ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF the Construction Lien Act, R.S.O. 1990, c.C.30
COURT FILE NO.: CV-11-428554
DATE: February 27, 2014
BETWEEN:
PARAGON BUILDING LTD.
John L. O’Kane, for the plaintiff,
Tel.: 905-216-4661,
Fax: 1-866-269-5791.
Plaintiff
- and -
BERTHA AIELLO, the Estate Trustee of the the Estate of Karafil Bleta, deceased, DONERITE CONSTRUCTION and ALFIE MARINACCI
Leroy A. Bleta, for the defendant, Bertha Aiello, the Estate Trustee of the Estate of Karafil Bleta,
Tel.: 416-221-8181,
Fax: 416-231-1280.
Defendants
HEARD: February 24, 2014.
Master C. Wiebe
COSTS AWARD
[1] On January 22, 2014 I gave a trial judgment in this matter granting the plaintiff, Paragon Building Ltd. (“Paragon”), the entirety of its claim for lien, $9,076.06, both as against Bertha Aiello, the Estate Trustee of the Estate of Karafil Bleta (“the Estate”) and as against the other two defendants, Donrite Construction (“Donerite”) and Alfie Marinacci. The Estate contested the Paragon claim for lien whereas Donerite and Mr. Marinacci were noted in default some time ago. Counsel advised that, on the eve of the trial, the Estate obtained an order vacating the Paragon claim for lien as the Estate had posted cash security for the said claim for lien in accordance with the Construction Lien Act (“CLA”), section 44.
[2] In awarding costs, I am guided by section 86 of the CLA which specifies that I have the discretion to award costs against any party, and on a substantial indemnity basis. Section 86 is governed by the overall stipulation in section 86(2) that the costs awarded cannot exceed what it would have cost the party being awarded costs to take the “least expensive course.” Since CLA section 67(3) adopts the Rules of Civil Procedure (“Rules”) to the extent that the Rules are not inconsistent with the CLA, and since it has been held, and I agree, that the provisions governing the award of costs in Rule 57, being discretionary, are not inconsistent with the CLA, I will also be guided by the factors outlined in Rule 57.01(1) to be considered in awarding costs; see SIPGP No.1 Inc. v. Easter Construction Company Limited 2010 ONSC 2695 (Ont.Master). It was these factors that counsel addressed in argument.
Costs Outline:
[3] As noted in my judgment, at the conclusion of the argument following the evidence, the Estate filed a Bill of Costs that showed a partial indemnity claim of $21,374.83 and a substantial indemnity claim of $30,132.33. Mr. Bletha argued that this was not really a “costs claim” and that it was simply a compilation of the costs that the Estate incurred to show how disproportionate the costs were to the amount of the claim. I do not accept this point, as the Estate document is clearly a claim for costs. It says so in the first sentence of the document.
[4] A bigger issue was whether the Paragon Costs Outline filed by Mr. O’Kane at trial could lay the foundation for a claim for substantial indemnity costs. The Costs Outline provids an “outline” of the submission to be made on costs and then presents a claim totaling $23,847.32. It is not stated whether this is a claim for partial indemnity costs. Later in the document there is a grid showing the person who worked on this file for Paragon (namely Mr. O’Kane), the hours worked (47.4), and both “partial indemnity” ($265/hour) and “actual indemnity” ($400/hour) rates to be applied. It is clear in reviewing this chart that the expressed Paragon claim for costs is a partial indemnity claim.
[5] Mr. O’Kane took the position in argument though that the Paragon Cost Outline did not bind Paragon to a partial indemnity position on costs. I agree. The Costs Outline under the Rules was instituted primarily to address the factor of what each party could reasonably expect to pay in costs. It does not bind the court in its discretion in awarding costs. Mr. Bletha raised the argument that he was not notified of this position in advance of the argument, but he did not advise as to how this lack of notice prejudiced his client given the information that was in the Paragon Costs Outline. I herewith allow Paragon to make a claim on a substantial indemnity basis.
[6] Mr. O’Kane submitted that, given the outcome of the trial, Paragon should be awarded costs based on the “actual rate” shown in the grid. Using that rate, the claimed fee is 47.4 hours x $400 = $18,960. For trial time, Mr. O’Kane used the total of 16 hours shown in the Estate’s Bill of Costs for a 2 day trial arguing that he spent the same time at trial that Mr. Bletha did. The trial time claim, Mr. O’Kane submitted, is therefore 16 hours x $400 = $6,400. The disbursements of $4,003.39 remain the same. Mr. O’Kane concluded that, with HST, the total Paragon costs claim on a substantial indemnity basis is $32,659. He submitted that this is what I should award as against the Estate.
[7] Mr. O’Kane rightfully pointed out that the trial time claimed in the Paragon Costs Outline pertained to only a two day trial, when in fact the trial went into a third day due to the problems concerning the attendance of Mr. Marinacci, a defence witness. I will take that into consideration in my award of costs.
[8] Concerning Donerite and Mr. Marinacci, as they were noted in default early in the action, Mr. O’Kane submitted that the award of costs against them should be no more than $5,000. He stated that these defendants were responsible for the dispute and the necessity of commencing the lien proceeding, but no further costs.
Interest on holdback liability:
[9] As a preliminary point, I had asked counsel to address the issue of whether the Estate was liable for prejudgment interest on its holdback liability to Paragon. Mr. O’Kane advised that he did not think that there was such liability, and did not seek recovery for this item. I therefore make no order in this regard.
Success:
[10] There is no doubt that Paragon was entirely successful in this action, and should be awarded costs. The real issue is what measure of costs should be awarded to Paragon.
Indemnity:
[11] Mr. Bletha had no serious overall objection to the time claimed by Paragon for fees and the quantum claimed for disbursements.
[12] Mr. Bletha did raise an objection to the three specific disbursements that therefore need to be addressed. He objected to the $90 claimed for the disbursement of noting Donerite and Mr. Marinacci in default, and to the $205.66 claimed for service of the statement of claim on Donerite and Mr. Marinacci. Mr. O’Kane conceded these items, and therefore they plus the associated tax will be deducted.
[13] Mr. Bletha also objected to the $418 plus tax disbursement claim for a “bankruptcy search” on April 15, 2013. Mr. O’Kane did not agree with this point, and he pointed to the ESC Corporate Services invoice to argue that all of these charges concern the Estate. Having reviewed this invoice, I agree with Mr. O’Kane and I include this disbursement in the amount of disbursements to be recovered.
[14] There is a further point to be made under the subject of indemnity. The court rarely awards costs on a full and complete indemnity basis, which it would appear is what is being requested by Paragon. The applicable fee rate being requested to be applied is an “actual rate,” by which I assume that this is the actual rate that Mr. O’Kane charged his client. A substantial indemnity recovery, though significant, is nevertheless usually less than complete indemnity. Having said that, I note that the $400/hour rate claimed by Mr. O’Kane for his “actual rate” is within the range of what is normally awarded to a counsel of his experience on a substantial indemnity basis. Mr. O’Kane started practicing law in 1986. I will therefore not make a significant reduction in this regard.
Reasonable expectation of the losing party:
[15] I am satisfied that the amounts being claimed by Paragon are within the reasonable expectation of what the Estate could expect to pay, given the amounts the Estate included in its Bill of Costs.
Complexity:
[16] This case should have been relatively straight forward. However, it was made more complex by the Estate when it raised issues of deficiencies and theft, which proved to be groundless, and the legal issue of ex turpi causa, on which it lost without producing any part of the statute on which it relied. The case became more complex than it should have been on account of the conduct of the Estate.
Importance of the issues:
[17] I accept Mr. O’Kane’s submission that while this case concerned a modest claim, the claimed amount is important for a contractor of the size of Paragon. What should have happened given the size of the claim was a more thorough, self-critical and timely review of the case by the Estate, which would in my view have resulted in a timely resolution of the claim.
Proportionality:
[18] Much of the argument was spent on this issue. The proportion between the amount of the claim and the costs being claimed is a factor to be considered. The costs being claimed by Paragon are 3.5 times the amount of its recovered claim.
[19] Mr. Bletha argued that in essence this was a Small Claims Court action, and that, had this been brought in the Small Claims Court, Paragon would have been entitled to only 15% of its claim in costs (ie. $1,361). He stated that the amount of the posted security for costs for the Paragon claim for lien was only 25% of the claim, namely $2,269.02. Both of these points, he argued, should be considered on the issue of proportionality.
[20] Proportionality is something to be considered by me in awarding costs, but I am not bound by any mathematical formula in this regard. In addition, Mr. O’Kane submitted several cases that stand for the proposition that proportionality should not be used to deny a successful plaintiff appropriate costs. In 163972 Canada Inc.(c.o.b. Teenflo) v. Isacco [1997] O.J. No. 838, Justice G.D. Lane awarded costs to the plaintiff apparently well in excess of the claim that was granted, and said the following concerning the issue of proportionality:
That the costs significantly exceed the amounts at stake in the litigation is regrettable, but it is a common experience and is well known to counsel as one of the risks involved in pursuing or defending a case such as this to the bitter end rather than finding a compromise solution. To reduce the plaintiff’s otherwise reasonable costs on this basis would simply encourage the kind of intransigence displayed by the defendants in this case.
[21] I agree with Justice Lane. The other cases presented by Mr. O’Kane reiterated this point. In Shearer (Litigation guardian of) v. Sewchand [2013] O.J. No. 5464 (Ont.Sup.Crt.) Justice O’Connell awarded the plaintiff $279,060 in costs on a $190,000 claims judgment. In the above noted SIPGP case, Master Polika awarded $225,000 in costs on a lien judgment of $272,249.77. I will therefore not reduce my award of costs on account of proportionality.
Conduct of a party that unnecessarily lengthened this proceeding:
[22] In my view, this is a key factor in this case. Mr. O’Kane submitted that the bulk of the costs that Paragon incurred in this case were the direct result of the Estate’s intransigence. By intransigence, Mr. O’Kane meant a deliberate failure by the Estate to critically review its case and resolve the Paragon claim in a timely way.
[23] Mr. O’Kane presented copies of a series of emails between him and Mr. Bleta starting on May 14, 2011 and ending on December 23, 2011. The Paragon claim for lien was registered on May 5, 2011. None of this correspondence contains a Rule 49 offer to settle. What it does contain are offers from Paragon to the Estate to accept a direct payment from the Estate to Paragon under CLA section 28 in the full amount of its claim. Initially, Paragon wanted $1,000 in addition in costs, but I am satisfied that by December, 2011 the costs demand was gone. Also by December 6, 2011, Paragon had provided the Estate with copies of its invoice, the diary entries that supported the Paragon invoice, the time cards and invoice from Calautti Electric, and the Paragon accounting records showing the amount owed. Mr. O’Kane had also provided Mr. Bletha with confirmation that Mr. Marinacci had the Paragon time cards that Mr. Bleta demanded.
[24] The Estate’s response on November 17, 2011 was to offer a consent to a discharge of the Paragon claim for lien on a without costs basis, as the Estate said that it did not consider itself a proper party to the proceeding. The Estate made no further offers. I am satisfied that the Estate made no attempt to resolve the substance of the Paragon claim, despite the obvious fact that it was potentially liable to Paragon to the full extent of the RGL holdback which exceeded the amount of the Paragon claim.
[25] Mr. Bletha argued that, as the Estate was not a party to the contract between Donerite and Paragon, it knew none of the issues between those parties and was simply exploring in this initial period the evidence to support the Paragon claim. He argued that the Estate was not intransigent. That may have been the case up to the point in November, 2011 when Mr. O’Kane made disclosure as discussed above. Thereafter, however, it seems clear to me that the Estate had no intention to resolve this case other than through trial.
[26] Mr. Bletha argued that the Estate wanted to interview Mr. Marinacci and had trouble finding him in order to verify Paragon’s claim. But later when it not only interviewed Mr. Marinacci, but got an affidavit from him for the trial, the Estate made no effort to resolve this case, despite the obvious flaws in Mr. Marinacci’s evidence, as outlined in my judgment. I find that this submission lacks credibility.
[27] Mr. Bletha also argued that the ordered discoveries were not necessary, and should not have been embarked upon by Paragon at the time of the first trial management conference (which Mr. Bletha did not attend). This was an interesting submission given Mr. Bleta’s failure to attend the first trial management conference. Mr. Bletha also admitted that his client proceeded to discover Paragon in accordance with these trial management directions. I do not give this submission any weight.
[28] I find that the Estate was intransigent, at least as of December, 2011, and that Paragon should therefore recover on a substantial indemnity basis the vast bulk of the costs it incurred thereafter, given the outcome of the case.
Less costly alternative:
[29] Mr. Bletha argued that there was a less costly alternative, namely a Small Claims Court action. When I pointed out to him that a lien action could not be pursued in the Small Claims Court and that it was only through the lien remedy that the Estate was liable to Paragon, Mr. Bletha responded by arguing that Paragon could have pursued the Estate for unjust enrichment and quantum meruit in the Small Claims Court.
[30] I do not give this submission weight as the claims for unjust enrichment and quantum meruit could easily have been undermined by the Estate in the Small Claims Court with proof that it had paid RGL fully on the main contract, thereby leaving Paragon without recourse.
[31] I find that Paragon has followed the least costly route.
Conclusion:
[32] In awarding costs against the Estate, I will reduce the amount contained in the Paragon Costs Outline by my estimation of the costs spent by Paragon in preserving and perfecting its claim for lien and by the aforesaid disbursements. Commencement of the lien proceedings was, in my view, the fault of Donerite and Mr. Marinacci who sparked this dispute by their unfounded allegations of theft and deficient work.
[33] I therefore order that the Estate pay Paragon the costs of the action on a substantial indemnity basis in the total amount of $29,000.
[34] I also order that Donerite and Mr. Marinacci jointly and severally pay Paragon costs of this action in the amount of $4,000.
[35] As I have not been given a copy of the order whereby the Estate vacated the Paragon claim for lien, I am unable to complete the final report. Therefore, I herewith direct the parties to confer and reach an agreement on the form of the final report, failing which they are to arrange a telephone conference with me at their earliest opportunity to settle the report.
MASTER C. WIEBE
Released: February 27, 2014
COURT FILE NO.: CV-11-428554
DATE: February 27, 2014
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Paragon Building Ltd.
Plaintiff
- and -
Bertha Aiello, the Estate Trustee of the Estate of Karafil Bleta, deceased, Donerite Construction and Alfie Marinacci
Defendants
COSTS AWARD
Master C. Wiebe
Released: February 27, 2014