SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-08-00369415
DATE: 20140304

RE: The Forzani Group Ltd., Plaintiff

– AND –

Vitran Express Canada Inc. and Canadian National Railway Company, Defendants

BEFORE: Justice E.M. Morgan

COUNSEL: Raj Datt and Gerry Grossi, for the Plaintiff

Orlando Rosa and Matthew Shoemaker, for the Defendant, Canadian National Railway Company

HEARD: September 23-25, 2013, followed by written submissions, and further written submissions on costs

COSTS ENDORSEMENT

[1] On February 4, 2014, I issued my endorsement in this action. The Defendant, Canadian National Railway Company (“CN”), was successful and the claim was dismissed.

[2] Mr. Rosa, on behalf of CN, seeks costs on a partial indemnity scale up until September 10, 2013, the date that CN made an offer to settle to the Plaintiff, The Forzani Group Ltd. (“Forzani”), after which he seeks costs on a substantial indemnity scale. The offer was for a dismissal of the claim in return for Forzani paying CN costs on a partial indemnity basis less $1,500. Since CN was entirely successful in the action, this offer is better than the Plaintiff did at trial.

[3] It is Mr. Rosa’s submission that Rule 49 of the Rules of Civil Procedure applies to the September 10, 2013 offer. Rule 49.10(2) provides:

(2) Where an offer to settle,

(a) is made by a defendant 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(b) is not withdrawn and does not expire before the commencement of the hearing; and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 plaintiff;

And the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless the court orders otherwise.

[4] Rule 40.13 is also of relevance to CN’s claim for substantial indemnity costs after the date of the offer. That Rule 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.

[5] Mr. Datt, on behalf of Forzani, cites the Court of Appeal’s judgment in S & A Strasser Ltd. v Richmond Hill, 1990 6856 (ON CA), [1990] OJ No 2321 for the proposition that Rule 49 does not allow a defendant to seek costs on a substantial indemnity basis. At para 4 of S & A Strasser, the court reasoned:

At first glance it seems an anomaly that the plaintiff should be awarded solicitor-and-client costs following the date of an offer, while the defendant only receives party-and-party costs. The answer is found in appreciating that this rule assumes that the plaintiff has recovered a judgment of some value. Without the rule, that plaintiff would normally recover party-and-party costs. The rule gives that plaintiff a bonus for an offer lower than the recovery by elevating costs to the solicitor-and-client level following the offer. The bonus to a defendant who makes an offer higher than the recovery is that the defendant pays no costs following the offer and, in addition recovers party-and-party costs for that period of time. That rationale does not fit a case where the plaintiff is totally unsuccessful because,, without the rule, the defendant is normally entitled to party-and-party costs. The words in the rule “and the plaintiff obtains a judgment as favourable” make it clear that the rule has no application where the plaintiff fails to recover any judgment.

[6] That reasoning is entirely logical given the wording of Rule 49.10(2). However, it does not apply to Rule 49.13, which specifically permits a judge fixing costs to consider any offer to settle nothwithstanding the limitations of Rule 49.10. Mr. Rosa’s request for costs asks that I exercise the discretion authorized in Rule 49.13 in a way that mirrors the operation of Rule 49.10(2) for plaintiffs – i.e. partial indemnity to the date of the offer and substantial indemnity thereafter.

[7] The Court of Appeal elaborated on the discretion to award substantial indemnity costs in Davies v Clarington (Municipality) (2009), 2009 ONCA 722, 100 OR (3d) 66, at para 40, where it held:

The judicial discretion under rules 49.13 and 57.01 is not so broad as to permit a fundamental change to the law that governs the award of an elevated level of costs. Apart from the operation of rule 49.10, elevated costs should only be awarded on a clear finding of reprehensible conduct on the part of the party against which the cost award is being made. As Austin JA established in Scapillati, Strasser should be interpreted to fit within this framework – as a case where the trial judge implicitly found such egregious behaviour, deserving of sanction.

[8] In the instant case, there was no such reprehensible conduct on the part of Forzani. It tried the case as it was entitled to do, and lost the case on its merits. I find nothing in its conduct to trigger an elevated level of costs.

[9] At the same time, this is not a case in which costs should be eliminated altogether. Mr. Datt submits that the point of law at issue here was novel, and that this novelty required a trial such that no costs should be awarded to either party. With respect, I do not see the case as presenting that kind of novelty. Forzani’s claim was not a previously untried cause of action that sought to expand the horizons of the law; rather, it was a claim under a specific set of federal regulations that turned out to have yielded no damages. As the successful party, CN deserves its costs in the ordinary course.

[10] Since Mr. Rosa’s request is for a combination of partial and substantial indemnity, his Bill of Costs does not provide me with a total amount of costs on a partial indemnity scale. In any case, I find his request for $158,677.03 for what was effectively a 3 day trial, with follow-up submissions in writing, to be quite high. Rule 57.01 (0.b) permits me to take into account “the amount of costs that an unsuccessful party could reasonably expect to pay”. This is an important ingredient in ensuring that the costs reflect “the notions of fairness and reasonableness [that] are embedded in the common law. Boucher v Public Accountants Council (2004), 2004 14579 (ON CA), 71 OR (3d) 291, at para 38 (Ont CA).

[11] I would exercise my discretion to fix CN’s costs at roughly one-half of what it requests on a part substantial and part partial basis. I hasten to add that this reduction is not a reflection on the work put in by Mr. Rosa and his legal team. They did an excellent job for their client and their investment of time in this case paid off in a successful result. However, the fixing of costs must take into account the losing side’s expectations as well as the costs incurred by the winning side.

[12] Forzani shall pay costs to CN in the all-inclusive amount of $80,000.

Morgan J.

Date: March 4, 2014