Court File and Parties

Court File No.: C-456-09

Date: 2013-11-18

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SCOTT RANDOLPH RIMMER and WILLIAM RALPH RIMMER, Plaintiffs

AND:

CAROLE LAHEY, BUILDING INSIGHTS INC., KELLY DACOSTA, RE/MAX TWIN CITY REALTY INC., ART RAE and GOLDEN TRIANGLE REALTY INC., Defendants

BEFORE: The Honourable Justice D.A. BROAD

COUNSEL: Andrew F. Camman and Joyce M.D. Thomas, for the Plaintiffs

M. Gosia Bawolska and Emily Zeppa, for the Defendant Building Insights Inc.

COSTS ENDORSEMENT

[1] The parties have delivered their submissions on costs pursuant to the direction in my Reasons for Judgment dated September 9, 2013.

[2] The following is my disposition that with respect to the costs of the action.

Background

[3] The claim arose out of alleged deficiencies in a residential property purchased by the plaintiffs. The plaintiffs originally commenced the action, utilizing the ordinary procedure, against the vendor, the vendor’s individual realtor and brokerage, their own individual realtor and brokerage, and the home inspector Building Insights Inc. Following examinations for discovery, the plaintiffs agreed to the dismissal of the action as against the vendor and the realtors and the action continued to trial against the home inspector Building Insights Inc. (hereinafter referred to as the "defendant").

[4] The Statement of Claim alleged the existence of a significant structural problem with the residence. As indicated in the Reasons for Judgment, the focus of the evidence at trial was expanded from the narrow basis for liability pleaded in the Statement of Claim, and was largely directed towards an allegation that the residence was subject to historical and ongoing (or the risk of ongoing) differential settlement, that the defendant failed to discover and report on it to the plaintiffs, and that they suffered damages as a result, equal to the cost of stabilizing the foundation and associated rectification costs. The plaintiffs claimed $250,000 in damages.

Positions of the Parties

[5] The plaintiffs' claim against the defendant based upon differential settlement did not prevail at trial, however, the defendant was found liable for failing to adequately report on the slope in the kitchen floor of the residence and was awarded damages in the sum of $18,645 inclusive of HST.

[6] The plaintiffs seek costs from the defendant on a “full indemnity” basis in the sum of $139,274.06 inclusive of fees, disbursement and taxes. How this amount is determined is not entirely clear from a review of the plaintiffs’ Bill of Costs. It appears that a total of $100,255.75 is claimed in respect of fees plus HST on the fees of $12,376.63. Disbursements and HST on the disbursements is stated to be in the sum of $30,192.43.

[7] In the alternative, the plaintiffs claim costs on a "substantial indemnity" basis in the sum of $80,500, inclusive of all these disbursements and taxes. The breakdown of this amount is not made clear. There is no figure given for costs calculated on a partial indemnity basis.

[8] The plaintiffs submit that the Court should not apply Rule 57.05(1) in the circumstances. That Rule provides that, if a plaintiff recovers an amount within the monetary jurisdiction of the Small Claims Court, the Court may order that the plaintiff shall not recover any costs. The plaintiffs say that they were unable to assess the extent of liability borne by each of the original six defendants until after Affidavits of Documents had been exchanged examinations for discovery had been completed. They point to the case of Sechon v. Allison <https://www.minicounsel.ca/scj/2012/3840 which confirmed that Rule 57.05(1) is discretionary, and not mandatory. In reliance on Polish National Union of Canada Inc. v. Dopke (No. 2) https://www.canlii.org/en/on/onsc/doc/2001/2001canlii28001/2001canlii28001.html they assert that the action was certainly not a "monumental waste of time and money in the administration of justice" such that an award of costs to them should be denied by reason of the modest recovery, and that the action did raise "knotty issues" and "complex principles of law."

Position of the Defendant

[9] The defendant seeks against the plaintiffs:

(a) its partial indemnity costs of the entire action, less 8% representing the plaintiffs’ partial success at trial, totaling $145,580.04;

(b) in the alternative, partial indemnity costs from the date of service of its Rule 49 Offer to Settle, totaling $112,545.01;

(c) in the further alternative, a no costs order pursuant to Rule 57.05(1) or Rule 76.13;

(d) in the further alternative, that the plaintiffs' costs be reduced to 50% of the judgment based on the principles of proportionality, and that the plaintiffs to be indemnified for no more than 8% of the expert witnesses fees; and

(e) and in any case, the defendant be indemnified for partial indemnity costs in the sum of $2,496 for responding to the plaintiffs’ unsuccessful mid-trial motion seeking to qualify as an expert the contractor who provided an estimate of the rectification costs.

[10] The defendant submits that the plaintiffs were totally unsuccessful in proving their central claim at trial which consumed an overwhelming amount of trial time. Accordingly, if costs are awarded to the plaintiffs, a 90% reduction to the plaintiffs’ partial indemnity costs should be made.

[11] The defendant points to its Offer to Settle made on November 28, 2012 providing for payment of $12,500 plus prejudgment judgment interest and costs, which amount was based upon the estimate of its expert engineer for the cost of leveling the kitchen floor (but without the contingency and allowance for inflationary increase allowed in the Reasons for Judgment). It also points to its all-inclusive Offer to Settle in the sum of $35,000 on June 18, 2013 which was withdrawn on June 24, 2013.

[12] The defendant further submits that this is an appropriate case for the application of Rule 57.05(1) and accordingly, since the amount awarded to the plaintiffs was within the Small Claims Court limit, no costs should be awarded, or in the alternative, the plaintiffs’ costs should be limited to the Small Claims Court scale being 15% of the maximum claimable in that Court ($25,000.00).

[13] In the further alternative, the defendant states that Rule 76.13 should be applied to deny the plaintiffs an award of costs since it was not reasonable for the plaintiffs to have commenced and continued the action under the ordinary procedure. Rule 76.13 provides that if the plaintiff obtains a judgment in an amount of $100,000 or less, the plaintiff shall recover no costs unless (a) the action was under Simplified Procedure at the commencement of trial; or (b) the Court is satisfied that it was reasonable for the plaintiff to have commenced and continued the action under the Ordinary Procedure.

[14] In the further alternative, the defendant submits that on principles of proportionality the plaintiffs' cost should be limited to 50% of the amount recovered at trial.

[15] With respect to the plaintiffs' disbursements for experts’ fees, the defendant asserts that the majority of the plaintiffs' expert evidence was unhelpful in establishing the elements of the plaintiffs' case, was not reasonably necessary and was not ultimately accepted at trial.

[16] Finally, the defendant submits that it incurred one night of preparation, a half day hearing and a one-day extension of the trial to respond to the plaintiffs' unsuccessful mid-trial motion seeking the qualification of its contractor as an expert.

Analysis

[17] Pursuant to https://www.canlii.org/en/on/laws/stat/rso-1990-c-c43/latest/rso-1990-c-c43.html#sec131subsec1_smooth of the https://www.canlii.org/en/on/laws/stat/rso-1990-c-c43/latest/rso-1990-c-c43.html R.S.O. 1990, c. C.43 the costs of and incidental to 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.

[18] The factors to be considered by the Court, in the exercise of its discretion on costs, are set forth in subrule 57.01(1), including the principle of indemnity and the amount of costs that an unsuccessful party could reasonably expect to pay.

[19] The Court of Appeal has observed that modern costs rules are designed to foster three fundamental purposes: (1) to indemnify successful litigants for the cost of litigation; (2) to encourage settlements; and (3) to discourage and sanction inappropriate behavior by litigants (see Fong v. Chan (1999) O.J. No. 3707 (CA) at para. 24).

[20] It is well known that the overall objective in dealing with costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful party. The expectation of the parties concerning the quantum of costs is a relevant factor to consider. The Court is required to consider what is "fair and reasonable" having regard to what the losing party could have expected the costs to be (see Boucher v. Public Accountants Council (Ontario) (2004) https://www.canlii.org/en/on/onca/doc/2004/2004canlii14579/2004canlii14579.html, O.J. No. 2634 (C.A.) at para. https://www.canlii.org/en/on/onca/doc/2004/2004canlii14579/2004canlii14579.html#par26 and Coldmatic Refrigerator of Canada Ltd. v. Leveltek Processing LLC https://www.canlii.org/en/on/onca/doc/2005/2005canlii1042/2005canlii1042.html, [2005] O.J. No. 160 (C.A.)).

[21] The most significant factor for determination of the issue of costs in the present case is the fact that the plaintiffs did not succeed on the major aspect of their claim relating to ongoing, or the risk of ongoing, differential settlement, and that as a result, the amount recovered was a fraction of the amount claimed in the Statement of Claim. Moreover, the issue relating to differential settlement occupied the greater portion of trial time.

[22] Under subrule 57.01(1)(a) “the amount claimed and the amount recovered in the proceeding” is a factor to be considered in the exercise of the Court's discretion on costs, as is “any other matter relevant to the question of costs” pursuant to subrule 57.01(1)(i).

[23] I would not give effect to the submissions of the defendant that its two Offers to Settle justify an award of costs in its favour. With respect to the offer dated November 28, 2012, I do not accept the defendant's argument that it would be inequitable for the contingency or inflationary factors to be considered in reference to the effect of this offer, based as it was on its expert's estimate of the cost of leveling the kitchen floor. Rule 49.10 is designed to encourage compromise and has the benefit of relative certainty in its application by permitting a straight comparison of the amount offered by the defendant against the amount awarded to the plaintiff at trial. Had the defendant wished to protect its position on costs from the application of contingency or inflationary factors on its expert’s estimate it could have increased its offer accordingly.

[24] The defendant's offer dated June 18, 2013 was withdrawn prior to trial and is therefore not eligible for consideration of pursuant to Rule 49.10. In my view it is not appropriate to apply Rule 49.13 in the circumstances in support an award of costs in favor of the defendant.

[25] In circumstances where there is divided success, and the plaintiff is not successful on a major issue at trial, it is appropriate to reduce the plaintiff's costs to reflect that (see United States v. Yemec https://www.canlii.org/en/on/onca/doc/2010/2010onca845/2010onca845.html (C.A.) at para.4 and Telesat Canada v. Boeing Satellite Systems International, Inc. (2011) ONSC 84 (SCJ) at para. 23).

[26] In this case it may be argued that the result achieved by the plaintiffs engages not only Rule 57.05(1) (by reason of the amount being within the Small Claims Court limit) but also Rule 76.13 (by not exceeding the amount to which the Simplified Procedure is applicable).

[27] Rule 76.13 differs from 57.05(1) in that the denial of costs to a plaintiff who commences and continues an action under the ordinary procedure is mandatory if the amount recovered is equal to or less than $100,000, unless the court is satisfied that it was reasonable for the plaintiff to have done so, whereas a denial of costs under Rule 57.05(1) is permissive.

[28] In my view, in this case, where there were two discrete bases upon which liability could be found, namely a failure of the home inspector to report on ongoing differential settlement on the one hand and on the sloping kitchen floor on the other, I am unable to find that it was unreasonable for the plaintiffs to have pursued the first issue, even though they were not ultimately successful on it. The plaintiffs did lead evidence at the trial supporting a claim of damages, if successful on the differential settlement issue, in excess of $100,000.00, even though such evidence was ultimately not accepted. As stated by Tysoe, J. in Dunhill Construction Co. v. Ledcor Industries Ltd. 1993 CarswellBC 3395 (B.C.S.C.) at para. 7 “a plaintiff should not be penalized because it has ‘put its best foot forward’ at trial as long as it has not unduly exaggerated its claim or unnecessarily lengthened the trial process” (emphasis added). I would therefore not deny costs to the plaintiffs pursuant to either Rule 76.13 or 57.05(1).

[29] However, as indicated above, it is appropriate to significantly reduce the plaintiffs' claim for costs to reflect its lack of success on the major issue at trial.

[30] In considering the quantum of costs, I am severely hampered by the manner in which the plaintiffs' Bill of Costs was presented by simply setting forth a global full indemnity amount for fees together with a list of disbursements and appending copies of lawyers' accounts to their client or docket entries. The better and customary practice is to provide an itemized Bill of Costs organized around the various steps in the proceeding, with details of the particular lawyer, student or clerk involved in each step, their hourly rates and the hours incurred.

[31] The list of disbursements included references to charges by third parties whose involvement is not clear (e.g. Kieswetter Demolition Inc.) as well as an unexplained amount of $8,831.73 lumped together as "Rimmer out of pocket expenses”.

[32] It should not be left to the trial judge to try to make sense of copies of lawyers’ bills to their client and lengthy docket print-outs, without a detailed breakdown organized around the steps in the proceeding. Similarly, a Bill of Costs should present the costs amount on a partial indemnity basis, even if the claim is for full indemnity or substantial indemnity costs. If experts’ fees are sought, their invoices should be provided.

[33] In the circumstances I am left with coming up with a global amount for the plaintiffs’ costs, without the benefit of a helpful and informative Bill of Costs.

Disposition

[34] I would not allow any amount for experts' fees as the reports and testimony of the plaintiffs' experts were not necessary or applicable to the issue upon which the plaintiffs were successful.

[35] Applying the principle of proportionality, exemplified in the case of Muskoka Fuels v. Hassan Fabricators Ltd. 2011 CarswellOnt 5820 (C.A.), I fix the plaintiffs’ costs in the sum of $10,000 inclusive of disbursements plus HST, totalling $11,300. Against this amount I would set off the sum of $2,496 plus HST, rounded to $2,800 in total, in respect of the defendant's costs associated with the mid-trial motion.

[36] The defendant shall therefore pay costs to the plaintiffs in the sum of $8,500.00.

D. A. Broad J.

Date: November 18, 2013