Court File and Parties

COURT FILE NO.: CV-13-10175-00 CL
DATE: 20131016
SUPERIOR COURT OF JUSTICE – ONTARIO
COMMERCIAL LIST

RE: GB/PLASMAN INVESTORS’ LIMITED PARTNERSHIP,

Applicants

- and -

APP HOLDINGS LIMITED PARTNERSHIP and APP HOLDINGS MANAGEMENT INC.,

Respondents

BEFORE: Newbould J.

COUNSEL:
Robert S. Harrison and Berkely D. Sells, for the applicants
David E. Lederman and Hannah Arthurs, for the respondents

ENDORSEMENT

[1] On August 22, 2013 I granted an application requesting documentation to be provided to the applicant, and awarded costs to the applicant. I have now received cost submissions.

[2] The applicant requests costs on a substantial indemnity basis. It refers to statements alleging the application was brought for an improper purpose that amounted to an abuse. I do not think that the allegations give rise to substantial indemnity costs.

[3] The applicant also requests costs on a substantial indemnity basis from the date of an offer to settle. It says the judgment was more favourable than the offer. The respondents say that there was no element of compromise and that the judgment was not more favourable than the offer to settle. An element of compromise is not essential to an offer to settle, but its absence can be a relevant factor to be taken into account. See Data General (Canada) Ltd. v. Molnar Systems Group Inc. (1991), 1991 7326 (ON CA), 6 O.R. (3d) 409 (C.A.).

[4] There was an element of compromise in the offer to settle. The applicants offered that the information to be provided by the respondents be information available to the date of the judgment, but not afterwards. The respondents were ordered in the judgment to provide the documentation on a going-forward basis.

[5] The respondents also assert that the judgment was not more favourable because the offer to settle did not offer a confidentiality undertaking that was ordered in the judgment. I do not think this objection is valid. The confidentiality agreement was ordered not because it was required but because it was offered by the applicant. In my reasons for judgment I stated:

[49] The respondents have not established any need for confidentiality undertakings to be provided by the applicant. However, the applicant and Mr. LaCroix are prepared to provide an undertaking and should do so as set out in paragraph 32 above, as should Messrs. Hughson and Howard if they are to be provided with the information.

[6] The offer of confidentiality undertakings was made with prejudice in the affidavit material served by the applicant on the same day as its without prejudice rule 49 offer. There was no argument offered by the applicants to recant from that offer. The respondents cannot say they were successful on something contested by the applicant.

[7] In the result, the applicant is entitled to costs on a substantial indemnity basis from the date of its offer.

[8] The applicant also contends that the costs ought not to be paid by the limited partnership as the applicant is a substantial limited partner and otherwise would in effect be paying a portion of the costs ordered to be paid to it. It asks for costs only against the general partner APP Holdings Management Inc. The respondents oppose, saying there is no provision for ordering costs against only one respondent.

[9] I do not agree with the respondents. Costs are in the discretion of the court. The applicant should not be required to partially fund the costs ordered to be paid to it. The general partner APP Holdings Management Inc. is controlled by affiliates of Insight Equity Holdings LLC which has a 57% interest in the limited partnership. It is Insight that has caused the limited partner, as well as the general partner, to object to the relief sought by the applicant. The costs ordered are to be paid by the respondent APP Holdings Management Inc. and APP Holdings Management Inc. may not be reimbursed by the limited partnership.

[10] The applicant’s claim for costs on a partial indemnity basis to the date of its offer of July 29, 2013 and on a substantial indemnity basis thereafter is for $85,233 for fees, which together with HST and disbursements comes to $100,821.08.

[11] The respondents say the amount claimed is too high and not fair and reasonable. They assert that it was not reasonable to have two lawyers, Mr. Harrison called to the bar in 1974, and Mr. Sells called to the bar in 1998, and that there was duplication.

[12] Whenever more than one lawyer is involved in a matter, there is going to be time spent by each of them on certain things such as drafting affidavits and facta. The issue is whether too much time was spent. In this case, Mr. Harrison spent a total of 32.7 hours and Mr. Sells 112 hours. That kind of a breakdown does not seem out of place at all. It indicates the benefit of having a less senior lawyer doing the bulk of the work.

[13] The respondents say that the rate charged by Mr. Harrison on a partial indemnity basis of $510 and by Mr. Sells of $420 are higher than the rates recommended by the Costs Subcommittee of the Civil Rules Committee, and that by taking inflation into account since 2005, they should be only $405 and $345. I have considerable difficulty with this contention and I have dealt with it before in Stetson Oil & Gas Ltd. v. Stifel Nicolaus Canada Inc., 2013 ONSC 5213, [2013] O.J. No. 3702 in which I stated:

[22] Regarding the use of the rates recommended in the practice direction of the Costs Subcommittee of the Civil Rules Committee, I have considerable difficulty with the rates in that practice direction. They were the rates contained in the cost grid introduced in January, 2002. When the cost grid was abolished on July 1, 2005, they were continued in the practice direction. These rates are completely outdated and unrealistic for an action fought by two major downtown Toronto law firms.

[23] The practice direction is not a binding rule enacted as a regulation. It states that it “may provide some guidance to the profession as these changes are implemented”. It is apparent that other courts agree that the rates are not realistic. I agree with R. Smith J. in First Capital (Canholdings) Corp. v. North American Property Group 2012 ONSC 1359, [2012] O.J. No. 885 that the rates should be adjusted to account for inflation, but I would go further.

[24] In Canadian National Railway v. Royal & Sun Alliance Insurance Co. of Canada, 2007 ONCA 531, the Court of Appeal awarded trial costs on a partial indemnity basis of 65% of the fees charged to the client. In Eastern Power v. Ontario Electricity Financial Corporation, 2012 ONCA 366, the Court of Appeal awarded trial costs on a partial indemnity basis at 60% of actual rates charged the client. The trial judge, 2008 48132 (ON SC), [2008] O.J. No. 3722, had included a substantial indemnity cost award as a result of an offer at 90% of actual rates charged, and while this was set aside as the offer was not better than the results of the appeal, the Court of Appeal made no suggestion that the 90% figure would not have been appropriate if the costs were awarded on a substantial indemnity basis.

[25] I think it appropriate to award costs at 60% of the time charged for partial indemnity costs and 90% for substantial indemnity costs for the work after the offer to settle.

[14] I am prepared in this case to award costs on the same basis, i. e. at 60% of the time charged for partial indemnity costs and 90% for substantial indemnity costs for the work after the offer to settle. The fact that other cases using this basis may or may not have been more complex or lengthy does not detract from the use of these percentages. The issue in each case is whether the amount of work claimed is fair and reasonable for the work involved and whether the amount claimed is one which the losing party could reasonably expect to pay on a partial indemnity basis to the time of the offer and on a substantial indemnity basis thereafter.

[15] The respondents have produced a bill of costs which contain fees of $32,594 on a partial indemnity basis and $48,892 on a substantial indemnity basis. I would note that they have used fees based on the subcommittee chart, which I have difficulty with. The bill of costs indicates that a total of 114.5 hours was spent by the respondents’ lawyers as compared to 144.7 hours spent by the applicant’s lawyers. However, that is not an indication of wasted time by the applicant’s lawyers. It is normal that the work to be done by a plaintiff to build a case is far more than the work needed to be done by a defendant to defend the case. See my comments in Stetson Oil & Gas Ltd. at para. 17.

[16] This was a motion for production of documentation that was of importance to both parties, and it was extremely hard fought on both sides. The respondents had to know that the applicant would have to spend considerable time and resources as it viewed the documents as necessary to understand the investment made by it in this business with substantial revenues in the order of a quarter-billion dollars a year. It was reasonable for the applicant to have someone of Mr. Harrison’s seniority and ability lead the case.

[17] I think the amount claimed by the applicant is fair and reasonable. The setting of an amount for costs is not a line by line assessment, but having said that I cannot discern any substantial work claimed that should have not been done. The respondent APP Holdings Management Inc. is to pay costs of $100,000 to the applicant within 30 days.

Newbould J.

Date: October 16, 2013