ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-12-2190
DATE: 2013-12-11
B E T W E E N:
DASHAM CARRIERS INC.
Ajay Duggal, for the Applicant
Applicant
- and -
DAVID CAMERON GERLACH, 2049574 ONTARIO LIMITED o/a JANDU TRUCK CENTRE and GURPREET SINGH JANDU a.k.a. GARY
Devinder Bath, for the Respondent David Gerlach
Respondents
HEARD: August 8, 2012,
at Brampton, Ontario
Price J.
Supplementary Reasons - Costs
NATURE OF MOTION
[1] This was an action by the Applicant, Dasham Carriers Inc., (“Dasham”), a commercial tenant, against its landlord, the Respondent, David Cameron Gerlach (“Mr. Gerlach”) for damages for breach of Dasham’s lease. Briefly, Dasham alleged that Mr. Gerlach wrongfully terminated Dasham’s lease and then leased the subject property to Dasham’s sub-tenants for the greater amount of rent that Dasham had been receiving from them. I found in favour of Dasham and ordered Mr. Gerlach to re-pay a security deposit that Dasham had paid him, plus damages in the amount of the rent that Dasham would have received from its sub-tenants, amounting to $130,000.00.
[2] After I released my Order in favour of Dasham on August 21, 2012, the parties were unable to agree on the costs that Mr. Gerlach should pay to Dasham. In a preliminary costs endorsement dated March 24, 2013, I noted that Dasham had recovered damages in the amount of $130,000.00, based on the rent it had lost from its sub-tenants, but further noted, in paragraph 71, “From this amount should be deducted $7,000.00 for any month in which Dasham did pay its rent to Mr. Gerlach.”
[3] I stated, in paragraph 3 of my Costs Endorsement, that “Dasham should clearly not be over-compensated by both parties’ failure to provide evidence at the hearing concerning the rent that Dasham paid or the rent that was required but was never paid.” I concluded my Costs Endorsement as follows:
The implication of Mr. Gerlach’s argument to the court is that Dasham has been over-compensated because Dasham failed to pay more than the amount of the judgment, being $145,335.00 of the rent it owed to Mr. Gerlach for the premises that he had leased to Dasham. Because this is a fact that was not proved by the evidence which the court received at the hearing, I invite both parties to address this issue, in the form of supplementary affidavits, with attached accounts regarding the rent paid, so that the net effect of my judgment can be calculated and compared with the effect of the Offer made by Dasham. These submissions should be made by Dasham by April 5, 2013, and by Mr. Gerlach by April 15, 2013, with Dasham’s reply, if any, to be delivered by April 20, 2013.
[4] I later received affidavits from the parties that addressed the issue of how much rent Dasham would have owed Mr. Gerlach had its lease not been wrongfully terminated; and the portion of the rent that it had, in fact, paid, in the form of a security deposit.
[5] While my costs endorsement was pending, Mr. Gerlach appealed to the Court of Appeal from my Order. It appears from the following passage of the Court of Appeal’s reasons, released November 19, 2013,[^1] that Mr. Gerlach sought to tender evidence to the Court of Appeal as to the rent that Dasham had paid to him, and that Dasham successfully opposed the introduction of this material in the appeal on the ground that it had not been tendered to me at the hearing of the application:
(a) Request for a review of the order of Cronk J.A.
[16] I will first deal with the appellant’s request for a review of the order of Cronk J.A. In addition to striking out the appellant’s affidavit of May 7, 2013 and all exhibits to which it refers, the order required the appellant to deliver a new factum in which all references to the affidavit and exhibits were removed. The impugned affidavit postdates the application judge’s reasons, is unsworn and contains material not in the record before the application judge. The appellant’s original factum made repeated references to the affidavit and exhibits, but the appellant had not moved for an order allowing the introduction of fresh evidence. In these circumstances, I see no reason to interfere with Cronk J.A.’s disposition of the motion and would therefore dismiss the appellant’s motion to review the order.
[6] In its decision disposing of Mr. Gerlach’s appeal, the Court of Appeal reduced the amount of Dasham’s damages by the amount that Dasham would have owed under its lease, including the renewals that had not yet been exercised without regard to the amount it had actually paid. In doing so, the Court construed the amount of damages awarded as a miscalculation, by which I had simply failed to take account of the rent that Dasham had owed under its lease. This reduction was a practical solution to the problem created by the failure of both parties to lead evidence before me as to the rent that Dasham had actually paid, or the evidence that it still owed to Mr. Gerlach, which had caused me not to deduct the amount that Dasham owed under its lease or would have owed under the renewals of it.
[7] Dasham now asks that I assess the costs that Mr. Gerlach owes it in relation to Dasham’s successful application for damages and the return of its security deposit. With the benefit of the Court of Appeal’s decision, I will now address Dasham’s costs based on its damages, as adjusted by the Court of Appeal.
PARTIES’ POSITIONS
[8] Dasham claims its costs on a substantial indemnity scale in the amount of $28,487.08. Mr. Gerlach submits that Dasham’s claim is excessive.
ANALYSIS AND EVIDENCE
General Principles
[9] As a general principle, costs are in the absolute discretion of the court.[^2] Determining costs is not a mechanical exercise. Its overall objective is “to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.”[^3] This is a “fundamental concept in fixing or assessing costs.”[^4]
[10] In Boucher v. Public Accountants Council for the Province of Ontario,[^5] Armstrong J.A., speaking for the Court of Appeal, noted that Rule 57.01(3) of the Rules of Civil Procedure provides that when the court awards costs, it assessed their amount in accordance with subrule (1), which lists a broad range of factors that the court may consider in exercising its discretion under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C. 43.”[^6]
[11] The Court must, first and foremost, be fair and reasonable when exercising its discretion to award costs. As Armstrong J.A. noted in Boucher, the expectation of the parties concerning the amount of a costs award is a relevant factor in deciding what is fair and reasonable.[^7]
[12] Rule 57.01(1) contains a non-exhaustive list of factors that guide the Court in its reasoning when awarding costs. It provides, in part:
57.01(1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the Court may consider…
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(a) the amount claimed and the amount recovered in the proceeding;
(c) the complexity of the proceeding;
(d) the importance of the issue;
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
any other matter relevant to the question of costs. [Emphasis added]
[13] I will review the factors most relevant to the determination of costs in the present case.
i) Indemnity
[14] Historically, the court’s paramount consideration when awarding costs was indemnifying the successful party. More recently, the Supreme Court has stated that costs orders serve broader objectives in the administration of justice, including penalizing a party who has refused a reasonable settlement offer, and sanctioning behaviour that increases the duration and expense of litigation, or is otherwise unreasonable or vexatious: “In short, it has become a routine matter for courts to employ the power to order costs as a tool in the furtherance of the efficient and orderly administration of justice.”[^8]
[15] A costs order balances two conflicting principles, namely, that:
a) A blameless litigant who is successful in a proceeding should not be required to bear the costs of prosecuting or defending the proceeding.
b) Citizens should not be made to feel unduly hesitant to assert or defend their rights in court by the prospect that, if unsuccessful, they will be required to bear all the costs of their opponent.
[16] The Supreme Court of Canada has held that the ultimate objective in balancing these two principles is to ensure that the justice system works fairly and efficiently.[^9]
[17] Dasham was successful in its application and should at least be partially indemnified for the costs that it incurred.
ii) Hourly Rates and Experience
[18] Dasham’s Bill of Costs states that its lawyers spent 66.90 hours prosecuting the application, consisting of the following:
a) 18.0 hours spent by Harinder Dhaliwal, called to the Bar in June 2008, at an hourly rate of $250.00, based on his four years of litigation experience.
b) 48.9 hours spent by Ajay Duggal, called to the Bar in July 2003, at an hourly rate of $400.00, based on his nine years of experience.
[19] The “Information for the Profession” bulletin from the Costs Sub-Committee of the Rules Committee (“the Costs Bulletin”)[^10] suggests maximum hourly rates (on a partial indemnity scale) of $225.00 for lawyers of less than 10 years of experience, $300.00 for lawyers between 10 and 20 years of experience, and $350.00 for lawyers with 20 years of experience or more. These limits are generally intended for the most complex and important of cases.
[20] The inflation calculator on the Bank of Canada web site[^11] records that $225.00 and $300.00 in 2005, the year when the Costs Bulletin was issued, translate to $256.49 and $341.98, respectively, in 2013. Based on the lawyers’ experience and the guidelines in the Costs Bulletin, adjusted for inflation, I find that reasonable hourly rates for Mr. Dhaliwal and Mr. Duggal are $250.00 and $325.00, respectively, on a partial indemnity scale.
iii) Hours Spent
[21] In reviewing a claim for costs, I need not undertake a line by line analysis of the hours claimed, nor should I second guess the amount claimed unless it is clearly excessive or overreaching. I must consider what is reasonable in the circumstances and, after taking into account all of the relevant factors, award costs in a global fashion: see the cases referenced in Fazio v. Cusumano.[^12]
[22] Dasham claims that Mr. Dhaliwal spent 18.0 hours and Mr. Duggal spent 48.9 hours, for a total of 66.9 hours, on the Application. Mr. Gerlach’s own Bill of Costs, discloses that his lawyer spent 47.5 hours. I do not find that the time spent by Dasham’s lawyers, amounting to 19.4% more than the time spent by Mr. Gerlach’s lawyer, was excessive.
iv) Complexity
[23] Dasham’s application was straightforward on its face, requiring determination of whether Mr. Gerlach’s termination of Dasham’s lease conformed to the requirements of section 19(2) of the Commercial Tenancies Act. Mr. Gerlach added to the complexity of the application by relying on:
a) his letter dated March 3, 2011, which I found did not comply with section 19(2) of the Act;
b) his undated list of deficiencies, which he said was delivered to Dasham on March 14, 2011, but which I found Dasham never received; and
c) an alleged meeting on February 29, 2012 in which he says that he gave Dasham’s principal an oral notification that his tenancy could not continue due to damage to the premises, which I found, if given, did not comply with section 19(2) of the Act.
[24] I find that Dasham was put to additional costs by the allegations contained in Mr. Gerlach’s affidavits, including the costs of cross-examining Mr. Gerlach and his process server, Terry Robertson, on their affidavits.
v) Importance of the Matter
[25] The issues in the motion were not ones of public interest. They affected only Dasham’s recovery of its lost rental income from its sub-leases. As the Court of Appeal noted, Dasham was not entitled to recover the profit that Mr. Gerlach received by reason of its wrongful termination of Dasham’s lease and its re-leasing of the premises to Dasham’s sub-tenants, beyond the amount that Dasham had lost as a result of the wrongful termination of its own lease.
vi) Reasonable Expectation of Unsuccessful Parties
[26] A costs award must be within the reasonable expectation of the unsuccessful parties in order to preserve access to justice.[^13]
[27] The range of costs awarded in motions and short trials of actions arising from breaches of commercial leases should reasonably have informed Mr. Gerlach’s expectation as to the costs he would face if he were unsuccessful.
In Tri-Novo Group Inc v. Radzio, 2012 ONSC 2442, Chapnik J. awarded costs of $20,000.00 on a motion for summary judgment involving an action for damages of $80,000.00 for breach of a commercial lease.
In Milner Scarborough Properties Ltd. v. Tradeworks Interiors Canada Corp., 2013 ONSC 6268, HimIn el J. sustained an award of damages in the amount of $10,155.00 by the Small Claims Court in an action for breach of a commercial lease, and substituted a costs award of $7,000.00.
In 1001411 Ont. Ltd. v. City of Toronto, 2012 ONSC 5429, counsel agreed on costs in the amount of $15,000.00 in a motion before Wilson J. to strike a pleading in an action for breach of a commercial lease.
In Dimitri’s Service Center Inc. v. Ocean Sands Developments Limited, 2009canlii47926 (ON SC), I awarded costs of $25,000.00 on a substantial indemnity scale to a landlord in a commercial tenant’s unsuccessful motion for an injunction against its landlord.
In Optrust Forecast Inc. v. Wild Wing Restaurants Inc., 2011 ONSC 3626, Carole Brown J. awarded costs of $5,443.24 on a partial indemnity scale in a motion for summary judgment involving breach of a commercial lease where costs of $11,848.00 were claimed on a substantial indemnity scale.
In Norwood Plaza Inc. v. 2050146 Ontario Inc. (Original Marines Family Clothing Store), 2009canlii26357 (ON SC), Marocco J. awarded costs of $10,000.00 plus disbursements in an action for damages of approximately $80,000.00 for breach of a commercial lease which Marocco J. described as a straightforward matter in which the parties had conducted themselves in a reasonable manner and made appropriate admissions.
In Hakim Optical Laboratory Limited v. Phillips, 2009canlii4240 (ON SC), Master Glustein awarded partial indemnity costs of $18,000.00 on a complex motion involving a half-day attendance, to set aside a registrar’s order dismissing an action for termination of a commercial lease.
[28] I conclude, from the foregoing decisions, that the range of costs awards in motions arising from breaches of a commercial lease is from $10,000.00 to $25,000.00, with the high end of the range reserved for cases in which costs are awarded on a substantial indemnity scale.
[29] Mr. Gerlach could reasonably have foreseen the approximate time Dasham’s lawyer would be spending, based on the time his own lawyer was spending opposing Dasham’s application. Mr. Gerlach’s own lawyer spent 47.5 hours on the application at an hourly rate of $250.00. This translates to costs of $14,333.03, on a substantial indemnity scale.
vii) Proportionality
[30] I have considered the principle of proportionality, incorporated into the Rules of Civil Procedure by the provisions of Rule 1.04 (1.1):
(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding. O. Reg. 438/08, s. 2.[^14]
[31] In Patene Building v. Niagara Home,[^15] Parayeski J. fixed costs at one-third the amount of damages awarded. He stated:
[1] …The plaintiff was successful, and should be paid its costs. Those costs should be on the partial indemnity scale. They should also bear some reasonable proportionality to the amount of money awarded to the plaintiff as damages. Those damages were for less than $15,000.00. Accordingly, the plaintiff’s request for $8,977.55, plus GST, is excessive. This was a short and simple trial. The plaintiff is entitled to judgment for costs fixed at $5,000.00, inclusive of GST and disbursements, as against both defendants, that liability being joint and several. [Emphasis added]
[32] Dasham was awarded damages in the amount of $35,000.00 and the return of its security deposit in the amount of $14,735.00, for a total amount of $49,735.00. Dasham requests costs of of $28,487.08, representing approximately 58% of the total amount it was awarded. I will discuss the scale of costs below, but I find the total amount claimed by Dasham, if awarded, would be disproportionate to the amount at stake.
viii) Improper or Unnecessary: The Scale of Costs
[33] I must consider whether there was some fault by Mr. Gerlach or other factor that justifies imposing costs against him on a substantial indemnity scale. In the normal course, costs are awarded to a successful party on a partial indemnity scale; however, the court has the discretion to order costs to be paid on a substantial indemnity scale in exceptional cases.[^16] Such cases include those in which the successful party achieves an outcome that is better than it would have achieved had an Offer to Settle it made to the unsuccessful party had been accepted.
[34] On July 12, 2012, Dasham delivered an Offer to Settle that remained open for acceptance until July 18, 2012. Had Mr. Gerlach accepted the Offer, he would have been required to pay $40,000.00 in full and final settlement of Dasham’s claim. Instead, the court ordered him to pay $49,735.00 (damages in the amount of $35,000.00 plus the return of the security deposit in the amount of $14,735.00).
[35] While Dasham’s Offer did not remain open for acceptance until the hearing, and therefore does not meet the requirements of Rule 49.10(1), the court may nevertheless consider it pursuant to Rule 49.13 in the exercise of its discretion as to costs. Rule 49.13 provides:
Despite rules 49.03, 49.10 and 49.11, the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer.
[36] The objective of Rules 49.10 and 49.13 is to promote settlement by giving litigants an incentive to make and accept reasonable Offers to Settle. The costs consequences of not accepting an Offer that is more beneficial than the outcome of the proceeding rest on the premises that:
a) The outcome of the proceeding is sufficiently predictable to permit a litigant to assess whether the result of accepting the Offer will be at least as favourable as a litigated outcome.
b) When compared with what was offered, the actual outcome is a measure of the recipient’s reasonableness in not accepting the Offer.
[37] Mr. Gerlach should have predicted that Dasham would be successful in recovering at least its security deposit and the amount by which the rental income from its sub-tenants exceeded the rent that it was required to pay to Mr. Gerlach. Dasham’s Offer to Settle was open long enough to give Mr. Gerlach sufficient time to consider his options. After considering those options, he should have accepted Dasham’s Offer. Had he done so, he would have saved himself, and Dasham, the costs of the hearing.
[38] The costs that Dasham claims for the hearing amount to $10,072.50 of the total costs of $23,595.00 (exclusive of HST and disbursements) that it claims for the application as a whole. I find that Dasham is entitled to recover the costs of the hearing on a substantial indemnity scale and the 60% of the balance of its costs ($13,522.50), on a partial indemnity scale, amounting to $8,113.50. Mr. Gerlach will therefore pay Dasham its costs in the amount of $18,186.00, plus HST on these fees, amounting to $2,364.18, plus its disbursements in the amount of $1,824.73.
[39] This amount, representing approximately 45% of the amount Dasham recovered, while high, is proportional to the amount that was at stake in the proceeding.
ORDER
[40] Having regard to the foregoing, it is ordered that:
- Mr. Gerlach shall forthwith pay to Dasham its costs of the application, on a substantial indemnity scale, fixed at $22,374.91, consisting of the following:
$ 18,186.00 for fees;
$ 2,364.18 for HST on fees;
$ 1,824.73 for disbursements.
Price J.
Released: December 11, 2013
COURT FILE NO.: CV-12-2190
DATE: 2013-12-11
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
DASHAM CARRIERS INC.
Applicant
and –
DAVID CAMERON GERLACH, 2049574 ONTARIO LIMITED o/a JANDU TRUCK CENTRE and GURPREET SINGH JANDU a.k.a. GARY
Respondents
COSTS ENDORSEMENT
Price J.
Released: December 11, 2013
[^1]: Dasham Carriers Inc. v. Gerlach, 2013 ONCA 707.
[^2]: Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131.
[^3]: Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA).
[^4]: Gratton-Masuy Environmental Technologies Inc. v. Building Materials Evaluation Commission, 2003 8279 (ON SCDC).
[^5]: Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA).
[^6]: Ibid., at para. 26.
[^7]: Ibid., at paras. 37‑38.
[^8]: Okanagan, at para. 25.
[^9]: British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71.
[^10]: “Information for the Profession” bulletin from the Costs Sub‑Committee of the Rules Committee.
[^11]: http://www.bankofcanada.ca/rates/related/inflation-calculator/
[^12]: Fazio v. Cusumano, 2005 33782 (ON SC).
[^13]: Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA).
[^14]: Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 1.04(11).
[^15]: Patene Building v. Niagara Home, 2010 ON SC 468.
[^16]: 131843 Canada Inc. v. Double “R” Toronto Ltd. (1992), 7 C.P.C. (3d) 15 (Ont. Gen. Div.), approved in Murano v. Bank of Montreal, 1998 5633 (ON CA).