COURT FILE AND PARTIES
COURT FILE NO.: CV-08-CT056666-0000
DATE: 20130207
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: JASON BRUMLEY and 1656679 ONTARIO LTD., Plaintiffs
AND:
CONSUELO BONILLA, Defendant
BEFORE: Stinson J.
COUNSEL:
Robert G. Zochodne, for the Plaintiffs
Consuelo Bonilla, in person
HEARD: By written submissions
ENDORSEMENT AS TO COSTS
[1] This endorsement addresses the costs sought by the plaintiffs in this proceeding. In my decision released July 10, 2012, I awarded the plaintiffs the net sum of $15,960.37. In arriving at that sum, I netted out any amount payable on the counterclaim and the counterclaim was therefore dismissed. I also directed that the plaintiffs were entitled to recover prejudgment interest. The parties were unable to reach agreement in relation to costs and therefore made written submissions. This endorsement is based upon those submissions.
liability as to costs
[2] As indicated above, the plaintiffs were successful in this action, in that they recovered a judgment on their claim, and the counterclaim was dismissed. Although the amount claimed and awarded was less than $25,000, at the time the proceeding was commenced the monetary limit for Small Claims Court was $10,000. As a result, the action was properly brought in the Superior Court and rule 57.05(1) does not apply. In any event, the counterclaim sought more than $90,000 and thus the action had to be tried in the Superior Court.
[3] In view of the foregoing, there is no reason to depart from the standard approach that the successful party should be awarded costs against the unsuccessful party. The plaintiffs are therefore entitled to costs as against the defendant.
Scale of costs
[4] In the ordinary case, absent sanctionable misconduct in the underlying complaint or in the conduct of the litigation, costs are recoverable on a partial indemnity basis only. This is not one of those rare and unusual cases in which substantial indemnity costs would be awarded.
[5] The plaintiffs seek substantial indemnity costs after a certain date, however, by reason of an offer to settle served by them on May 17, 2010. By that offer, the plaintiffs were prepared to accept the sum of $10,000 for their claim, inclusive of prejudgment interest, together with $5,000 for costs and $1,000 for assessable disbursements. That offer remained open for acceptance until the trial commenced, and was not withdrawn.
[6] For her part, the defendant delivered an offer to settle seeking $99,621.44 together with costs. That offer was not withdrawn before trial.
[7] At trial, the plaintiffs recovered the sum of $15,960.37, plus prejudgment interest. Interest would increase the recovery to more than $16,000. Thus, without regard to costs, the judgment recovered by the plaintiffs was more favourable than the plaintiffs' offer, which was for $16,000 inclusive of interest and costs.
[8] Rule 49.10(1) provides as follows:
49.10 (1) Where an offer to settle,
(a) is made by a plaintiff at least seven days before the commencement of the hearing;
(b) is not withdrawn and does not expire before the commencement of the hearing; and
(c) is not accepted by the defendant,
and the plaintiff obtains a judgment as favourable as or more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer to settle was served and substantial indemnity costs from that date, unless the court orders otherwise.
[9] In relation to the plaintiffs' offer, all of the prerequisites (a), (b), (c) were met. It is further the case that the plaintiffs' judgment was more favourable than the terms of their offer to settle. As a consequence, applying rule 49.10(1) the plaintiffs are entitled to partial indemnity costs to the date of the offer and substantial indemnity costs thereafter.
[10] I acknowledge that I have a discretion to order otherwise, but I am not prepared to exercise that discretion. Here, the plaintiffs made a good faith attempt to resolve the dispute short of trial, by taking a significant discount (down to $10,000 for principal) on their claim, which initially sought approximately $17,000 plus interest and costs. The counterclaim by the defendant sought approximately $99,000 and thus her offer represented little effort on her part to compromise.
[11] Given the good faith attempt by the plaintiffs to resolve the matter short of the trial, and the comparative absence of such an effort by the defendant, I see no proper reason to depart from the result prescribed by rule 49.10(1). To the contrary, the attempts made by the plaintiffs to resolve the matter short of trial should be recognized and rewarded with an order for substantial indemnity costs following the date of their offer, consistent with the underlying policy rationale that is embodied in rule 49.10(1).
[12] I therefore conclude that the plaintiffs should recover partial indemnity costs up to the date of their offer to settle, May 17, 2010, and substantial indemnity costs thereafter.
Quantum of costs
[13] This litigation began after the defendant terminated the plaintiffs as her contractors on the job site of a house renovation project that the defendant was carrying out with a view to profit. In response, they filed a construction lien. The defendant refinanced and was able to post security to obtain the discharge of the lien. The plaintiffs then commenced this action, claiming approximately $17,000. As noted, I ultimately awarded the plaintiffs slightly less than $16,000.
[14] What drastically altered the complexion of the litigation, however, was the counterclaim initiated by the defendant. She sought in excess of $90,000. I calculated the damages properly recoverable by her at approximately $3,400. Indeed, the damage award in favour of the plaintiffs of slightly less than $16,000 was calculated after netting out the damages recoverable by the defendant on her counterclaim.
[15] The foregoing analysis leads two conclusions. Firstly, the amount sought by the plaintiffs corresponded very closely to the amount recovered by them. By contrast, the amount sought by the defendant in her counterclaim bore almost no resemblance whatsoever to her recovery. Secondly, because of the unjustified sum sought in her counterclaim, the defendant increased the amount at stake in the litigation from approximately $20,000 to almost $110,000. I mention this point at this juncture in my endorsement, because it had a significant impact on the approach taken by the plaintiffs and the amount of time consumed by the case, all resulting in a very significant claim for costs being advanced by the plaintiffs.
[16] In all, the plaintiffs seek costs of the action fixed at $93,858.84. Of that sum, approximately $79,400 is on account of fees, $5,300 is on account of disbursements and $9,200 is on account of tax.
[17] Dealing firstly with fees, of $79,400 claimed, $13,400 is said to relate to events prior to the offer to settle, and is sought on a partial indemnity basis. The remaining $66,000 relates to activities subsequent to the May 17, 2010 offer to settle the period, for which I have held the plaintiffs entitled to claim substantial indemnity costs.
[18] The defendant raises a range of objections to the amount claimed by the plaintiffs. I will address some of the individual submissions presently, but the basic thrust of the defendant's position is that, based on the principle of proportionality, the amount sought by the plaintiffs is excessive, having regard to the amount in issue. As indicated previously, I consider the amount in issue in this case to be in the order of $110,000, due to the size of the counterclaim asserted by the defendant.
[19] In relation to the applicable principles, these were aptly stated in Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722, where at paras. 51 and 52, Epstein J.A. stated as follows:
51 In Andersen v. St. Jude Medical Inc. (2006), 2006 85158 (ON SCDC), 264 D.L.R. (4th) 557, the Divisional Court set out several principles that must be considered when awarding costs:
The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in rule 57.01(1): Boucher, Moon, and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 2005 1042 (ON CA), 75 O.R. (3d) 638 (C.A.).
A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case: Boucher. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 119 A.C.W.S. (3d) 341 (Ont. C.A.), at para. 4.
The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: rule 57.01(1)(0.b).
The court should seek to avoid inconsistency with comparable awards in other cases. "Like cases, [if they can be found], should conclude with like substantive results": Murano v. Bank of Montreal (1998), 1998 5633 (ON CA), 41 O.R. (3d) 222 (C.A.), at p. 249.
The court should seek to balance the indemnity principle with the fundamental objective of access to justice: Boucher.
52 As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding at para. 37, where Armstrong J.A. said "[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice."
[20] Against the backdrop of the foregoing principles, I now turn to the specific factors enumerated in rule 57.01(1) that I consider relevant to the exercise of my discretion.
57.01(1)(0.a)
The principle of indemnity, the experience of the lawyer, the rates charged and the hours spent. As noted in Andersen, supra, these considerations are subject to the overriding principle of reasonableness. Against the backdrop of a $110,000 dispute, a costs claim of nearly $94,000 seems somewhat high.
57.01(1)(0.b)
The reasonable expectations of the unsuccessful party. The defendant vigorously advanced her case. She presented extensive documentation and testimony with a view to attacking the plaintiffs' claim and justifying her counterclaim. It should have been within her reasonable expectation that, by doing so, she was forcing the plaintiffs to incur substantial legal costs. This factor weighs in favour of the costs claim advanced by the plaintiffs.
57.01(1)(a)
The amount claimed and recovered in the proceeding. The total dispute was in the order of $110,000, adding the amount claimed by the plaintiffs and the amount of the counterclaim. That dispute warranted a serious application of legal sources, with the attendant expense. On the other hand, the amount recovered by the plaintiffs was only $16,000. A recovery in that magnitude would suggest a more modest expenditure would be appropriate.
57.01(1)(b)
The apportionment of liability. The plaintiffs was largely successful, although not wholly. Some (but very few) issues were decided in favour of the defendant. This would support a modest reduction of the amount claimed.
57.01(1)(c)
Complexity. The plaintiffs' claim was relatively straight forward. Matters were made more complex by the defendant's counterclaim as well as the complications arising from the parties' accounting records. This led to more time being consumed in the trial than might otherwise have been required.
57.01(1)(e)
Conduct of any party that tended to shorten or lengthen the proceeding. The greatest share of the trial time was devoted to the defendant's counterclaim. In her written submissions, the defendant commented that the court insisted on a translator, which increased time and costs. In particular, the defendant stated "the court did not like her accent". This is a regrettable and unfounded comment. After attempting to conduct the proceeding without the involvement of a translator on Day 1, it became apparent that, despite the defendant's best efforts at expressing herself in the English language, what she was saying was very difficult to understand. Rather than run the risk of deciding the case on the basis of an inaccurate understanding of the defendant's evidence and submissions, I determined that the only safe way to proceed was to involve an interpreter, so that the defendant could participate in the proceedings fully and fairly in her original language. The interpreter was supplied by and at the expense of the court. The translation process did lengthen the time consumed by the trial. That said, one of the principal reasons for the length of the proceeding was the manner in which the defendant presented her case, conducting argumentative cross-examinations, presenting repetitive or irrelevant information or difficult to understand calculations and documents. The defendant must therefore accept a large share of the responsibility for the length of the hearing.
57.01(1)(f)
Not applicable.
57.01(1)(g)
Not applicable.
57.01(1)(h)
Not applicable.
[21] In addition, rule 57.01(1)(i) requires me to consider "any other matter relevant to the question of costs". The defendant submitted that the plaintiffs changed lawyers in advance of the trial and this fact increased the number of hours spent in trial preparation. I do note that the previous lawyer spent 17.2 hours in trial preparation and the successor spent 39.1 hours, for a total of 56 hours. I find there was some duplication of effort, for which the defendant should not be required to pay.
[22] The defendant submits that the plaintiffs have not proven how much they actually paid their lawyer. The state of accounts between lawyer and client is not relevant to fixing the costs payable by an unsuccessful party.
[23] The defendant contends that the hourly rate the plaintiffs' counsel was excessive. At $300 per hour, for a lawyer of over 25 years' experience, I do not agree.
[24] The defendant objects to the expense incurred for the expert real estate appraisal. This witness was called by the plaintiffs to rebut the allegation by the defendant that the modification to the cathedral ceiling on the second floor significantly decreased the value of the property. I accepted the evidence of the expert. In my view, the fee charged is within the range of that charged by expert witnesses who provide similar testimony. I therefore conclude that this charge is appropriate and payable by the defendant.
[25] The defendant also objects to the charges incurred by the plaintiffs to call an engineering expert who gave evidence regarding the cathedral ceiling and other alleged deficiencies. Once again, this evidence was called in response to the issues raised by the defendant. I therefore consider it to be a proper expense. I further find the amount to be reasonable.
[26] The defendant objects to disbursements for parking during trial and effecting service. I agree with the former objection as not being a properly assessable disbursement. The latter, however, is properly recoverable. In the result, I would reduce the plaintiffs' claim for disbursements by $265.
[27] In relation to the plaintiffs' claim for fees, while I acknowledge the validity of some of the defendant's points, most of the factors that I have reviewed favour the plaintiffs. The most vexing aspect of this costs dispute is the seeming lack of proportionality between the amount recovered by the plaintiffs and the amount of his costs claim. The principal reason for this and indeed for the length of the trial was the largely ill-founded counterclaim advanced by the defendant, coupled with the fashion in which she conducted her case. In large measure, it is the defendant who must bear responsibility for the amount of time consumed by the trial. Additionally and very significantly, the defendant rejected a settlement offer that was left open for acceptance until the commencement of trial, for an amount that was considerably less than the plaintiffs' final recovery. The Rules provide a built-in sanction in relation to a party’s failure to accept a reasonable settlement proposal. Once again, the defendant must accept responsibility for her own decisions and their consequences.
[28] I am mindful of the exhortation of the Court of Appeal that the quantum of costs awarded should reflect an amount the court considers to be fair and reasonable. Taking into account the foregoing considerations, I conclude that a fair and reasonable award of costs in favour of the plaintiffs would be to award fees of $55,000 (down from $79,432.50), tax of $7,150 (down from $9,230.62) and disbursements of $5,090.72. This results in a total award of $67,240.72. I order the defendant to pay that sum to the plaintiffs.
Stinson J.
Date: February 7, 2013