ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 11-51706

DATE: 2013/02/12

BETWEEN:

KIMBERLY MOORE

Applicant

– and –

THE REPUBLIC OF GREECE

Respondent

Patrick A. Thompson, for the Applicant

Nicolas P. Katsepontes, for the Respondent

DECISION ON COSTS

POLOWIN J.

[1] An Application was brought by the Applicant, Kimberly Moore, which sought the removal of a fence (referred to in the Reasons for Decision as the “litigation fence”) which demarks a Right of Way on her property and to install gates on the east and west sides of the Right of Way. The Application was dismissed in its entirety.

[2] While one day was set for the hearing of this matter, it was completed in less time. The affidavits filed by the parties in this matter were not especially lengthy. Only Ms. Moore was cross-examined on her affidavits. The matter was not legally or factually complex.

[3] The Court was provided with sealed Bills of Costs, calculated on a substantial indemnity basis, after the Application was argued. The Applicant indicates fees in the amount of $11,753.10 (HST excluded) and disbursements of $718.75 (HST excluded) plus $465.00 for the preparation of the Bill of Costs for a total of $12,936.85. The Respondent indicates fees in the amount of $26,937.50 (HST excluded) and disbursements of $3,142.00 (HST excluded) plus $450.00 for the preparation of the Bill of Costs for a total of $30,529.50. The Respondent later amended its Bill of Costs to include an invoice later received from Cornell Catana Reporting Services in the amount of $437.50.

[4] Both parties made settlement offers in this case. On July 15, 2011 Mr. Katsepontes wrote to Mr. Thompson, referring to the 1992 legal proceeding, requesting the withdrawal of the Application and a release, with no costs consequences. The letter went on to warn that should the matter proceed, substantial indemnity costs would be sought. On February 28, 2012 a Rule 49 offer was made by the Respondent that the Applicant withdraw the Application, pay reasonable costs and execute a Release that would acknowledge the Right of Way. This offer was open for acceptance until April 2, 2012. On March 19, 2012, Mr. Katsepontes wrote to Mr. Thompson seeking a withdrawal of the Application and quantifying costs to be paid by the Applicant to the Respondent at $14,000.00.

[5] On January 23, 2012 Mr. Thompson wrote Mr. Katsepontes. In that offer the Applicant acknowledged that the Right of Way is valid and remains in effect and that the Respondent had an interest in same. However, the Respondent was required to acknowledge that the Applicant has full rights to her property, and that it would not interfere with her modification/refurbishing/ repair of the fenced area, the removal of the litigation fence, and the installation of two privacy gates for which the Applicant would provide keys. In consideration for the above and the dismissal of the Application, the Respondent was to pay the Applicant the all-inclusive sum of $95, 000.00, inclusive of legal fees. In an email dated March 1, 2012, the Applicant maintained his previous offer but included that the Respondent would pay the Applicant $15,000.00 inclusive of legal fees.

[6] It is submitted by the Respondent that it is entitled to substantial indemnity costs in this matter. It noted that the Applicant initially brought her Application pursuant to the provisions of the Registry Act, R.S.O. 1990, c. R.20, claiming that the Right of Way had expired by statute and that she had maintained this position for quite some time. The Application was amended on June 15, 2012, withdrawing the Registry Act remedies. The Respondent submitted that it had considerable throw-away costs relating to the Registry Act claim that was eventually dropped. Further the Respondent noted the Court’s finding that the litigation fence was subject to the principle of res judicata. It noted that the Respondent’s solicitor advised counsel for the Applicant by letter dated July 5, 2011 of the previous litigation. In addition, it is submitted that the Applicant was unsuccessful with regard to its amended claim. Finally, the Respondent pointed to the settlement offers made.

[7] It is submitted by the Applicant that the Respondent should not be awarded costs on a substantial indemnity basis and that she in fact should be relieved from the full burden of paying the Respondent’s partial indemnity costs. It is submitted that the Application was unduly complicated and lengthened by the Respondent. In this regard the Applicant noted that the Respondent requested and was granted additional time to confirm instructions and explore arguments, including the application of the Foreign Missions and International Organizations Act, S.C. 1991, c. 41, regarding the Respondent’s immunity.

[8] Further it is submitted by the Applicant that the Application was commenced in good faith and with just cause. She noted that the Reasons for Decision did not state that the matter which needed the Court’s determination was res judicata. The Applicant also complained that the Respondent was slow to provide particulars of the Court Orders which were not registered on title. While the Application was amended on June 15, 2012, the Respondent was advised by letter dated January 23, 2012 of her intention to amend.

[9] It is submitted that a costs award will result in an unjust hardship on the Applicant. She is a single individual who has incurred great expense to get to the hearing. In addition to the financial loss incurred as a result of the Application, a substantial award of costs would result in a financial hardship for the Applicant which could result in her needing to sell her home. It is submitted that any award of costs should take into account the Applicant’s ability to defray the cost of the Application as opposed to the Respondent’s.

[10] The Applicant also noted the issue of proportionality. The Applicant has lost a degree of possessory interest or control over the Right of Way, a significant portion of the land she owns. According to the Applicant, the value of this portion of the land exceeds the fees incurred by both parties in this matter. Despite the loss of rights, the Respondent continues to pay taxes and to be legally liable for the land. It is submitted that the loss of a degree of possessory interest and control over this land should be considered in the determination of any costs award.

[11] Finally it is noted that the proportion of the legal fees incurred by both parties should also be taken into consideration in any costs award. The Respondent’s Costs Outline seeks more than double the amount claimed by the Applicant.

Reasons

[12] Section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, states:

131.(1) Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.

[13] Rule 57.01(1) sets out the factors that a court may consider in determining costs. It provides:

57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(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 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;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs.

[14] Subrule 57.01(1)(0.b) came into effect in July 2005. It introduced as a factor to be considered “the amount of costs that an unsuccessful party could reasonably expect to pay.” This change reflected the jurisprudence of the Ontario Court of Appeal which confirmed that a critical controlling principle for the fixing of costs is to ascertain an amount that is a fair and reasonable sum to be paid by the unsuccessful litigant, rather than any exact measure of the actual costs to the successful litigant.

[15] The jurisprudence provides guidance to the Court with respect to this determination. I note firstly in this regard the Divisional Court case of Gratton-Masuy Environmental Technologies Inc. (c.o.b. Ecoflo Ontario) v. Building Materials Evaluation Commission (2003), 2003 8279 (ON SCDC), 170 O.A.C. 388. The Divisional Court referred to the dicta of the Ontario Court of Appeal in Zesta Engineering Ltd. v. Cloutier (2002), 2002 25577 (ON CA), 21 C.C.E.L. (3d) 161 (Ont. C.A.) where the following was stated at para. 4:

In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.

[16] The Divisional Court rejected the contention of counsel that the Zesta decision is simply one of the factors to be considered along with a combination of factors. The Court stated as follows at page 6 of the decision:

... We disagree. The Zesta decision is not simply one of the factors to be considered along with a combination of factors. It is more than that. The case stands for the proposition that the award must reflect “more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.” This is a fundamental concept in fixing or assessing costs.

The amount at which costs are to be fixed is not simply an arithmetic function dependent on the number of hours worked and the hourly rates employed but, rather, the party paying the costs should be subjected to an order which is fair and predictable. In other words, the party required to pay costs must not be faced with an award that does not reasonably reflect the amount of time and effort that was warranted by the proceedings. This court accepts as valid the following excerpt from the decision of Wright J. in Lac Des Mille Lacs First Nation v. Canada (Attorney General), [2002] O.J. No. 3749, (Sep. 12, 2002), (S.C.J.) as follows:

[12] As salutary as it may be to keep judges up to date on the actual costs of litigation, one must never forget that in determining costs as between party and party one is not pronouncing upon the legitimacy of fees charged by solicitors to their clients, one is simply determining what, in the circumstances of a particular trial, application or motion, an unsuccessful party should be ordered to contribute towards the costs of the successful party. While the actual costs incurred by the successful party may be a factor to be consider [sic, considered], a factor which does not appear to be enunciated in Rule 57.01(1), it is not a governing factor.

[17] In Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA), [2004] O.J. No. 2634, the following was stated at para. 26:

[26] It is important to bear in mind that rule 57.01(3), which established the costs grid, provides:

When the court awards costs, it shall fix them in accordance with subrule (1) and the Tariffs.

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. The express language of rule 57.01(3) makes it clear that the fixing of costs is not simply a mechanical exercise. In particular, the rule makes clear that the fixing of costs does not begin and end with a calculation of hours times rates. The introduction of a costs grid was not meant to produce that result, but rather to signal that this is one factor in the assessment process, together with the other factors in rule 57.01. Overall, as this court has said, 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.

[18] Further, in Stellarbridge Management Inc. v. Magna International (Canada) Inc. et al. (2004), 2004 9852 (ON CA), 71 O.R. (3d) 263 (Ont. C.A.), the Ontario Court of Appeal again confirmed that a critical controlling principle for the fixing of costs under the Costs Grid is to ascertain an amount that is a fair and reasonable sum to be paid by the unsuccessful litigant rather than any exact measure of the actual costs to the successful litigant.

[19] The Ontario Court of Appeal stated in Davies v. Clarington (Municipality), 2009 ONCA 722, [2009] O.J. No. 4236 at para. 52:

As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding at para. 37, where Armstrong J.A. said "[t]he 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."

[20] Rule 57.01(4) further expands the authority of the court. It provides:

Nothing in this rule or rules 57.02 to 57.07 affects the authority of the court under section 131 of the Courts of Justice Act.

(a) to award or refuse costs in respect of a particular issue or part of a proceeding; (b) to award a percentage of assessed costs or award assessed costs up to or from a particular stage of a proceeding; (c) to award all or part of the costs on a substantial indemnity basis;

(d) to award costs in an amount that represents full indemnity; or

(e) to award costs to a party acting in person.

[21] Rule 49 deals with offers to settle and sets out the costs consequences of a failure to accept an offer to settle pursuant to its terms. Further, Rule 49.13 provides that in determining costs a court may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer.

[22] Implicit in the submissions of the Applicant with respect to financial hardship is the issue of access to justice. I note that in the Boucher case, comment is made with respect to the objective of access to justice. Justice Armstrong stated the following at para. 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. 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. However, in my view, the chilling effect of a costs award of the magnitude of the award in this case generally exceeds any fair and reasonable expectation of the parties.

[23] The Respondent was completely successful in this case and is entitled to costs. The Applicant initially commenced her Application pursuant to the Registry Act, based on a misapprehension of the law. The Respondent incurred costs thrown away with respect to this issue. The Applicant also pursued, throughout the litigation, that she be permitted to remove the litigation fence, a matter that was clearly res judicata in the circumstances of this case. Further, her offers to settle were way off the mark when compared to the offers of the Respondent and the decision of the Court.

[24] The Applicant has submitted that the Application was commenced in good faith. The Respondent does not suggest otherwise. But the bringing of an application or action in good faith does not immunize a litigant from a potential costs award. It has also been submitted that as a result of the Reasons for Decision she has lost a degree of possessory interest or control over the Right of Way. However, it must be remembered that the Applicant bought her home subject to the Right of Way. The litigation fence was already present. The Right of Way, leading to the Greek Embassy’s parking lot, was clearly demarked. The validity of the Right of Way had been determined in the 1992 litigation. The Application could not lose what she did not ever possess.

[25] There was nothing in the litigation behaviour of the Respondent that would disentitle it to costs. While it may have taken Mr. Katsepontes a couple of months to provide all of the documentation with respect to the 1992 litigation, he explained that his instructions were delivered from the Greek Foreign Ministry in Athens and that it could take several weeks to receive a response as several departments and layers of Greek government were involved. From the correspondence provided with the costs submissions it appears that the Respondent fully provided its position and supporting documentation to the Applicant in a fulsome and appropriate manner. The Respondent acted reasonably in this matter.

[26] However, having said the above, this is not a case that would attract substantial indemnity costs throughout. The case law has established that substantial indemnity costs are the exception and not the rule. In Mortimer v. Cameron (1994), 1994 10998 (ON CA), 17 O.R. (3d) 1 (C.A.) the following was stated at paras. 67 and 68:

67 The law respecting solicitor-and-client costs is admirably reviewed in Orkin, The Law of Costs, 2nd ed. (1993), pp. 2-91 to 2-92:

Costs on the solicitor-and-client scale should not be awarded unless special grounds exist to justify a departure from the usual scale.

Such orders are not to be made by way of damages, or on the view that the award of damages should reach the plaintiff intact, and are inappropriate where there has been no wrongdoing.

An award of costs on the solicitor-and-client scale, it has been said, is ordered only in rare and exceptional cases to mark the court's disapproval of the conduct of a party in the litigation. The principle guiding the decision to award solicitor-and-client costs has been enunciated thus:

[S]olicitor-and-client costs should not be awarded unless there is some form of reprehensible conduct, either in the circumstances giving rise to the cause of action, or in the proceedings, which makes such costs desirable as a form of chastisement.

(Footnotes omitted)

68 In hindsight it is clear that the appellants should have accepted the plaintiffs’ offers. The result at trial also supports the contention that the appellants' offers to settle were unreasonable. The appellants, however, were entitled to defend the case; they were not required to settle it. They were mistaken in their assessment of liability to the plaintiffs but they did nothing to harass the plaintiffs nor abuse the process of the court. In short, there was no wrongdoing on their part which, apart from rule 49.10, would have called for the imposition of solicitor-and-client costs. Their failure to make a reasonable offer to settle, standing alone, does not warrant an award of solicitor-and-client costs.

[27] In determining costs in this matter I am mindful that the Applicant pursued her claim that the Right of Way had been extinguished by operation of the Registry Act, a position which she later abandoned. However, the Respondent indicated that it would advance a position as to the application of the Vienna Convention on Consular Relations (1963) and the enacting Canadian legislation – the Foreign Missions and International Organizations Act. The issue of immunity was not pursued in the end. From the Costs Outline provided by the Respondent it is not possible to determine how much time was spent on these issues.

[28] The Applicant has noted that the Respondent’s Costs Outline seeks more than double the amount being claimed by the Applicant. Legal costs are a function of both the number of hours spent by a lawyer, law student or paralegal involved and the hourly rate applied thereto. In determining appropriate hourly rates I am mindful of the Ontario Courts Information for the Profession, where rates are set out to provide guidance to the profession. Those rates are the maximums that were available under the former costs grid. The document notes, “It is further anticipated that the maximum rates would apply only to the more complicated matters and to more experienced counsel within each category.” The guidelines provide:

Law Clerks Maximum of $80 per hour

Student-at-law Maximum of $60 per hour

Lawyer (less than 10 years) Maximum of $225 per hour

Lawyer (10 years or more but less than 20 years) Maximum of $300 per hour

Lawyer (20 years and over) Maximum of $350 per hour

[29] In the case of Moon v. Sher, [2004] O.J. No. 4651, 2004 39005 (Ont. C.A.) it was noted at para. 31 that “Maximum rates should be reserved for maximum cases.”

[30] This case was not a “maximum” case. It was not complex. It raised no new issues at law. Mr. Katsepontes is a 1996 call to the Bar. Demitra Moutsios is a 2008 call. The hourly rate sought in the Bill of Costs by the Respondent for these lawyers is $325 and $225 per hour respectively. These amounts are excessive in the circumstances of this case.

[31] In addition, I note the number of hours spent on this matter. Mr. Katsepontes spent some 72.50 hours on this case. Demitra Moutsios spent 15 hours on the file. By contrast, Mr. Thompson spent 55.5 hours, Jonathan O’Hara (a 2012 call) spent 3.9 hours, and a law student spent 19.3 hours, perhaps indicating a more cost efficient approach to the matter.

[32] There has been much commentary in the case law with respect to this issue. In Moon v. Sher, Justice Borins stated at para. 33:

If a lawyer wants to spend four weeks in preparing for a motion when one week would be reasonable, this may be an issue between the client and his or her lawyer. However, the client, in whose favour a costs award is made, should not expect the court in fixing costs to require the losing party to pay for over-preparation, nor should the losing party reasonably expect to have to do so.

[33] Further, in Canadian National Railway Corp. v. Royal and SunAlliance Co. of Canada (2005), 2005 33041 (ON SC), 77 O.R. (3d) 612, 2005 CarswellOnt 4402 (Ont. S.C.J.), Justice Ground stated at para. 11:

It has been stated many times that the fixing of costs by a judge is not an assessment and it is not the role of the judge to minutely examine and dissect docket entries or to second guess the utilization of personnel and resources by counsel. In reviewing the bill of costs submitted by the Plaintiffs, I must, however, conclude that there appears to have been a “money is no object” approach taken by counsel toward the preparation for trial and that the maximum number of hours was expended by counsel in a very thorough, perhaps, in some cases, to a fault, preparation of documents and other materials for trial. This approach may have been perfectly acceptable to the Plaintiffs in view of the amount of money involved in the action and the complexity and importance of the matter to the Plaintiffs. The question, however, for the court is what amount would constitute fair and reasonable costs to be paid by the Defendants to the Plaintiffs.

[34] The Respondent’s counsel spent significantly more time on this matter. While I do not doubt that those hours were so spent and that the Respondent undertook a very thorough approach to this case, it does not appear to me that those hours and such costs would be within the reasonable expectation of the Applicant.

[35] In determining costs I am mindful of the factors referred to in Rule 57.01(1), the Ontario Courts Information for the Profession, the settlement offers and the case law cited above which directs that a court is to ascertain an amount that is a fair and reasonable sum to be paid by the unsuccessful litigant rather than any exact measure of the actual costs to the successful litigant. In my view, it is fair and reasonable, in all of the circumstances of this case, that the Applicant pay costs in the amount of $18,000.00 inclusive of fees and disbursements, plus the HST on that amount.

The Honourable Madam Justice H. Polowin

Released: February 12, 2013

COURT FILE NO.: 11-51706

DATE: 2013/02/12

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

KIMBERLY MOORE

Applicant

– and –

THE REPUBLIC OF GREECE

Respondent

DECISION ON COSTS

Polowin J.

Released: February 12, 2013