ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-10-413728CP

DATE: 20140411

BETWEEN:

JO-ANNE BLAIR
Plaintiff

– and –

TORONTO COMMUNITY HOUSING CORPORATION and GREENWIN PROPERTY MANAGEMENT INCORPORATED
Defendants

– and –

JOHN/JANE DOE, STEPHEN VASSILEV, THE TORONTO BOARD OF HEALTH, CLAIMS PRO INC., HOUSING SERVICES INC., FORENSIC INVESTIGATIONS CANADA CARRYING ON BUSINESS AS MUSTANG SECURITY and 1507329 ONTARIO LTD. CARRYING ON BUSINESS AS J.S. SERVICES AND JAYA STAR SERVICES
Third Parties

Lea Nebel, for the Defendant Greenwin Inc. (incorrectly described as Greenwin Property Management Incorporated)

Lisa C. Munro, for the Third Parties, Claims Pro Inc. and Forensic Investigations Canada carrying on business as Mustang Security

Proceeding under the Class Proceedings Act, 1992

HEARD: April 10, 2014

Perell, J.

REASONS FOR DECISION

A. INTRODUCTION

[1] The Defendant, Greenwin Inc. (incorrectly described as Greenwin Property Management Incorporated) seeks leave to discontinue this Third Party Claim without costs.

[2] The Third Parties, Claims Pro Inc. and Forensic Investigations Canada carrying on business as Mustang Security, oppose Greenwin’s motion and seek costs on a substantial indemnity basis in the amount of $127,093.31.

B. FACTUAL AND PROCEDURAL BACKGROUND

[3] On September 24, 2010, a fire occurred at 200 Wellesley Street East, Toronto, Ontario at a large public housing apartment building owned by Toronto Community Housing Corporation and operated by Greenwin. Many residents were evacuated and there was considerable damage to the property that they left behind.

[4] After the fire, the Housing Corporation hired Claims Pro Inc., a claims investigation and insurance adjuster firm. Claims Pro retained third party contractors to salvage property. Forensic Investigations Canada, which carries on business as Mustang Security, was hired to investigate and to provide security inside and outside the building.

[5] The Housing Corporation offered a compensation program but some regarded the offering as inadequate, and on November 5, 2010, Jo-Anne Blair commenced a proposed class action against the Housing Corporation and Greenwin.

[6] In her claim brought on behalf of the tenants of 200 Wellesley Street East, in addition to claims for disturbance and property losses, Ms. Blair alleged that the tenants suffered emotionally from the loss of their property, some of which had been stolen in the aftermath of the fire. She claimed that the Class Members had suffered damages of $80 million.

[7] On October 13, 2011, Greenwin issued a Third Party Claim against, among others, Claims Pro and Mustang Security. Although Claims Pro and Mustang Security had no involvement at the apartment building before the fire, Greenwin alleged wrongdoing both before and after the fire. Greenwin sought contribution and indemnity for all of the damages sought by the Class Members, including their claim for punitive damages.

[8] By Order dated October 17, 2011, Ms. Blair’s action was certified as a class action. See Blair v. Toronto Community Housing Corporation.[^1] The common issues that were certified concerned the alleged negligence of the Housing Corporation and of Greenwin before the fire. The fire itself was blamed on a tenant who horded an enormous amount of flammable material in his apartment unit. It was alleged that the Defendants knew about the fire hazard and did nothing about it.

[9] On January 23, 3012, Claims Pro and Mustang Security delivered a Statement of Defence and Crossclaim to the Third Party Claim. They did not defend the Main Action. In their Statement of Defence to the Third Party Claim, Claims Pro and Mustang Security denied any involvement before the fire and they denied any wrongdoing for the post-fire period.

[10] After filing their pleading, Claims Pro and Mustang Security brought a motion for an order staying the Third Party Claim pending determination of the common issues as certified in the Main Action and other relief. The motion eventually proceeded on consent, and one of the orders made was that Greenwin amend the Third Party Claim as against Claims Pro and Mustang Security to limit its claims against them to post-fire activity. Greenwin also consented to withdraw its claim for contribution and indemnity for punitive and aggravated damages.

[11] As part of the agreement reached between Claims Pro and Mustang Security and Greenwin in respect of the stay order, Claims Pro and Mustang Security agreed that: (a) they would attend the mediation (respecting the common issues in the main action) and participate in good faith; (b) they or the Housing Corporation would produce claims files reasonably requested by Greenwin for the mediation and, failing agreement, would produce claims files in accordance with the direction of the mediator, subject to privilege considerations; and (c) the costs of reproducing claims files would be at the expense of the requesting party.

[12] At the time of the consent, Claims Pro and Mustang Security had incurred legal fees of approximately $64,000 excluding $44,000 in respect of the stay motion, which they agreed not to seek.

[13] None of the third parties, including Claims Pro and Mustang Security, were examined for discovery. They did not attend the examinations for the other parties but did review the transcripts of the examination.

[14] After reviewing the transcripts, which did not provide evidence of wrongdoing by Claims Pro and Mustang Security, by letter dated October 29, 2012, counsel for Claims Pro and Mustang Security communicated to counsel for Greenwin an offer to settle the Third Party Claim without costs. The offer to settle was not accepted and it expired.

[15] The main action was mediated on April 29 and 30, 2013. A representative of Claims Pro and its counsel were in attendance as agreed. A settlement was reached. Claims Pro and Mustang Security did not contribute to the settlement funds.

[16] On June 19, 2013, I approved the class action settlement. See Blair v. Toronto Community Housing Corp.[^2]

[17] After the Main Action was settled, Greenwin made an offer in writing to all the Third Parties to dismiss the Third Party Claim on a without costs basis.

[18] The Third Parties, the Toronto Board of Health, Housing Services Inc., and 1507329 Ontario Ltd. carrying on business as J.S. Services and Jaya Star Services, all agreed on consent to an order dismissing the Third Party Claim and crossclaims against them without costs.

[19] Claims Pro and Mustang Security did not consent to a discontinuance without payment of costs by Greenwin. They seek costs on a substantial indemnity basis in the amount of $127,093.31.

C. POSITION OF THE PARTIES

[20] Greenwin submits that the court has the discretion to order a discontinuance of the Third Party Claim without costs and that the case at bar is an appropriate case to exercise that discretion. In the alternative, it submits that Claims Pro and Mustang Security’s claim for costs should be on a partial indemnity scale. Further it submits that the $127,093.31 claim is excessive and disproportionate. Greenwin submits that if Claims Pro and Mustang Security receive costs, it should be a modest award.

[21] Claims Pro and Mustang Security submit that given the sloppy way that Greenwin pleaded its claim, the meritless claims that it was forced to defend, the rejected settlement offers, the reasonable way it conducted the defence to the counterclaim, and its success in having the Third Party proceedings resolved favourably, it should recover costs of $127,093.31 on a substantial indemnity basis.

[22] The following chart summarizes Claims Pro and Mustang Security’s claim for costs:

SUMMARY OF FEES AND DISBURSEMENTS:

Partial Indemnity

Substantial Indemnity

Total Fees (inclusive of H.S.T.)

$109,174.39

$163,924.58

Taxable and Non-taxable Disbursements (inclusive of H.S.T.)

$11,187.19

$11,187.19

Less fees and disbursement for motions for stay of proceedings

($33,216.59)

($48,018.46)

Total Fees and Disbursements

$87,144.99

$127,093.31

D. DISCUSSION AND ANALYSIS

[23] In P.M. Perell and J.W. Morden, The Law of Civil Procedure in Ontario (1st ed.) (Markham: LexisNexis, 2010), at pages 400‑401, I discuss the case law about costs awards when a party seeks to discontinue an action, including a third party claim, as follows:

Under rule 23.05(1), which came into force on January 1, 2010, if all or part of an action is discontinued, any party to the action may, within 30 days after the action is discontinued, make a motion respecting the costs of the action. Under rule 23.05(2), if a crossclaim or third party claim is deemed to be dismissed, any party to the crossclaim or third party claim may, within 30 days after the deemed dismissal, make a motion respecting the costs of the crossclaim or third party claim.

Under the former version of rule 23.05, a discontinuance normally exposed the plaintiff to the payment of costs, although the court retained its discretion with respect to making an award of costs and might allow a discontinuance without costs.[^3] A presumption in favour of costs is no longer part of Rule 23 and, therefore, it follows that costs follow the general principles set out in rule 57.01.[^4] However, the former case law remains relevant.[^5] Under the case law on the former rule, to be relieved of costs, the plaintiff must satisfy the court that the material filed discloses a bona fide cause of action that is not frivolous or vexatious and that he or she was justified in commencing a lawsuit.[^6] Whether or not a defendant should be awarded costs on the discontinuance of an action will require a very fact‑specific analysis of the circumstances giving rise to the initiation of the action and its discontinuance.[^7] [I have updated the footnotes.]

[24] In my opinion, having regard to the claims being advanced by the Class Members, it was reasonable to the point of almost being inevitable that Claims Pro and Mustang Security would be joined as third parties because of what is alleged in the Plaintiff’s Amended Statement of Claim to have occurred after the fire.

[25] It was sloppy and unnecessary for Greenwin to make allegations about pre‑fire involvement and the claim for contribution and indemnity for punitive damages was inappropriate, but the circumstances were such that Greenwin did have bona fide claims against Claims Pro and Mustang Security and Greenwin was more than justified in bringing a third party claim against them. There is thus a basis for the court to exercise its discretion to make an order that the Third Party Claim be discontinued without costs.

[26] There is also a basis for ordering costs against Greenwin because, as noted in the above quote, whether or not a party should be awarded costs on the discontinuance of an action requires a very fact‑specific analysis of the circumstances giving rise to the initiation of the action, its continuance, and its discontinuance.

[27] My own analysis is that Greenwin could not reasonably expect that Claims Pro and Mustang Security should be let out of the action without costs. Rather, it should have and likely did assess this contingency when it agreed to settle the class action without a contribution from Claims Pro and Mustang Security to the settlement funds that were distributed to the Class Members.

[28] In my opinion, although it was reasonable to join Claims Pro and Mustang Security, it is not reasonable in all the circumstances of this case to order a discontinuance without costs.

[29] In my opinion, Claims Pro and Mustang Security are entitled to their costs on a partial indemnity basis.

[30] There is nothing in the circumstances of this case that would justify costs on a substantial indemnity basis. Claims Pro and Mustang Security’s main submission is that being forced to defend an unmeritorious proceeding should attract costs on a substantial indemnity basis. That submission is not correct.

[31] There has been no determination of the merits of the Third Party Claim, and all that can be said is that it appears that the case against Claims Pro and Mustang Security was unlikely to succeed; but that circumstance in and of itself is not a basis for substantial indemnity costs. Costs on a substantial indemnity scale or full indemnity scale are reserved for rare and exceptional cases, where the conduct of the party against whom costs is ordered is reprehensible or where there are other special circumstances that justify costs on the higher scale.[^8] The case at bar is not a case for substantial indemnity costs.

[32] In the case at bar, costs should be assessed in accordance with the normal principles set out in rule 57.01 and the case law about the exercise of the court’s discretion with respect to costs. Of these, in the circumstances of the case at bar, the principle from Boucher v. Public Accountants Council for the Province of Ontario[^9] is particularly important.

[33] In the Boucher v. Public Accountants for the Province of Ontario case, after a two‑day hearing of a judicial review application, the motions judge fixed costs on a partial indemnity scale at $187,682.51, all inclusive. It should be noted that there were three respondents claiming costs with separate bills of $88,896.45, $60,033.96, and $38,752.10. On appeal, the Court of Appeal reduced the aggregated award to $63,000, all inclusive. At para. 24 of his judgment, Justice Armstrong stated:

24. The appellants submit that the motions judge accepted the bills of costs that were presented to her without any deductions. The bills were prepared in accordance with the calculation of hours times dollar rates provided by the costs grid. While it is appropriate to do the costs grid calculation, it is also necessary to step back and consider the result produced and question whether, in all the circumstances, the result is fair and reasonable. This approach was sanctioned by this court in Zesta Engineering Ltd. v. Cloutier (2002), 2002 25577 (ON CA), 21 C.C.E.L. (3d) 161 (Ont. C.A.) at para. 4 where it said:

In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.

See also Stellarbridge Management Inc. v. Magna International (Canada) Inc., 2004 9852 (ON CA), [2004] O.J. No. 2102 (C.A.) para. 97.

[34] Having reviewed Claims Pro and Mustang Security’s Bill of Costs, I award them $72,000 all inclusive of costs, disbursements, and taxes payable forthwith.

E. CONCLUSION

[35] Order accordingly.

[36] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Claims Pro and Mustang Security’s submissions within 20 days of the release of these Reasons for Decision followed by Greenwin’s submissions within a further 20 days.

Perell, J.

Released: April 11, 2014

[^1]: 2011 ONSC 4395.
[^2]: 2013 ONSC 4237.
[^3]: Economy Forms Ltd. v. Aluma Systems Corp., [2000] O.J. No. 2169 (S.C.J.); Provincial Crane Inc. v. AMCA International Ltd., [1990] O.J. No. 806 (H.C.J.); Gianopoulos v. Olga Management Ltd., [2004] O.J. No. 4273 (S.C.J.).
[^4]: Bulloch‑MacIntosh v. Browne, 2011 ONSC 1210; New Style Metal Store Fixtures Ltd. (Receiver of) v. Dhudwarr, 2013 ONSC 4164; Digiuseppe v. Todd, 2012 ONSC 1028; Marupov v. Metron Construction Inc., 2013 ONSC 609.
[^5]: Carriere Industrial Supply Ltd. v. 2026227 Ontario Inc., 2013 ONSC 1016; DiFilippo v. DiFilippo, 2013 ONSC 5460; New Style Metal Store Fixtures Ltd. (Receiver of) v. Dhudwarr, 2013 ONSC 4164; Digiuseppe v. Todd, 2012 ONSC 1028; Marupov v. Metron Construction Inc., 2013 ONSC 609.
[^6]: Golda Developments Inc. v. Dawe, [2008] O.J. No. 1565 (S.C.J.); Provincial Crane Inc. v. AMCA International Ltd., [1990] O.J. No. 806 (H.C.J.).
[^7]: Carriere Industrial Supply Ltd. v. 2026227 Ontario Inc., 2013 ONSC 1016; DiFilippo v. DiFilippo, 2013 ONSC 5460; Metropolitan Toronto Condominium Corp. No. 943 v. Channel Property Management Ltd., 2013 ONSC 3278.
[^8]: St. Elizabeth Home Society v. Hamilton (City), 2010 ONCA 280; 3574423 Canada Inc. v. Baton Rouge Restaurants Inc., 2012 ONSC 296; McBride Metal Fabricating Corp. v. H & W Sales Co. (2002), 2002 41899 (ON CA); 1483677 Ontario Ltd. v. Crain, 2010 ONSC 1353; Davies v. Clarington (Municipality), 2009 ONCA 722.
[^9]: 2004 14579 (ON CA).