ONTARIO
SUPERIOR COURT OF JUSTICE
Court File No.: CV-11-425032
Date: April 7, 2014
BETWEEN:
GOULIMIS CONSTRUCTION LTD.
David Rothwell, for the plaintiff,
Tel.: 416-593-5555,
Fax: 416-593-7760.
Plaintiff/Defendant by Counterclaim
- and -
JASON SMITH, EVA KLEIN and BANK OF MONTREAL
Lawrence Pick and Karen Dawson, for the defendants, Jason Smith and Eva Klein,
Tel.: 416-814-2822;
Fax: 416-362-2211.
Defendants
-and-
JASON SMITH and EVA KLEIN
Plaintiffs by Counterclaim
HEARD: November 5, 6, 7, 8, 12, 13, 2013 and December 5, 2013.
Master C. Wiebe
COSTS AWARD
[1] On February 27, 2014 I delivered a judgment concerning the trial of this action in which I dismissed the claim of the plaintiff (“GCL”), discharged the GCL lien, vacated the GCL claim for lien and certificate of action from title, and awarded Jason Smith and Eva Klein (together “the Owners”) $6,504.08 on their counterclaim. GCL had registered a claim for lien in the amount of $175,066.04, which was reduced to $166,651.04 at the commencement of trial and which was further reduced by the Owners’ payment to subtrades, Polo and Rapid Trends, in the amount of $36,460.01, leaving a total GCL claim of $130,191.03. The Owners counterclaim was in the amount of $200,000.
[2] This ruling concerns the question of costs. The Construction Lien Act (“CLA”) section 86(1) stipulates that costs are at the discretion of the court, subject to the requirement of section 86(2) that the costs “shall not exceed what would have been incurred had the least expensive course been taken.”
Least expensive course:
[3] Neither party made submissions as to another, less expensive, course of action that could have been taken by either party. Mr. Rothwell alluded to this provision in his written submissions, but did not articulate what other course of action should have been followed by the Owners. Therefore, I do not make a finding in that regard.
[4] I will therefore apply the general discretion of the court in determining costs. In this regard, I am guided by the factors stipulated by Rule 57.01 to be applied when exercising the court’s discretion in awarding costs. These factors are not, in my view, inconsistent with the provisions of the CLA.
Costs outlines:
[5] As indicated in my judgment, GCL filed a Cost Outline on December 5, 2013 which showed a partial indemnity claim for costs in the action and the counterclaim of $117,985.67. The actual costs incurred by GCL are shown as being $144,746.31. Mr. Rothwell, senior counsel, is shown to have spent a total of 297.9 hours. This amount is not broken down. Another lawyer is shown to have spent 4.55 hours on real estate related matters. A student is shown as having spent 14.2 hours on research. Disbursements totaling $3,882.74 (tax included) are also shown.
[6] On December 20, 2013 Mr. Pick delivered a letter stating that the Owners were “seeking costs of $45,000 plus HST, on a partial indemnity basis.” Further to my judgment, on March 12, 2014, Ms. Dawson delivered a letter enclosing an Owners’ Bill of Costs and written submissions on costs. The Owners’ Bill of Costs shows a partial indemnity claim for costs of $83,946, namely almost twice the amount in the December 20, 2013 letter from Mr. Pick. The actual costs incurred by the Owners are shown as being $93,045 ($128,627.50 less a discount of $35,582.50). Mr. Pick, senior counsel, is shown to have spent a total of 117.7 hours; Ms. Dawson, junior counsel, 242 hours; Michael Courneyea, another junior counsel, 3.2 hours; and Chris Housser, a student, 19.5 hours.
[7] I do not conclude that the Owners are bound by their letter of December 20, 2013. Cost outlines or statements are just methods of assessing the reasonable expectations of the parties concerning costs.
Result:
[8] Mr. Rothwell argued in his written submissions that there was divided success on account of the GCL success in defeating the bulk of the counterclaim. He argued that there should be no order as to costs as a result.
[9] I do not agree. The essence of the Owners’ counterclaim, as indicated in paragraph 18 of the counterclaim, was that they had overpaid GCL for the value of its work, and that they were seeking recovery of the overpayment. The Owners succeeded in establishing that they had overpaid. The excessive quantum of the counterclaim has been factored into the fees being claimed by the Owners, as only 48% of what was actually paid by the Owners is being claimed.
[10] On the other hand, the Owners succeeded in completely defeating the GCL claims.
[11] As a result, I find that the Owners were the successful parties in this action.
Offers to settle:
[12] Neither party filed formal written offers to settle that had been exchanged in this reference. Therefore, I do not consider this factor in my award.
[13] Mr. Rothwell alluded to three “GCL Rule 49 Offers” in his submissions. None of these were appended. His point was that the GCL offers had all included the dismissal of the counterclaim. I am not sure of his point here, as the Owners did succeed to some degree in their counterclaim. Therefore, I do not apply the provisions of Rule 49.
Reasonable expectation of GCL:
[14] I note that the GCL partial indemnity claim in its Costs Outline exceeds the Owners’ partial indemnity claim in their Bill of Costs by in excess of $15,000. Even the GCL actual costs exceed the Owners’ actual costs. Therefore, the Owners’ partial indemnity claim for costs is well within the reasonable expectation of what GCL should expect to pay.
Complexity:
[15] The trial had some complexity. I was advised several times of the over 7,000 pages of GCL documentation that both sides had to wade through. It appears that only a fraction of the total volume of productions was used at trial. The Owners produced expert evidence as to the value of GCL’s work which had to be assessed and understood. There were some complex issues of accounting, given the often confusing nature of GCL’s accounting.
Importance of the issues:
[16] I have no doubt that this matter was important to both sides. I heard evidence that GCL was suffering severely as a result of its alleged outstanding accounts in this matter. The Owners, on the other hand, advised throughout that their resources were not limitless.
Conduct of the parties:
[17] Mr. Rothwell argued, or implied, that the Owners were guilty of misconduct in failing to pay the full amounts of the claims of the subtrades, Polo and Rapid Trends, until the end of trial. He argued that this conduct on the part of the Owners needlessly prolonged the involvement of Polo and Rapid Trends in pre-trial activities and that the Owners should be denied the costs of these pre-trial activities as a result.
[18] I do not agree. Firstly, I agree with Ms. Dawson that these are submissions more properly made by Polo and Rapid Trends, and were not so made by them because these trades did not participate in the trial. Their claims were settled before the trial.
[19] Secondly, I have been given no evidence that these trades participated needlessly in pre-trial activity. At the second trial management conference in this reference on September 19, 2011 Master Polika excused them from further pre-trial activity. On the eve of trial, I required on October 9, 2013 that these trades be contacted to determine the extent to which they would be participating in the trial. Neither of these trades appeared before me at any time.
[20] Thirdly, concerning the issue of the alleged lateness of the Owners’ payment to Polo and Rapid Trends, I understand that the issue here was the Owners’ holdback liability to these trades. The Owners always maintained that they had paid more than enough for GCL’s work. However, they had retained no holdback, and there was therefore a deficiency in the Owners’ holdback. This holdback liability remained somewhat of an uncertainty throughout, given the various positions as to the “price” of the GCL work pursuant to CLA section 14. I note that the Owners’ evidence at no time indicated a value of GCL’s work that produced a holdback deficiency equal to or in excess of the total of the two sub-trade claims. I was also given no evidence that Polo and Rapid Trends would have accepted payment of anything less than the full amounts of their claims in settlement of their claims.
[21] In the end, the Owners decided for whatever reason to pay the full amount of these sub-trade claims at the time of trial. Given the evidence, I do not fault them for waiting this long in the circumstances. Indeed, I have found that the Owners’ decision ended up in an overpayment to GCL.
[22] I, therefore, do not find that the Owners have misconducted themselves as alleged.
Indemnity (quantum):
[23] There were several issues raised concerning the quantum of the Owners’ Bill of Costs. Mr. Rothwell argued that the involvement of Ms. Dawson at trial was largely unnecessary, and that generally many steps were taken by junior and senior counsel for which costs ought not to be awarded. No further particulars of this position were provided.
[24] Having reviewed the Owners Bill of Costs in this regard, I note that Ms. Dawson, at her lower rate, performed the bulk of the pre-trial work. Mr. Pick’s pre-trial involvement was limited to the initial file review, the preparation of the pleadings, some document review and a judicial mediation. Ms. Dawson performed the remainder of the pre-trial work, including the discoveries. Mr. Pick became more involved at the trial, but obviously needed the assistance of Ms. Dawson, given her knowledge of the case. I find no fault with this allocation of the work load. I also find no inappropriate items of work in the Owners’ Bill of Costs. Many of these steps were ordered by Master Polika. Finally, I note that the combined actual cost of the time spent by Mr. Pick and Ms. Dawson in this matter was equivalent to the actual cost of the time spent by Mr. Rothwell as shown on the GCL Costs Outline.
[25] Therefore, I do not agree with Mr. Rothwell’s criticisms of the allocation of the work load by the Owners’ lawyers, or of the claimed work items themselves.
[26] Concerning the partial indemnity rates claimed by the Owners, the rates shown on their Bill of Costs are actual rates. What is claimed in fees, however, is but a fraction of the actual fees shown on the Bill of Costs. The claimed fees are about 48% of the fees that were charged to the Owners, which in turn are only about 72% of what the fees derived from the actual rates. In short, the claimed fees are about 35% of what they would have been had they been charged at the shown actual rates. I have no complaint about the rates.
[27] Mr. Rothwell submitted that the disbursements claimed by the Owners (other than for Mr. Clifford) were in many instances overhead and non-assessable. These included courier charges, legal research, photocopies and process servers, Teranet and LSUC transaction levies. I was given no authority in support of this position. I also note that GCL’s own Costs Outline includes those items. Furthermore, these disbursements totaled $3,576.26, which is less than the $3,882.74 of disbursements that GCL claimed in its Costs Outline. I do not deduct or reduce any of these items in the Owners’ Bill of Costs.
[28] There is a large disbursement being claimed for Mr. Clifford, $29,520. Ms. Dawson submitted in her written submissions that the entire amount should be paid by GCL for the following reasons: Mr. Clifford was the only expert called at trial; I adopted his assessment of the value of the GCL work in place; without Mr. Clifford’s evidence, I would not have been able to make such an assessment. I agree with Ms. Dawson in this regard.
[29] Mr. Rothwell responded that only the first of the two Clifford Reports focused on the assessment of the value of GCL’s work. He argued that the second Clifford Report focused more on advocacy, and should not therefore give rise to a costs entitlement. The Second Clifford Report made important observations about labour productivity and the GCL billable rates. It was indeed more limited in usefulness than the First Clifford Report. However, I was given no breakdown as to the costs of the two reports. Therefore, I made an estimate of what should be deducted on account of the Second Clifford Report. I will reduce the Owners entitlement to the charge for Pelican Woodcliff by about 25% as a result.
Conclusion:
[30] Given the above noted analysis, I have reached the conclusion, and I hereby rule, that GCL pay the Owners partial indemnity costs in the amount $75,000 (inclusive of tax).
[31] The parties are to agree on a form of report to be submitted to me for review, approval and execution. If they cannot so agree, they can schedule an appointment before me to settle the form of the report.
Master C. Wiebe
Released: April 7, 2014
2014ONSC 2155
COURT FILE NO.: CV-11-425032
DATE: February 27, 2014
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
GOULIMIS CONSTRUCTION LTD.
Plaintiff/Defendant by Counterclaim
- and -
JASON SMITH, EVA KLEIN and BANK OF MONTREAL
Defendants
-and-
JASON SMITH and EVA KLEIN
Plaintiffs by Counterclaim
COSTS AWARD
Master C. Wiebe
Released: April 4, 2014