SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-12-444388

DATE: 2013/10/24

RE: Epoch’s Garage Limited, Cook School Bus Lines Limited, 678928 Ontario Inc. and Robert Douglas Akitt O/A Doug Akitt Bus Lines

AND:

Upper Grand District School Board, The Wellington Catholic District School Board, Service De Transport De Wellington-Dufferin Student Transportation Services and Her Majesty the Queen in Right of Ontario

BEFORE: Mr. Justice A.J. O’Marra

COUNSEL:
Jonathan Lisus, Daniel A. Schwartz and Matthew Law, for the Plaintiffs/
Responding Parties

Ronald E. Carr and Nadia Laeeque, for the Defendant/Moving Party

COSTS ENDORSEMENT

A.J. O’MARRA J.:

[1] The plaintiffs, small rural bus operators, have brought an action against the Crown, and other defendants claiming damages for negligence and negligent misrepresentation. They claim to have been driven out of business as a result of unfair competitive procurement process for school bus services through a government designed and implemented request for proposals in Wellington and Dufferin Counties.

[2] The Crown brought a motion to strike the plaintiffs’ action under Rule 21.01.1(b) of the Rules of Civil Procedure in its entirety on the basis the claim lacked foreseeability, proximity and immunity as its actions were “true or core policy” decisions, as well as vicarious liability. The Crown’s claim to blanket immunity under the Broader Public Sector Accountability Act argued in its factum was abandoned in oral argument on the day of the motion.

[3] The motion to strike was dismissed with costs to the plaintiffs. I have received submissions of counsel concerning costs and the following is my costs endorsement.

[4] The plaintiffs ask for costs on a substantial indemnity basis in the amount of $59,144. inclusive of disbursements and HST. In the alternative, the plaintiffs seek costs on a partial indemnity basis in the amount of $39,897.

[5] The position of the defendant is that substantial indemnity costs are not warranted in the circumstances of this matter and that costs awarded to the plaintiffs should be on a partial indemnity basis in the amount of $21,217.50 for fees and $1,402.67 for disbursements.

[6] In determining the issue of costs in this matter, I take into account the factors as set out under Rule 57 of the Civil Procedure including the time spent, the result achieved, and the significance of the legal issues and complexity of the matter. In addition, I must adhere to the principles set out by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (CA), that the overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances, rather than an amount fixed by actual costs incurred by the successful litigant.

Position of the Parties

[7] The plaintiffs submit that the Crown’s motion was both groundless and certain to fail. The motion was complex and made more difficult for the plaintiffs to respond to as a result of the Crown’s “sweeping” approach by challenging every aspect of the plaintiffs’ claim. Their response required significant legal research and preparation of argument.

[8] The Plaintiffs submit that the outcome of the motion was critical to the continuation of their action in that had the Crown succeeded it would have terminated its claim not only against the Crown, but as well effectively undermined its claim against the School Boards. They anticipated that if the Crown was successful the School Boards would have defended on the basis that their actions were part and partial of the Crown’s policy decision immunity.

[9] The Crown does not dispute that the motion involving issues of government immunity from litigation, duty of care and proximity of relationships was complex or of the legal significance to the plaintiffs had it been successful in striking their pleadings in relation to the Crown. However, it does not concede that its success would have doomed the claims of the plaintiffs against the School Boards and transportation services consortia. It argued that many of the allegations in the fresh as Amended Statement of Claim said to give rise to loss or harm to the plaintiffs are directed primarily to the School Boards and consortia and would have survived the decision permitting the Crown out of the action.

[10] Plaintiffs’ counsel seeks in the award enhanced hourly rates in recognition of several recent costs awards which note that the costs grid is ten years out of date and does not reflect the influence of inflation over the intervening period.

[11] In First Capital (Canholdings) Corporation v. North American Property Group, 2012 ONSC 1359, R. Smith J. allowed 55% of counsel’s actual hourly rate as a reasonable basis for a partial indemnity award. In Stetson Oil and Gas Limited v. Stifel Nicolaus Canada Inc., 2013 ONSC 5213 F. Newbould J. observed that the new grid set in 2005 is discretionary and the rates are now completely outdated and unrealistic for an action contested by two major downtown Toronto law firms. Based on such decisions the plaintiffs seek in the alternative to substantial indemnity 55% of their normal hourly rates as a partial indemnity award.

[12] The Crown concedes that the hours spent by counsel on the matter are not unreasonable save for time cited with respect to what appears to have been one junior counsel duplicating the work of another. In response to the assertion of duplication, the plaintiffs submit much of the work of the more senior of the two counsel involved preparing for the issue of vicarious liability, which was abandoned at the hearing and the remainder of that counsel’s work entailed reviewing the work of a more junior counsel with only two years experience, who had been delegated as much of the work as possible to him (approximately 75% of the total hours billed). I accept in the circumstances that the work was not duplicative or unreasonable.

[13] Further, in considering the appropriate applicable hourly rates, I accept the direction taken by other courts that the costs grid is woefully inadequate in face of the effect of inflation over the past ten years.

[14] In terms of the plaintiffs’ claim for an award based on a substantial indemnity basis, while I accept that the Crown’s sweeping attempt to strike the pleadings of the plaintiffs caused counsel to assiduously prepare their response, the motion was not wholly devoid of merit (see Standard Life Assurance Company v. Elliott, 2007 18579 (ON SC), [2007] O.J. No. 2031, and Hunt v. T.D. Securities Inc. (2003), 2003 3649 (ON CA), 66 O.R. (3rd) 481 (OCA)). Whether the Crown’s decisions or conduct was operational or as it claims “true and core policy” will require, as indicated in the ruling dismissing the motion, a full evidentiary record. The Crown had not met the very high threshold required to strike pleadings under Rule 21.01.

[15] Lastly, the Crown argues that where it is liable for costs it is not required to pay HST. Accordingly, HST should not be added to the final amount awarded to the plaintiffs. Counsel has not directed the Court to any jurisprudential or legislative authority for the proposition. As the plaintiffs have pointed out in their written submissions recently the Court in Seed v. Ontario, 2012 ONSC 4588 ordered the Crown to pay costs for one day certification motion and specifically awarded applicable HST in the amount of $14,000. Further, as the plaintiffs are required to pay HST on the fees they pay to their counsel I see no basis to deviate from the usual inclusion of HST in the costs award in this instance.

[16] In determining a fair and reasonable amount to be awarded on a partial indemnity basis, I consider as well that in a related matter 2145850 Ontario Limited o/a Highland Bus Services, et al v. Student Transportation of Eastern Ontario, 2012 ONSC 6865 in which the defendant sought to strike the plaintiffs Statement of Claim on the basis it had immunity under the Broader Public Service Accountability Act, G.W. Tranmer J. ordered on consent for a half day motion costs on a partial indemnity basis in the amount of $39,500., including HST and disbursements to the plaintiffs.

[17] In the circumstances, considering the complexity of the matters at issue, the importance of the outcome to the continuation of the action to the plaintiffs, the award in another related matter, and other matters noted above I conclude that a fair and reasonable award to the plaintiffs, on a partial indemnity basis is $39,897., inclusive of disbursements and HST.

A.J. O’Marra J.

Date: October 24, 2013