Attorney General of Ontario v. $19,570.00 in Canadian Currency (In Rem)

[Indexed as: Ontario (Attorney General) v. $19,570 in Canadian Currency (In Rem)]

Ontario Reports

Ontario Superior Court of Justice,

Shaw J.

June 5, 2013

116 O.R. (3d) 554 | 2013 ONSC 3322

Case Summary

Civil procedure — Costs — Offer to settle — Applicant applying for forfeiture order of seized funds under Civil Remedies Act — Application settled pursuant to Rule 49 offer to settle made by respondent — Respondent obtaining return of most of seized money but application not unmeritorious and applicant having some success — Offer to settle not providing for disposition of costs — Rule 49.07(5)(a) of Rules of Civil Procedure applying — Applicant entitled to its costs up to date of service of offer to settle — Reduction of costs on basis that respondent was largely successful not appropriate as it would defeat intention of rule 49.07(5)(a) — Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 49.07(5)(a).

The applicant brought an application under the Civil Remedies Act, 2001, S.O. 2001, c. 28 for a forfeiture order in respect of money that was seized from the respondent. The application was settled pursuant to a Rule 49 offer to settle made by the respondent, which provided for the return of most of the seized money to the respondent. The offer to settle provided that costs were to be assessed by the court. The respondent sought costs of the application.

Held, the applicant should be awarded its costs up to the date of service of the Offer to Settle.

Although the respondent was successful in obtaining the return of most of the seized money, rule 49.07(5) (a) of the Rules of Civil Procedure applied. The court was bound by rule 49.07(5)(a) to award costs to the applicant up to the date of service of the offer to settle. A reduction of costs on the basis that the respondent was largely unsuccessful would not be appropriate as it would defeat the intention of rule 49.07(5) (a).

Gupta v. Nguyen, [2006] O.J. No. 2151, 2006 17935, 148 A.C.W.S. (3d) 367 (S.C.J.), distd

Other cases referred to

Apotex v. Egis Pharmaceuticals (1991), 1991 2729 (ON SC), 4 O.R. (3d) 321, [1991] O.J. No. 1232, 37 C.P.R. (3d) 335, 28 A.C.W.S. (3d) 26 (Gen. Div.); Atlas Holdings & Investments Inc. v. Vratsidas, [2009] O.J. No. 823, 180 A.C.W.S. (3d) 10 (S.C.J.); [page555] Hunt v. TD Securities Inc. (c.o.b. TD Evergreen) (2003), 2003 3649 (ON CA), 66 O.R. (3d) 481, [2003] O.J. No. 3245, 229 D.L.R. (4th) 609, 175 O.A.C. 19, 36 B.L.R. (3d) 165, 39 C.P.C. (5th) 206, 124 A.C.W.S. (3d) 1033 (C.A.); Ontario (Attorney General) v. $138,650 in Canadian Currency, [2013] O.J. No. 339, 2013 ONSC 444 (S.C.J.)

Statutes referred to

Civil Remedies Act, 2001, S.O. 2001, c. 28 [as am.]

Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131 [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.03(1), 49, 49.02(1), 49.07, 49.07(5), (a), (b), 49.10(1), 57.01

RULING on costs.

Dan Phelan, for applicant.

Nicola-Antonio Melchiorre, for respondent.

[1] SHAW J.: — This is a decision on costs involving an application under the Civil Remedies Act, 2001, S.O. 2001, c. 28.

[2] On July 15, 2006, police seized $19,570 from Fortunato Colistro and Mario Colistro.

[3] The Attorney General of Ontario brought an application for a forfeiture order under the Civil Remedies Act.

[4] The application was settled pursuant to a Rule 49 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] offer to settle, made by the respondent and served on the Attorney General on February 9, 2011. The offer to settle was accepted on December 6, 2011.

[5] On consent, an order was made on February 2, 2012 in accordance with the terms of the February 9, 2011 offer to settle. The order provided for the return of $19,500 to the solicitor for the respondent, in trust. It further provided for the forfeiture of the remainder of the moneys seized, including accrued interest. The sum forfeited to the Attorney General was $2,019.88.

[6] The Rule 49 offer to settle provided that costs were to be assessed by the court. This wording was incorporated into the order of February 2, 2012.

[7] The respondent (in effect, Fortunato and Mario Colistro) now seeks costs of the application. The respondent also seeks costs of a motion brought by the Attorney General to compel Fortunato Colistro to provide answers to refusals on cross-examination. That motion was dismissed for reasons which I released on December 5, 2011. In those reasons, I provided that the parties could make written submissions on the costs of the motion. Written submissions were received from the solicitor for the respondent in March 2013, approximately 15 months after [page556] the decision was released. The respondent and the Attorney General agree that the costs of that motion should be dealt with at this hearing on the costs of the application.

[8] The respondent seeks costs of the application on a full recovery basis in the amount of $20,793.50 or, in the alternative, on a partial indemnity basis in the amount of $15,555.45. The respondent also seeks disbursements of $2,800 and costs of this costs hearing.

[9] In addition, the respondent seeks costs of the refusals motion on a full recovery basis in the amount of $5,959.62 plus $69.04 in disbursements.

[10] The Attorney General submits that the provisions of rule 49.07(5)(a) entitle the Attorney General, not the respondent, to costs of the application up to the date of the service of the offer to settle on February 9, 2011.

[11] Rule 49.07(5) provides:

49.07(5) Where an accepted offer to settle does not provide for the disposition of costs, the plaintiff is entitled,

(a) where the offer was made by the defendant, to the plaintiff's costs assessed to the date the plaintiff was served with the offer;

(b) where the offer was made by the plaintiff, to the plaintiff's costs assessed to the date that the notice of acceptance was served.

[12] Rule 49.02(1) provides:

49.02(1) A party to a proceeding may serve on any other party an offer to settle any one or more of the claims in that proceeding on the terms specified in the offer to settle (Form 49A).

(2) Subrule (1) and rules 49.03 to 49.14 also apply to motions with neccesary moditifications.

[13] A "proceeding" is defined in rule 1.03(1) to mean an action or an application.

[14] Rule 49.07(5) therefore applies to applications. As concerns applications, the reference to "plaintiff" in rule 49.07(5) would be read as "applicant" and the reference to "defendant" would be read as "respondent". In Ontario (Attorney General) v. $138,650 in Canadian Currency, [2013] ONSC 444 (S.C.J.), the court dealt with a Rule 49 offer to settle made by the Attorney General as applicant, and granted a costs order based on the provisions of rule 49.10(1), as an offer made by a plaintiff.

[15] In response to the claim of the Attorney General for its costs up to the date of service of the respondent's offer to settle, the respondent submits that in this application it, not the Attorney General, is truly the plaintiff because it was the respondent [page557] that was seeking the return of the money seized by the police. In support of this position, the respondent observes that before the civil remedies application was delivered, Messrs. Colistro had brought a replevin action for the return of the money. The replevin action was dismissed on consent without costs, after the civil remedies application was brought by the Attorney General.

[16] The respondent submits that the applicable rule is not rule 49.07(5)(a), but rather rule 49.07(5)(b), and that having made its offer to settle as a plaintiff, not as a defendant, it is entitled to its costs assessed to the date that the notice of the Attorney General's acceptance was served, namely, December 6, 2011.

[17] The respondent relies on the decision of Justice H.J.W. Siegel in Gupta v. Nguyen, [2006] O.J. No. 2151, 2006 17935 (S.C.J.). That case arose out of an agreement of purchase and sale between Nguyen, as purchaser, and the Guptas, as vendors. The Guptas were unable to give clear title. Nguyen had given a deposit of $5,000 and was ready, willing and able to close. The Guptas sought a declaration that the agreement was enforceable and sought damages based on the alleged non-performance of the agreement by Nguyen. Nguyen counterclaimed for return of his deposit and for other damages. The action was settled pursuant to an offer to settle of Nguyen which was accepted by the Guptas. Pursuant to the settlement, the Guptas agreed to pay Nguyen $5,000 on condition that the counterclaim and cross-claim of Nguyen were dismissed without costs.

[18] The Guptas sought their costs under rule 49.07(5)(a).

[19] Justice Siegel found that the Guptas were seeking costs of an unmeritorious action to the point at which Nguyen filed a response. He held that in the circumstances of that proceeding, the Guptas could not properly claim to be a "plaintiff" for the purposes of rule 49.07(5). Justice Siegel held that the reality in the action was that Nguyen was at all times the relevant plaintiff for the purposes of rule 49.07(5) and that the proper characterization of the settlement was that it was a settlement of Nguyen's counterclaim based on an offer to settle made by Nguyen, as plaintiff in the counterclaim.

Decision

[20] I have determined that although the respondent was successful in obtaining the return of most of the moneys seized by the police, I am bound by the provisions of rule 49.07(5)(a) to [page558] award costs to the Attorney General up to the date of service of the respondent's offer to settle.

[21] This case is distinguishable from Gupta v. Nguyen. There, the settlement was of a counterclaim, based on an offer to settle made by Nguyen as a plaintiff in the counterclaim. In the present case, it was the Attorney General who applied for forfeiture of the moneys. Unlike the Guptas, the Attorney General had some success in this application. It was not an unmeritorious claim met by a counter-application. The offer to settle was made by the respondent, as a respondent (defendant).

[22] In Atlas Holdings & Investments Inc. v. Vratsidas, [2009] O.J. No. 823, 180 A.C.W.S. (3d) 10 (S.C.J.), Justice Low held that rule 49.07 does not give the court discretion either to deny the plaintiff costs or to reverse the costs consequences set out in the rule by awarding them to the defendant. Justice Low, at para. 11, set out the rationale for not conferring such discretion on the court:

The policy underlying the costs consequences in Rule 49 is the fostering of predictability and the early settlement of litigation. When a defendant issues an offer which does not address costs, he or she knows exactly what the costs consequences are under Rule 49.07(5). If he wishes to make an offer that does not entitle the plaintiff to costs or if he wishes to make an offer under which he is to receive costs, he need only express that in his offer.

[23] The offer to settle did not provide for the disposition of costs. It left costs to be assessed by the court. By doing so, the issue of costs then fell to be determined by the provisions of rule 49.07(5)(a). This court does not have a discretion to depart from the provisions of rule 49.07(5)(a). If the respondent wished to avoid the costs consequences of rule 49.07(5)(a), it could have drafted the offer to settle to provide that the respondent was to receive its costs. Having not provided for the disposition of costs, the applicant is therefore entitled to costs assessed to the date that the applicant was served with the offer to settle.

[24] The Attorney General acknowledges that although the court does not have a discretion to make an order different from that prescribed by rule 49.07(5)(a), it does have a discretion with respect to the quantum of costs to be awarded to the applicant. This discretion is derived from s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[25] In addition to listing the factors that the court may consider, rule 57.01 allows the court to take into account "any other matter relevant to the question of costs". Read in conjunction with s. 131 of the Courts of Justice Act, the court therefore has wide discretion. [page559]

[26] The bill of costs filed by the Attorney General sets out 28 hours of lawyer time, at hourly rates varying from $120 to $150, for a total fee of $3,975 plus disbursements of $1,029.09. The bill of costs is broken down into four categories:

Preservation Motion
$250

Forfeiture Application
$1,925

Cross-Examinations
$1,200

Bill of Costs
$600

[27] The counsel involved for the Attorney General have six and eight years' experience, respectively.

[28] In my view, the hourly rates and the hours claimed are reasonable.

[29] The disbursements are for photocopies, process server and transcripts. The amounts shown for these expenses appear to be what one would reasonably expect for a matter of this kind.

[30] The respondent does not take issue with the hours, hourly rates or disbursements set out in the Attorney General's bill of costs. Rather, the respondent takes issue with the entitlement of the Attorney General to costs, which I have dealt with.

[31] I had given consideration to reducing the costs of the Attorney General from the amount set out in the bill of costs, because the respondent had been successful in receiving the return of most of the principal sum which had been seized. This would be the only basis on which a reduction of these otherwise reasonable costs would be justified. However, rule 49.07(5)(a) is clear that the Attorney General should have its costs assessed to the date it was served with the offer to settle. To reduce what I have determined to be a reasonable amount of costs up to the date of the offer to settle because the respondent got back the money would defeat the intention of rule 49.07(5)(a). I would be doing indirectly what I cannot do directly, that is, exercising my discretion to deprive the applicant of costs which the rule says the applicant is entitled to. The applicant should receive reasonable costs and I have determined that the costs claimed are reasonable.

[32] The Attorney General shall have partial indemnity costs in the sum of $3,975 for fees and $1,029.09 for disbursements, for a total of $5,004.09.

[33] Rule 49 does not apply to the refusals motion. The respondent was successful on that motion. There is no reason to deprive the respondent, as a successful party, of its costs.

[34] The respondent seeks a full recovery fee of $5,274 or, in the alternative, a partial recovery fee of $3,691.80. [page560]

[35] An award of costs on a substantial indemnity side has traditionally been reserved for cases where the court wishes to show its disapproval for reprehensible conduct. They are awarded only in rare and exceptional cases. See Apotex v. Egis Pharmaceuticals (1991), 1991 2729 (ON SC), 4 O.R. (3d) 321, [1991] O.J. No. 1232 (Gen. Div.), at p. 325 O.R.; and Hunt v. TD Securities Inc. (c.o.b. T.D. Evergreen) (2003), 2003 3649 (ON CA), 66 O.R. (3d) 481, [2003] O.J. No. 3245 (C.A.), para. 133. There was nothing in the conduct of the applicant to warrant an award of costs on a full recovery scale or on a substantial indemnity scale.

[36] The respondent's bill of costs for the motion shows 17.8 hours of counsel's time at a partial indemnity scale calculated as 70 per cent of full recovery. Partial indemnity rates are defined by the Rules as, in effect, 2/3 of substantial indemnity rates. Substantial indemnity rates are slightly less than full recovery. If 60 per cent of full recovery rates were used, the partial indemnity hourly rate for counsel would be $132 rather than $154 shown for counsel. Counsel shows 17.8 hours of docketed time. He has nine years' experience. The bill of costs shows 9.7 hours of clerk time. At 60 per cent of full recovery, her partial indemnity rate would be $84 per hour. She has seven years' experience. These rates are reasonable.

[37] The hearing of the motion took two hours. I am of the view that the approximately 25 hours of preparation time for a procedural motion involving three refusals on cross-examination is excessive.

[38] I fix the partial indemnity costs of the motion at a fee of $2,500 plus HST, for a total of $2,894.04.

[39] The Attorney General has been awarded costs totalling $5,004.09. The respondent has been awarded costs totalling $2,894.04. The difference between the two amounts is $2,110.05. The respondent, in the persons of Fortunato Colistro and Mario Colistro, shall pay this net sum of $2,110.05 to the Attorney General of Ontario within 30 days.

Order accordingly.

End of Document