Harris v. Leikin Group Inc., 2013 ONSC 3300
CITATION: Harris v. Leikin Group Inc., 2013 ONSC 3300
COURT FILE NO.: 08-CL-7482
DATE: 20130606
ONTARIO
SUPERIOR COURT OF JUSTICE
COMMERCIAL LIST
BETWEEN:
Adam Leikin Harris, Naomi Sara (Harris) Stanton, Sheira Rachel Harris, Zena Leah Harris, Hilliard Brian (Rick) Kesler and David Joseph Spieler
Plaintiffs
– and –
Leikin Group Inc., Barbara Linda Farber, David Lawrence Katz, Andrew Mark Katz, Grant Jameson, Geoffrey Gilbert, Ogilvy Renault LLP, Ingrid Levitz, in her capacity as estate trustee with a will of the Estate of Gerald Levitz, Patricia Day, Ginsburg Gluzman Fage & Levitz LLP and First Capital Realty Inc.
Defendants
COUNSEL:
S. Erskine and D. Barbaree, for the Plaintiffs
S. Victor, Q.C. and D. Cutler, for the Defendants, Barbara Linda Farber, David Lawrence Katz and Andrew Mark Katz
D. Scott, Q.C. and I. Mentina, for the Defendant, Leikin Group Inc.
B. Zarnett, J. Kimmel and S. Gotlieb, for the Defendants, Ogilvy Renault LLP, Grant Jameson and Geoffrey Gilbert
Alan D’Silva, L. Mercer and S. Clarke, for the Defendants, Ingrid Levitz, in her capacity as estate trustee with a will of the Estae of Gerald Levitz, Patricia Day and Ginsburg Gluzman Fage & Levitz LLP
HEARD: May 28, 29, 30, 31, June 1, 5, August 9 and 10, 2012
REASONS FOR JUDGMENT – COSTS
D. M. Brown J.
I. Overview and positions of the parties
[1] By Reasons released March 12, 2013 (2013 ONSC 1525), I dismissed the plaintiffs’ action and called for written cost submissions.
A. The Accountant Defendants
[2] By letter dated April 25, 2013, counsel for Patricia Day, Ginsberg Gluzman Fage & Levitz LLP and Ingrid Levitz, in her capacity as estate trustee with a will of the estate of Gerald Levitz, advised that his clients had settled the issue of costs with the plaintiffs. No order need be made in respect of the costs claimed by those defendants. In their cost submissions the plaintiffs disclosed that they had agreed to pay the Accountant Defendants $550,000 inclusive of fees, taxes and disbursements.
B. The other defendants
[3] The costs claimed by the other defendants, and the plaintiffs’ position in respect of each, are summarized on the following table:
| Defendant | Scale | Fees claimed | Disb. claimed | Total claimed, including HST | Position of the plaintiffs |
|---|---|---|---|---|---|
| Barbara Farber, David Katz, Andrew Katz | Substantial and actual | $997,493 | $98,401 | $1,195,218 | $500,000 to $550,000 for these defendants and the Leikin Group |
| Leikin Group Inc. | Substantial | $762,097 | $45,835 | $889,228 | See above |
| Grant Jameson, Geoffrey Gilbert and Ogilvy Renault LLP | Substantial | $1,021,761 | $100,153 | $1,121,914 | $550,000 to $600,000 |
| Total | $2,781,351 | $244,389 | $3,206,360 | $1.05 to 1.15 million |
[4] The plaintiffs accepted that in light of their pleading of intentional torts against each of these defendants, the appropriate scale of costs is the substantial indemnity one. The plaintiffs submitted, however, that the amount of costs claimed by the defendants was disproportional, unfair and unreasonable in the circumstances of this case.
II. Guiding principles
[5] In fixing the costs of the trial, I have taken into account the factors enumerated under Rule 57, including the time spent, the result achieved, and the complexity of the matter, as well as the application of the principle of proportionality: Rule 1.04(1). In addition, I have considered the principles set forth by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3rd) 291 (C.A.) and Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.), specifically that the overall objective of fixing costs is to fix an amount that is fair and reasonable for an unsuccessful party to pay in the particular circumstances, rather than an amount fixed by actual costs incurred by the successful litigant.
[6] While a trial judge need not undertake a line-by-line, or item-by-item, review of the costs claimed by a successful party, a trial judge must consider any significant concerns raised about the bill of costs submitted by the party.
III. Some common issues
[7] The plaintiffs acknowledged that in light of the nature of the claims which they had advanced, the defendants were entitled to costs on a substantial indemnity basis. Accordingly, I need not review the submissions of the defendants relating to the nature of the issues litigated or the effect, if any, of the offers to settle submitted by them a few weeks prior to the commencement of the trial.
[8] The dispute about costs between the parties really is one over the fair and reasonable amount of the quantum, calculated on a substantial indemnity scale.
[9] The plaintiffs submitted, in part, that the costs claimed by the defendants were disproportionate when viewed against (i) the substantial indemnity costs which I awarded First Capital Realty Inc. (“FCR”) at the end of the summary judgment motion ($384,465.78, consisting of fees of $282,199.30 and disbursements of $62,174.71) and (ii) the $550,000 paid to the Accountant Defendants in settlement of their costs of this action. While, in the strictest sense, those amounts are not irrelevant, their practical relevance to the assessment of the remaining costs is limited. FCR’s involvement in the lengthy factual narrative which went in through the evidence at trial was much more limited than that of the other defendants. If of any relevance, a substantial indemnity award of some $280,000 in fees to a party of more limited involvement for its costs up until the end of the summary judgment motion signals that the substantial indemnity fees of the more major parties for the entire action would be large.
[10] As to the cost settlement reached with the Accountant Defendants, the absence of a bill of costs describing the breakdown of the fees renders that settlement amount of little practical guidance when it comes to fixing the awards for the remaining defendants.
[11] Finally, the plaintiffs made some submissions regarding the way in which the remaining defendants staffed their litigation teams, particularly their claims for the time spent by multiple associates and articling students. The plaintiffs filed their own bill of costs which disclosed that they had staffed their litigation team in similar fashion. Where a party employs a team of lawyers consisting of senior counsel, junior counsel, and various associates, students and paralegals, no doubt because the party thought the nature of the case merited such staffing, then that party should reasonably expect that the other significant parties in the action will likely adopt a similar approach to staffing.
IV. The Lawyer Defendants: Grant Jameson, Geoffrey Gilbert and Ogilvy Renault LLP
[12] In their responding cost submissions the plaintiffs expressed several concerns about the amount of costs claimed by the Lawyer Defendants:
(i) The rates used for Ms. Kimmel were too high;
(ii) The time spent on 9:30 attendances and case conferences was excessive;
(iii) The time spent on the discovery of documents was excessive;
(iv) The time spent in preparing and reviewing materials for the motion for summary judgment was excessive;
(v) It was unreasonable to claim the time for an associate who attended with more senior counsel on out-of-court examinations;
(vi) The time claimed for attending the summary judgment motions should be disallowed and a reduction should be made to research time for those motions;
(vii) The time spent following the summary judgment motions was excessive in that it did not take into consideration the trial preparation directions which I gave in my Summary Judgment Reasons.
Let me consider each concern in turn.
[13] Critique No. 1: Ms. Kimmel’s rates: During the life of this action Ms. Kimmel was a lawyer of some 18 to 21 years’ experience. The plaintiffs submitted that since the Lawyer Defendants claimed a substantial indemnity rate of $525/hour for Mr. Zarnett, a lawyer with a decade’s more experience than Ms. Kimmel, then Ms. Kimmel’s substantial indemnity rate should be adjusted down to an average of $450/hour.
[14] I do not accept that submission. Although the plaintiffs referred to the guidance offered by the rates described by the Costs Subcommittee, there is no formal costs grid in place at the present time. The partial indemnity rate of $350/hour sought for Ms. Kimmel is certainly within the range of reasonable partial indemnity rates for a Toronto lawyer in the neighbourhood of 20 years’ experience. The resulting substantial indemnity rate of $525/hour ($325/hour x 1.5) therefore is reasonable. That a similar substantial indemnity rate was sought for Mr. Zarnett simply indicates that partial indemnity rates, and the substantial indemnity rates derived from them, tend to plateau out at senior levels, with the significant rate differences for senior counsel manifesting themselves in the full indemnity rates.
[15] Critique No. 2: The time spent on 9:30 attendances and case conferences was excessive: The Lawyer Defendants responded in detail to this concern in paragraphs 11 through to 14 of their Reply Submissions. I accept their submissions on the point. I see no need to make an adjustment of the costs claimed for these items.
[16] Critique No. 3: The time spent on the discovery of documents was excessive: The plaintiffs submitted that the 300 hours in time recorded for this item of work was excessive given that the plaintiffs spent approximately half of the time on their document management tasks. I reject this criticism of the bill of costs in light of the following explanations provided by the Lawyer Defendants in their initial and reply cost submissions:
The OR Defendants shouldered the majority of the responsibility and associated cost of the documentary discovery phase, having been required to produce approximately half of the electronic productions in this matter, as well as many boxes of hard copy files, which they also had to review for purposes of being questioned about them.
Keeping track of the documents and evidence was laborious. The Plaintiffs had six lawyers working on this file, compared to the equivalent of three lawyers for the OR Defendants. According to the Bills of Costs, when tallied, the total lawyer hours docketed on this case by the Plaintiff’s counsel was 4,439 hours, compared to 2,606 lawyer hours docketed for the OR Defendants.
The OR Defendants bore the brunt of documentary discovery, producing approximately 5,750 documents after having to undertake extensive electronic and hard copy file reviews. The Plaintiffs produced only 1,576 documents, many of which were sourced from the OR Defendants’ hard copy files.
There were complexities associated with the production of the Transaction Files pursuant to the order of Justice Wilton Siegel entered December 3, 2008 (the “Production Order”…) which had to be completely reviewed or privilege and other concerns before being produced.
[17] I have also reviewed the statement of time spent on the discovery of documents in the Bill of Costs of the Lawyer Defendants. It disclosed an appropriate allocation of document review responsibility amongst senior counsel, an associate and two law clerks. Appropriate delegation of tasks to less expensive time-keepers was done.
[18] Accordingly, when looked at as a whole, and in light of the explanations for their work on this item given by the Lawyer Defendants, I consider the time spent to be fair and reasonable in the circumstances.
[19] Critique No. 4: The time spent in preparing and reviewing materials for the motion for summary judgment was excessive: The plaintiffs submitted that since the Lawyer Defendants only filed a two-volume summary judgment motion record, the amount sought for this item was excessive. I do not understand the plaintiffs’ argument. The description of the item in the Lawyer Defendants’ Bill of Costs indicated that the work included not only the preparation of its own record, but the review of the records filed by all other parties. Given the major role in the action of the allegations made against the Lawyer Defendants, such a review was reasonable.
[20] I do have a concern about the reasonableness of the total time claimed for the associate, Ms. Murdock, for this item. The time spent by the two senior counsel totaled about 40 hours; Ms. Murdock’s time came to about 160 hours, or four times that amount. While I can understand an associate doing a good part of the leg-work in assembling the first draft of affidavits, this is an item in which one would expect senior counsel to spend a fair amount of time to ensure the appropriateness of the evidence filed by the client and to gain a clear understanding of the evidence filed by other parties. I would expect the relationship between the work performed by senior counsel and an associate in this area to be closer to 1:2. I therefore will only allow the Lawyer Defendants to claim 100 hours for Ms. Murdock’s time. That results in a reduction of fees claimed by $15,300.00 (60 hours x $255/hour).
[21] Critique No. 5: It was unreasonable to claim the time for an associate who attended with more senior counsel on out-of-court examinations: Although the plaintiffs recognized the benefit of having an associate, Ms. Murdock, attend with Ms. Kimmel at the cross-examinations, the plaintiffs submitted that “a party cannot reasonably expect to recover all of the costs of having two counsel present – particularly where one of the counsel did not participate in the examinations”. The plaintiffs sought to reduce Ms. Murdock’s fees by 50%.
[22] I agree, but I approach the consequences in a different fashion. When a senior counsel brings an associate with her to examinations and the associate does not conduct any of the examinations, the associate is performing a function which could be performed by a law clerk – note-taking, accessing documents, etc. Consequently, while I will not adjust the time claimed for Ms. Murdock, I think it should be allowed at the rate of a law clerk, or $120/hour, not $255/hour, on a substantial indemnity basis. That results in a reduction of the fees claimed for Ms. Murdock of $41,283.00 ($135/hour x 305.8 hours).
[23] Critique No. 6: The time claimed for attending the summary judgment motions should be disallowed and a reduction should be made to research time for those motions: The plaintiffs submitted that since the Lawyer Defendants were not successful on their motion for summary judgment, they should not be allowed to recover (i) the time claimed for the four-day hearing and (ii) that part of the preparation time which dealt with arguments concerning the law of summary judgment motions.
[24] I agree. I dismissed the motion for summary judgment brought by the Lawyer Defendants. Although I gave directions which enabled the work product for that motion to be used at trial, the Lawyer Defendants are not entitled to recover for the days of the motion hearing. While most of the preparation for the legal arguments used on the summary judgment motion was used at trial, a small part dealt with the law of summary judgment motions. I think a disallowance of the time claimed for a student, Ahmed Mozzafari, reasonably would approximate a disallowance for the time spent researching the law of summary judgment motions. Accordingly, I disallow the claim for the recovery of the counsel fees for the four days of the summary judgment motion hearing (4 days x $9,400 = $37,600), as well as for Mr. Mozzafari’s time ($90/hour x 27.9 hours = $2,511).
[25] Critique No. 7: The time spent following the summary judgment motions was excessive in that it did not take into consideration the trial preparation directions which I gave in my Summary Judgment Reasons: The plaintiffs submitted that because the fees claimed by the Lawyer Defendants for work performed subsequent to the summary judgment motion amounted to more than 50% of the fees claimed for the entire action, those defendants were claiming an amount which was “not proportional to what a party would reasonably expect to have to pay following the detailed trial directions provided to the parties by this court”. The plaintiffs did not identify any specific items of post-motion work which they thought were unreasonable or disproportionate.
[26] In response, the Lawyer Defendants made the following submission:
The fact that the OR Defendants spent more time after the Summary Judgment motion can, if explanation is required, be explained by the directions of the Motions Judge about what evidence and issues the Court expected to hear further about at trial. These included evidence and issues associated with the OR Defendants, which they appropriately focused on and prepared for. In a hybrid trial such as this, the true efficiencies can only be evaluated by looking at the total lawyer hours spent.
Plaintiffs 4,439 hours
OR Defendants 2,606 hours
[27] In my Summary Judgment Reasons I indicated that I needed to hear viva voce evidence from certain witnesses, including Grant Jameson. While it was open to the parties to narrow the issues for trial following that motion, they did not, but only because the plaintiffs maintained their broad range of allegations. The defendants cannot be faulted for that decision by the plaintiffs. As I noted in my Trial Reasons, counsel for all parties conducted a very efficient trial. There was no “litigation fat”, so to speak; it was all lean evidence. I have reviewed the entries on the Lawyer Defendants’ Bill of Costs for “trial preparation” and “counsel fee at trial”. Even taking into account the use of associates, students and clerks, I see nothing excessive given the factual density of the issues in this case, as well as the breadth and complexity of the legal issues. In sum, I do not accept the plaintiffs’ submission that this part of the claim by the Lawyer Defendants showed signs of disproportionality. I regard the amounts claimed as fair and reasonable in the circumstances.
[28] By way of summary, in light of the specific criticisms made by the plaintiffs about these defendants’ Bill of Costs, I reduce the fees claimed by $96,694 ($15,300 + $41,283 + $37,600 + $2,511), together with H.S.T. of $12,570.22, for a total reduction of $109,264.22. On these defendants’ Bill of Costs, that would result in an award of substantial indemnity costs for fees and tax of $1,021,761.27 - $109,264.22, or $912,497.05. No objection was taken to the disbursements and tax claimed of $35,737.49.
[29] Stepping back, would an overall substantial indemnity cost award of $948,234.54 be a fair and reasonable one in the circumstances of this case? I conclude that it would. As set out in my Summary Judgment Reasons and Trial Reasons, this was a factually dense case spanning a long period of time in which the plaintiffs asserted several kinds of legal claims against these defendants based upon the defendants’ involvement throughout the entire length of the transaction. A significant amount of money was at stake – over $11 million. As well, serious allegations of professional misconduct were leveled against these defendants, and the plaintiffs could only expect these defendants would mount a vigorous defence to those most serious allegations. Given those overall circumstances, I am satisfied that such an award would be fair and reasonable.
[30] Consequently, I order the plaintiffs to pay the Lawyer Defendants, Grant Jameson, Geoffrey Gilbert and Ogilvy Renault LLP, their costs of this action which I fix at $948,234.54, inclusive of fees, disbursements and applicable taxes.
V. Barbara Farber, David Katz, Andrew Katz and Leikin Group Inc.
[31] Turning to the remaining defendants, their claims of costs must be considered together to some degree in light of the co-operative litigation approach adopted by the Katz Defendants and the Leikin Group.
VI. Costs claimed by the Katz Defendants
[32] Before dealing with each concern raised by the plaintiffs about the costs claimed by the Katz Defendants, let me first consider the issue of the discount given by counsel to the Katz Defendants.
[33] Counsel for the Katz Defendants provided his clients with a courtesy discount of 20% off his firm’s standard rates for legal fees incurred after October 1, 2008. The plaintiffs did not object to the partial indemnity rates employed by counsel for the Katz Defendants in preparing his Bill of Costs. The Rules provide that substantial indemnity costs are 1.5 times that which would otherwise be awarded at a partial indemnity rate. It follows that the plaintiffs do not object to the substantial indemnity rates used by counsel for the Katz Defendants.
[34] I accept, as reasonable, the partial and substantial indemnity rates contained in the Bill of Costs of the Katz Defendants.
[35] What follows from the discount given by counsel is that for a significant amount of the work recorded on the Bill of Costs, the amounts actually billed to the Katz Defendants were less than the amounts calculated using the substantial indemnity rates. For the period prior to October 1, 2008, the Katz Defendants claim costs calculated by reference to the substantial indemnity rates; for the period thereafter, they claim costs on the basis of the rates actually billed which were less than the substantial indemnity rate.
[36] I think the parties agreed on that approach, although paragraph 47 of the Plaintiffs’ Cost Submissions was less than crystal clear on the point. In any event, both parties pointed to the decision in Mantella v. Mantella, [2006] O.J. No. 2085 (S.C.J.) as articulating the principle to be applied – i.e. since costs operate to indemnify, costs awarded may not exceed a client’s total liability to his lawyer, but in fixing partial, and therefore substantial, indemnity costs, the actual fees charged are not the starting point of the analysis. Instead, the court considers the pertinent factors laid down in the rules in fixing the amount of recovery appropriate on a partial indemnity basis.[^1]
[37] I accept that approach as the appropriate one in the circumstances. The Bill of Costs of the Katz Defendants highlighted, in bold, the substantial or actual rate claimed, as the case might be, and page 13 of the Bill of Costs summarized the amounts claimed for each category of work, disclosing whether the amount was that actually billed or one calculated by reference to the substantial indemnity rate.
A. Time spent by senior counsel
[38] The plaintiffs objected to the cost claim which saw most of the work done by the two senior counsel (Mr. Victor, 1968 call, and Mr. Cutler, 2001 call), with little work done by more junior associates, law students or para-legals. The plaintiffs pointed specifically to the large amount of work done by senior counsel on scheduling motions, documentary discovery and the presence of Mr. Cutler as a second counsel at out-of-court examinations.
[39] Although the Katz Defendants contended that the amount of time spent by senior counsel was justified given the amount of damages at stake and the complexity of the case, I accept the principle advanced by the plaintiffs that especially in lengthy, complex cases, a party is obligated to delegate down the staffing pyramid as many tasks as it reasonably can. While one expects to see significant involvement by senior counsel at the pleadings stage of an action, most work in the documentary discovery phase should be handled by junior lawyers or law clerks, with senior counsel’s involvement limited to critical issues of relevance or privilege. Counsel who conducts out-of-court examinations of course must be involved in the preparation of the examinations, but a fair amount of delegation still can occur at that phase as well. If examining counsel brings another person to the discovery or cross-examination and that person does not conduct any of the examination, then the time of the second person should be treated as equivalent to that of a law clerk in most cases. Senior counsel has a large role to play in actual trial preparation, but the rates at which a party can recover time for additional persons at the trial will be assessed in light of the functions played by those persons at trial. So, if two counsel appear at trial, and both are involved in equal fashion in the examinations, etc., it is reasonable to expect both to recover a counsel fee. If, however, two senior counsel appear, yet only one conducts the examinations, etc., I do not think it reasonable to expect that the second senior counsel can recover his or her time at their normal rates.
Scheduling matters
[40] Turning to the specific objections made by the plaintiffs, I agree that the time claimed for “preliminary motions, 9:30 a.m. hearings and scheduling” was senior counsel-top heavy. The Bill of Costs of the Lawyer Defendant disclosed that Ms. Kimmel dealt with most of those attendances, with the occasional involvement by Mr. Zarnett. That division of labour was reasonable between those two senior counsel; I do not regard the division between Mr. Victor and Mr. Cutler as reasonable. It was well open to delegate more of that work to Mr. Cutler. In the absence of a party’s dockets it is not possible to make adjustments to such claims in a fine-tuned way. On my review of the Bill of Costs, I conclude that a 50% reduction in the amount claimed for that work would bring the overall substantial indemnity costs for that item into line. That results in a reduction of the amount claimed of $53,154 to $26,577, or a reduction of $26,577.
Documentary discovery
[41] The claim for documentary discoveries included 244 hours for Mr. Victor, 220 hours for Mr. Cutler, and only 8 hours for junior associates, and a mere 12 hours for a law clerk. That division of labour for documentary review in this day and age of sky-high discovery costs is out of line and unreasonable. A few weeks back I delivered a paper to the Osgoode Professional Development program on e-discovery. It was entitled, “Making Mountains out of Molehills: Or How can we save Civil Litigation from Committing E-Seppuku?” In that paper I wrote that “e-discovery risks killing civil litigation by pricing civil suits out of the reach of all but the rich.” Elsewhere in the paper I made the following observation:
Just as Adam and Eve succumbed to the wiles of the serpent and partook of the forbidden fruit, so too litigation lawyers cannot resist the temptations of e-discovery. While Odysseus plugged his sailing companions’ ears with bees-wax and lashed himself to the mast in order to resist the calls of the Sirens, modern day litigators are not exercising the same self-restraint when it comes to e-discovery, with the result being escalating civil litigation costs.
Given the threat that runaway discovery costs now pose to our civil litigation system, I think courts must scrutinize with great care cost claims for documentary discovery. Complex litigation, such as this action, often results in much documentation. Fair enough; that is just the nature of the complex litigation beast, to some extent. But in the face of such complexity, litigation counsel are obligated to introduce and apply efficient, cost-effective document management and review processes. That includes putting in place a staffing pyramid which sees most of the document collection, identification, assembly and review work performed at the bottom tiers of the pyramid.
[42] The profile of time claimed for similar work by the Lawyer Defendants was 1 hour for Mr. Zarnett, 40 hours for Ms. Kimmel, 150 hours for a junior associate and 100 hours for two law clerks. That is a reasonable staffing pyramid profile for documentary discovery. By contrast, the profile for this task by counsel for the Katz Defendants was an inverted pyramid. If a client wants to pay through the nose for documentary discovery by having its counsel apply an inverted pyramid profile to that task, a client is free to do so. But an opposing party cannot reasonably be expected to pick up the tab for such an unreasonable division of labour, even if the opposing party is obliged to pay substantial indemnity costs.
[43] Accordingly, for the approximately 475 hours of time spent on documentary discovery by the Katz Defendants, I will allow 10 hours at Mr. Victor’s rate, 50 hours at Mr. Cutler’s rate and the balance of 415 hours at the law clerk’s rate. As between the substantial and actual billing rates, I have used the lower of the rates in force when most of the work was done on this item by a person. That results in the following calculations:
Mr. Victor: 10 hours x $420/hour = $4,200.00
Mr. Cutler: 50 hours x $250/hour = $12,500.00
Law clerk: 415 hours x $100/hour = $41,500.00
The resulting total of $58,200, while not a product of scientific precision, is, in my view, fair and reasonable. That results in a reduction of claimed costs for this item of $110,790 ($168,990 - $58,200).
Examinations for discovery
[44] The plaintiffs submitted that while a party may wish to have two counsel present during out-of-court examinations, it cannot reasonably expect to recover full costs for both counsel when one does not conduct any part of the examinations. They objected to the allowance of a substantial fee rate for the 66 hours recorded for Mr. Cutler on examinations relating to the Summary Judgment motion. In response the Katz Defendants submitted that Mr. Cutler did not attend most of those examinations, only the examinations of key witnesses such as Harris, Kesler, Lewy and Spieler. I accept the defendants’ explanations for Mr. Cutler’s presence, and find that the allocation of work on this item between Mr. Victor and Mr. Cutler was reasonable.
Post-trial work
[45] The Katz Defendants claim $34,454 for post-trial work, including reviewing the trial reasons and preparing their Bill of Costs. Of the 100 hours docketed, 32 were recorded by Mr. Victor, 48 by Mr. Cutler and 22 by a law clerk. The plaintiffs submitted that the amount claimed was excessive.
[46] I agree. Again, by reference to the Bill of Costs of the Lawyer Defendants, only 3 hours were claimed to review the trial reasons, and in respect of the 86 odd hours to prepare the Bill of Costs, all but 14 hours were performed by a junior associate, law student and law clerk. Allocating the 100 hours claimed by the Katz Defendants amongst the law clerk (80 hours), Mr. Cutler (18 hours) and Mr. Victor (2 hours), results in allowable fees of $12,300 (80 x $80/hour = $6,400 + 18 x $280/hour = $5,040 + 2 x $460/hour = $920), or a reduction of $18,190 from the costs claimed.
B. Claims for work not related to this action
[47] The plaintiffs submitted that the Katz Defendants claimed for time spent in respect of a separate arbitration, the Integris/Atlin litgation and the plaintiffs’ appeal of the summary judgment in favour of FCR in respect of which the Katz Defendants did not participate. The Bill of Costs did not provide sufficient particularity to understand the precise amounts involved with each item. I accept the submissions made by the Katz Defendants in paragraphs 33 to 37 of their Reply Submissions that the small amount of work reflected in those entries had some relevance to this action.
C. Summary Judgment motion
[48] The plaintiffs submitted that the Katz Defendants should not be allowed to recover time for attendance at the summary judgment motion which they lost or time related to preparation on the law of summary judgment. I agree, for the reasons I gave above in respect of the Lawyer Defendants. Disallowance of the counsel fee for attendance at the motion hearing results in a reduction of fees in the amount of $24,747, the actual amount billed to the client, which in this case was less than the substantial indemnity rate otherwise calculated. As to the law, I reduce the fees claimed by $2,500, roughly the same as the disallowance for the Lawyer Defendants.
[49] The plaintiffs also took issue with the amounts claimed by the Katz Defendants for the preparation of the summary judgment motion materials and the factum. I have compared the time spent on these tasks by the Katz Defendants and the Lawyer Defendants. Given the somewhat larger role in the overall factual matrix of the Katz Defendants, I do not regard the time spent as unreasonable. Also, as I mentioned above, one would expect to see a greater degree of involvement of senior counsel in these two tasks. I do not regard the amount of time claimed for Mr. Victor as unreasonable.
Other pre-trial motions
[50] The plaintiffs objected to the claim for costs by the Katz Defendants for time spent on the transfer of the action to the Commercial List, the scheduling of the summary judgment motions and the order regarding the production of documents, either on the basis that the matters went on consent or that the judge made no order as to costs. The Katz Defendants submitted that production orders dealt with costs on an “in the cause basis” and they pointed to prior requests by the plaintiffs for the recovery of similar costs. I accept the defendants’ submissions.
D. Disbursements
[51] The plaintiffs objected to some of the disbursements sought by the Katz Defendants, including travel to and accommodation for counsel in Toronto, on the basis that (i) the defendants did not produce invoices to support the items claimed and (ii) some of the disbursements more properly were overhead. As to the latter, no such objection was made to similar disbursements claimed by the Lawyer Defendants.
[52] In any event, having reviewed the list of disbursements (apart from travel expenses), I conclude they are reasonable and recoverable. As to the lack of invoices to support the travel expenses, the Katz Defendants submitted that invoices were available for inspection. If a party has questions about particular disbursements, it should ask to see the invoices before filing its cost submissions; it should not wait until the stage of making cost submissions to raise the issue of invoices.
[53] The Katz Defendants seek about $30,000 for travel expenses for their counsel. The plaintiffs commenced this action in Toronto even though the Leikin companies carried on business in Ottawa. Accordingly, the plaintiffs should have reasonably expected that the Katz Defendants might retain Ottawa counsel and some travelling would be involved. Given the number of examinations, the length of the summary judgment motion hearings and the length of the trial, $30,000 strikes me as a reasonable amount to claim for travel expenses.
E. Summary and conclusion
[54] By way of summary, for the reasons given above I have made the following reductions to the costs claimed by the Katz Defendants:
| Item | Reduction |
|---|---|
| 1. Scheduling matters | $26,577 |
| 2. Documentary discovery | $110,790 |
| 3. Post-trial work | $18,190 |
| 4. Summary judgment hearing | $24,747 |
| 5. Summary judgment law | $2,500 |
| Total reduction | $182,804 |
[55] The Katz Defendants claimed fees, calculated on the lesser of a substantial indemnity or actual basis, in the amount of $997,493. Applying those reductions, that would result in fees of $814,689. On the information filed, I cannot calculate a precise amount for taxes because some of the work pre-dated the implementation of the H.S.T. However, I conclude that $9,000.00 would reasonably approximate the taxes payable. Adding, as well, disbursements of $98,401, that would result in a total award of substantial indemnity costs in the amount of $922,090.
[56] Given the factual density of the case, the major role played by the Katz Defendants in the action, as well as the complexity of the issues and the amount at stake, I consider an award of $922,090 in costs to the Katz Defendants to be a fair and reasonable one, especially in light of the approach which I take to the claim by the Leikin Group Inc., to which I now turn.
VII. Costs claimed by the Leikin Group Inc.
[57] In paragraphs 50 to 63 of their Cost Submissions the plaintiffs made detailed objections to the costs claimed by the Leikin Group. The latter responded with a detailed reply. In the circumstances of this cost claim, I do not think that an item-by-item consideration of the plaintiffs’ critiques is the appropriate way to proceed. I think that a few basic considerations inform the approach to ascertaining what costs would be fair and reasonable to award to the Leikin Group.
[58] Although named as a defendant, the presence of the Leikin Group in the action stemmed, in large part, from the way in which the purchase of the plaintiffs’ shares was structured – i.e. by way of a share redemption. While the legal interests of the Leikin Group, strictly speaking, may not have been identical to those of the Katz Defendants, they were pretty darned close. While it was open to the Katz defendants to retain separate counsel for the Leikin Group, they reasonably should have expected that a court would regard them as carrying the ball for the defence of the purchasing side and that the role of counsel for the Leikin Group would be viewed by the court as a subsidiary one.
[59] Against that larger background, and in light of the “watching brief” nature of some of the work performed by counsel for the Leikin Group, especially with respect to some of the examinations, I think the amount claimed for costs by the Leikin Group is completely disproportionate to its actual role in the defence of the action. Senior counsel for the Leikin Group played a significant role at the trial. Junior counsel and paralegal staff played a large role in the management of the very large documentary production on behalf of the corporation and the Katz Defendants, but in other respects the Leikin Group played a subsidiary role in the defence of the action. Allowable reasonable costs to the Leikin Group, even on a substantial indemnity basis, must reflect that basic litigation reality.
[60] I have reviewed with care the Bill of Costs of the Leikin Group. I have considered how best to achieve an award of substantial indemnity costs to that successful party which would be proportionate in the circumstances. In light of my understanding of the role played by the lawyers for the Leikin Group for the summary judgment motion and the trial, I think the most fair and reasonable way to award costs would be to fix the substantial indemnity fees recoverable by the Leikin Group at 50% of the amount claimed on a substantial indemnity basis, or $419,066.83, including taxes. While I appreciate that there may appear to be something of a “rough and ready” flavor to such an approach, I do not see a meticulous fine-tuning of numerous line items reaching any result which is fairer to either party.
[61] As to the disbursements claimed, although the plaintiffs made similar criticisms of this party’s disbursements as they did of those of the Katz Defendants, I regard the disbursements as reasonable in the circumstances, and I allow the full amount claimed of $51,094.38, including taxes.
[62] I therefore award the Leikin Group Inc. substantial indemnity costs in the amount of $470,161.21 payable by the plaintiffs.
VIII. Summary
[63] I have made the following overall awards of substantial indemnity costs to these defendants payable by the plaintiffs:
Grant Jameson, Geoffrey Gilbert and Ogilvy Renault LLP: $948,234.54
Barbara Farber, David Katz and Andrew Katz: $922,090.00
The Leikin Group Inc.: $470,161.21
Those awards total $2,340,485.75.
[64] The plaintiffs submitted a bill of costs which showed their substantial indemnity costs of the action at approximately $990,000. While $2,340,485.75 certainly is a lot more than $990,000, as I wrote in my reasons granting FCR its costs of its successful summary judgment motion:
The plaintiffs seem to suggest that where five separate motions for summary judgment are brought against it, an unsuccessful plaintiff should not be responsible for more than one-fifth of its own substantial indemnity costs to any one successful party. I see no merit to that claim. That is not the way litigation works. A plaintiff must reasonably expect that the greater the number of defendants it brings into a lawsuit, the more likely it will be that the resulting costs of all defendants will exceed significantly the costs incurred by the plaintiff. That is especially true in an action such as this where the plaintiffs pleaded their case in a way requiring all defendants to deal with events during the entire period of time in dispute. So, the reasonable expectation of a plaintiff in such circumstances should not be that the costs incurred by each of the five sets of defendants would only amount to one-fifth of its own costs. The more reasonable expectation is that the costs incurred by those five sets of defendants would come closer to approximating five times the costs incurred by the plaintiff. That is why a plaintiff should consider, with great care, which persons it wishes to bring into its lawsuit – how wide a net a plaintiff casts has concrete cost consequences.[^2]
[65] I repeat those comments. In the circumstances of this complex case I regard the costs I have awarded to the three sets of defendants as fair and reasonable.
D. M. Brown J.
Released: June 6, 2013
[^1]: Of course, the whole issue of how to calculate the starting point for appropriate partial indemnity costs is in an utter state of chaos in Ontario at the moment. Each judge tries to come up with a reasonable rate reflecting current market conditions. At best, this system results in cost awards by a judge which (fingers crossed) are consistent with his or her previous costs awards, but it offers no predictive value in discerning what award one judge might make as compared to another. The whole area of civil costs needs to be re-thought: both with respect to the limiting role of the indemnification principle, as well as the method of calculating an award. Judges spend far too much time on this issue, with little to show in the way of consistent or predictable awards.
[^2]: Harris v. Leikin Group, 2011 ONSC 5474, para. 31.