluded that Mr. Gartner used his tradesmen, including the plaintiff, as his bank when he ran out of funds to finance his cottage renovation, carrying out a deliberate policy of withholding payment.
[35] Allegations of dishonesty, made without a factual foundation, are particularly reprehensible in that they are defamatory. In this case, Mr. Gartner accused Mr. Burnett of stealing groceries and inflating hours worked. The plaintiff was forced to deal with those allegations at trial, even though the defendants did not pursue them in their case.
[36] The trial was significantly lengthened by Mr. Gartner’s refusal to admit that which should have been admitted, even to the point of challenging the agreed statement of fact, disputing his knowledge of documents listed in his own affidavit of documents, and giving testimony that was obviously untruthful. It was obvious he could not succeed at trial.
[37] In addition, the defendants attempted twice to adjourn the trial. In dealing with those costs previously, I found the motions were launched for strategic reasons to delay the case and ordered substantial indemnity costs in both cases. The scale of costs ordered should have been a warning to the defendants.
[38] Without doubt, Mr. Gartner’s case was characterized by a pattern of reprehensible conduct. In addition, I find that he engaged in a course of conduct designed to beggar the plaintiff, in the hopes that it would either abandon its claim or settle it to the defendants’ advantage. In the reasons for judgment, I noted Mr. Gartner’s use of his tradesmen as his bank. His conduct was outrageous. The award of costs should not permit Mr. Gartner to continue to beggar the plaintiff by paying minor costs. In the circumstances, a punitive award of costs is justified. Had the plaintiff submitted its costs based on a full indemnity basis, I would have been disposed to order them on that scale. The plaintiff is, however, entitled to costs on a substantial indemnity scale.
Quantum of Costs
[39] The defendants also made submissions challenging the quantum of costs claimed by the plaintiff. These submissions are:
Accounts for law clerks are excessive. They engaged in secretarial rather than law clerk work and the hourly rate claimed is excessive.
The use of two counsel was excessive.
The number of hours claimed by counsel was excessive, particularly with reference to preparation of the bill of costs.
The claim for expenses incurred by the client in the litigation should be disallowed, including the engineer’s report that was not used at trial and the disbursements for the client’s bookkeeper’s services, for copying and for photographs.
[40] I will deal with these objections in order.
Law Clerks
[41] The plaintiff seeks costs on a “modified full indemnity scale” to include some secretarial time charged at a substantial indemnity rate, based on 90% of the rate.
[42] The defendants submit that the guideline for hourly rates for law clerks, set out in Rule 57, has application here. The guideline prescribes a maximum hourly rate of $80 per hour on a partial indemnity scale. The defendants argue that most of the time claimed for law clerks, some 125 hours, is for secretarial functions and should be disallowed.
[43] As the authorities indicate, unless a client agrees to pay for secretarial services, charges for secretarial and clerical services are part of the solicitor’s overhead and not chargeable separately. The solicitor’s hourly rate is understood to pay for the wages of secretarial and clerical staff, whose time cannot be separately billed. In Mark Orkin’s The Law of Costs, 2nd ed. (Toronto: Canada Law Book), para. 311.12, some services which constitute a solicitor’s overhead are listed:
• clerical work done by a law student or law clerk;
• word processing;
• filing court documents;
• the administrative portion of a solicitor’s time recorded for billing;
• the cost of secretarial work;
• opening and operating a trust account and making deposits after hours on a client’s behalf.
[44] In hearing the challenge to law clerk/secretarial time, I asked counsel to define what characterizes law clerk work. Counsel agree that the law clerk performs skilled functions such as the lawyer would perform: for example, drafting pleadings, affidavits, motion material and bills of costs, preparing a file for discovery, assisting in the preparation of a client for discovery, and communicating with witnesses, and navigating the court’s process.
[45] By contrast, secretarial duties involve less skilled and more routine processes such as reception, making appointments, typing, printing, copying, faxing, filing, preparing simple letters, collating and assembling materials, and arranging to courier documents.
[46] In his bill of costs, the plaintiff claims substantial indemnity rates for law clerk functions ranging between $130.50 - $144.00. However, when the clerks are performing secretarial functions, such as collating material, the hourly rate claimed reduces to between $50 - $60 per hour. The years of experience for the clerks for whom claims are advanced range between 15 – 35 years.
[47] As an economy to both parties, counsel agreed that the plaintiff’s law clerk would be used to prepare joint documents. Those costs are set out in the bill of costs. No issue was taken with these shared costs totalling $1,886.58.
[48] The plaintiff filed 18 pages of dockets as an adjunct to its bill of costs. A review of the dockets shows that law clerks in Mr. Shanks’ office did perform secretarial functions in this action on an on-going basis. These functions include preparing or transcribing correspondence at the direction of counsel, faxing, printing, binding and filing documents and e-mail, scanning and e-mailing documents, organizing files, copying client’s documents, preparing, collating and paginating documents, responding to requests for copies, courier documents, and arranging and diarizing appointments with the client and witnesses.
[49] Leaving aside the shared clerk time agreed to by counsel for the parties, the plaintiff claims approximately $9,000 in additional clerk time on a substantial indemnity basis. In my view, even at that scale, the defendants should not be expected to pay for secretarial services that constitute overhead which is part of the solicitor’s hourly rate. The plaintiff’s bill of costs shall be reduced by the sum of $3,000 plus HST on account of secretarial services performed by law clerks.
The Use of Two Counsel
[50] The bill of costs shows that a junior lawyer, Mr. Ritson, who was called to the bar in 2009, (3 years) claimed 20.9 hours on the file at a substantial indemnity rate of $180 per hour. Mr. Ritson did not appear at trial and was not present when motions were argued. Rather, he was involved in the initial stages of the litigation: meeting with the client, preparing and filing the construction lien, drafting the statement of claim, taking instructions on the statement of defence and counterclaim, drafting a reply and defence to counterclaim, reviewing the client’s documents and preparing documentary discovery.
[51] Mr. Shanks was trial counsel. He was called to the bar in 1979 (33 years) and claims 162.8 hours for his work at a substantial indemnity rate of $400.50 per hour.
[52] I am satisfied that, apart from the communication necessary for Mr. Shanks to supervise his junior and to take over the management of the file after the pleadings were complete, there was no “double lawyering” on this file. Trial preparation and conduct of the trial was solely in Mr. Shanks’ hands.
Excessive Hours Claimed by Counsel
[53] The defendants contend that the number of hours claimed by counsel was excessive, especially with respect to the bill of costs.
[54] As I noted, the hours claimed by Ms. Clinker and Mr. Shanks in preparing for and attending at trial are comparable. Mr. Shanks claimed an hour for researching case law on full indemnity costs. Both sides filed authorities that were helpful to the court. As Mr. Shanks’ argument on the scale of costs has been accepted, it is hard to quibble with his preparation and I do not think that Mr. Garofalo does so. The issue is time claimed for preparation for and argument of costs.
[55] The plaintiff claims 15.7 hours of law clerk time to prepare the bill of costs charged at $22.50 per hour for a total of $353.25, which is clearly an economical use of clerk time. It would be far more costly to have a solicitor do the same preparation. The plaintiff claims a further 3.5 hours for Mr. Shanks to review the bill of costs, prepare submissions, and attend at court to argue, charged at $400.50 per hour. This time is claimed at $1,401.75. My recollection is that the time for a well-developed argument on both sides was at least 1.5 hours, though it may have been a little more.
[56] The bill of costs, calculated at various scales and breaking down the work of each lawyer and clerk involved and attaching comprehensive dockets comprises 23 pages and a further page calculating the implications of costs based on a Rule 49 offer. It is somewhat ironic that because the bill of costs is detailed, the defendants were able to argue successfully for a reduction in time allotted to secretarial services. In the result, although there is a significant amount of clerk time attributable to preparing the bill of costs, it is not charged at premium rates; it therefore represents a reasonable expenditure. Given the quality of the argument on costs, I do not find the claim for Mr. Shanks’ time to be excessive either.
The Client’s Expenses
[57] The plaintiff claims the sum of $5,435.04 (inclusive of tax) for expenses incurred by the client. These relate to the conduct of the litigation and are broken down as follows:
• Draft engineering report $ 565.00
• Bookkeeping services $3,580.00
• Photographs $ 550.66
• Materials and supplies $ 600.00
• Photocopying $ 139.38
[58] The defendants object to these expenses as not being tariff items and on the basis that they cannot be controlled or verified. The plaintiff argues that this is work that would have, in any event, have to be done by his lawyer in order to prepare for trial.
[59] The costs claimed are supported by invoices and receipts to Mr. Burnett. I will deal with them in sequence.
The Engineering Report
[60] The defendants sought an adjournment of the trial and were refused. The costs of that motion were allowed on a solicitor and client basis. Then the defendants delivered an expert report on the eve of trial alleging deficiencies, no doubt anticipating that the plaintiff would request an adjournment of the trial. Instead, Mr. Burnett commissioned an expedited engineering report in response to service of the defendants’ expert report, in preparation for trial. In his haste, he neglected to mention the expense to Mr. Shanks.
[61] The trial was ordered to proceed, and the defendants were denied leave to file their late-served expert report. Consequently, the plaintiff did not serve or file its expert report at trial.
[62] When costs for the second motion were argued, the cost to the plaintiff of expediting an expert report was overlooked. Nevertheless, I am persuaded that commissioning an expert report was a necessary and proper expense and should be allowed. If the trial had been adjourned, the plaintiff would have doubtless commissioned an expert report to answer the defendants’ expert. As with many aspects in this litigation, the plaintiff’s expenses were triggered by the defence strategy. The claim of $565.00 for an engineering report is allowed.
Bookkeeping Services
[63] The plaintiff claims the sum of $3,580 paid to the plaintiff’s bookkeeper for 179 hours of work billed at $20 per hour. In fact, the invoices supplied total $4,855. Although the work is described as “bookkeeping,” it is really secretarial in nature.
[64] The plaintiff submits that “farming out” this work saved time and expense of having it done by his solicitor’s staff. The defendants challenge these expenses, arguing that there is no way to verify them.
[65] The time claimed for bookkeeping is set out in itemized invoices. Services provided include meeting with Mr. Burnett to plan the organization of his notes, journals, correspondence, and photographs; typing Mr. Burnett’s notes; photocopying; assembling materials into binders; organizing and filing photographs; purchasing supplies; indexing materials; transcribing phone calls; and reporting to Mr. Burnett.
[66] Leaving aside the issue as to whether a party can claim costs for work it undertakes personally to prepare the file for counsel, the services performed are secretarial in nature. Had they been performed in-house by the lawyer’s staff, these services would have been disallowed as falling within the overhead component attributable to the lawyer’s fee. For that reason, the claim for bookkeeping services is disallowed.
Photographs
[67] The plaintiff claims the sum of $550.66 for its own costs for picture printing. The invoice is included in the materials. Tariff “A”, item 25, allows disbursements incurred by lawyers “for the preparation of a plan, model, videotape, film or photograph reasonably necessary for the conduct of the proceeding, a reasonable amount.”
[68] At trial, the plaintiff filed as an exhibit a binder of multiple photographs of the project. The defendants, in their bill of costs, also claimed a modest amount for photographs. I accept that this cost was incurred in order to advance the case at trial. Had it been incurred by the solicitor, it would have been an allowable expense. In this instance, the solicitor did not incur additional costs for photos because the client had already incurred the cost. There is no reason to deprive the plaintiff of the cost of photos that were tendered at trial in these circumstances. The claim for $550.66 is allowed.
Materials and Supplies
[69] The client also claims the sum of $600 for materials and supplies. An itemized invoice for these purchases is included in the bill of costs; the purchase of these materials is documented in the bookkeeper’s breakdown of charges. They include binders; tabs; paperclips; printer ink; sheet protectors; flash drives; photo album refills; CDs; and a case of paper.
[70] These expenses are not allowable pursuant to Tariff “A” and would normally be considered part of a lawyers overhead if the costs were incurred within the lawyers office. Accordingly, they are disallowed.
Photocopying
[71] The plaintiff claims the sum of $139.38 for photocopying. Invoices for the cost of commercial copying are included in the bill of costs. The cost of copying documents or authorities prepared for or by a party for the use of the court and supplied to the opposite party are recoverable under Tariff “A”.
[72] The Tariff does not specify that the cost of all copies is recoverable, only those used by the court or supplied to an opposing party. The solicitors agreed to share certain copying costs, which are set out in the bill of costs. Here, there is no indication as to what documents were copied by Mr. Burnett and whether they were used in the litigation. Therefore, the claim for copying is disallowed.
Conclusion
[73] The defendants shall pay to the plaintiff its costs as follows:
Total fees $75,886.97
HST at 13% on fees $ 9,865.31
Disbursements $ 1,703.88
HST on disbursements $ 107.48
Client expenses:
- Engineer’s report $ 565.00
- Photographs $ 550.66
Total $88,679.30
Regional Senior Justice H.M. Pierce
Released: April 04, 2013
COURT FILE NO.: CV-12-0056-00
DATE: 2013-04-04
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
1188710 ONTARIO LIMITED trading as BURNETT CONSTRUCTION
Plaintiff
- and –
GREGORY GARTNER and SUZANNE GARTNER
Defendant
REASONS ON COSTS OF THE TRIAL
Pierce, RSJ
Released: April 04, 2013
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