ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-11-104363

DATE: 20140115

CORRIGENDA: 20140117

BETWEEN:

Ella Raitman and Samuel Raitman

Plaintiffs

– and –

Medallion Development Corporation

Defendant

In person

Matthew P. Maurer, Counsel for the Defendant

HEARD: Cost Submissions in Writing

REVISED Ruling on costs

The text of the original ruling on costs has been corrected with the text of corrigendum

(released today’s date)

Boswell J.

[1] On November 29, 2013 I released reasons for judgment following a short trial on November 25 and 27, 2013. I invited the parties to make written submissions on costs, which they completed on January 8, 2014. The Defendant, successful at trial, seeks $60,971.20 in costs. The Plaintiffs urge the Court to award no costs.

The Action

[2] The Plaintiffs purchased a new home to be constructed by Medallion Developments (South Maple) Limited. They expected that the basement would have a seven foot high ceiling. It didn’t. They sued the Defendant for damages measured as the cost of lowering the basement slab, so that a ceiling height of seven feet would be achieved.

[3] After a two day trial, I found that the Plaintiffs had named the wrong party as the defendant in the action. They were given an opportunity to amend their claim, but declined. In any event, I went on to assess the claim as though they had named the correct party and found that the Defendant had not breached the agreement of purchase and sale, properly interpreted. The Plaintiffs’ claim was dismissed.

Legal Framework

[4] The award of costs is governed by section 131 of the Courts of Justice Act, R.S.O. 1990 c. C.43 and by Rule 57.01 of the Rules of Civil Procedure. Section 131 provides for the general discretion to fix costs. Rule 57.01 provides a measure of guidance in the exercise of that discretion by enumerating certain factors that the court may consider when assessing costs. In addition, the Court must always be mindful of the purposes that costs orders serve. As Perrell J. summarized in 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (S.C.J.), at para. 10:

Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements (internal citations omitted).

[5] The general rule is that costs follow the event and will be awarded on a partial indemnity basis: Bell Canada v. Olympia & York Developments Limited et. al. (1994), 1994 239 (ON CA), 17 O.R. (3d) 135 (C.A.). In special circumstances, the Court may depart from the general rule and order costs payable on a higher scale. In this instance, the Defendant made a Rule 49 offer to settle, which it bettered at trial. Substantial indemnity costs are sought for the period after the offer was made, which was April 30, 2013.

[6] Rule 49.10 of the Rules of Civil Procedure creates a presumption that substantial indemnity costs will be awarded from the date of an offer to settle if the party who made the offer obtained a more favourable judgment at trial than the terms of the offer. The rule specifically 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.

[7] As a general rule, the Court will not overly analyse counsel’s docketed time. As Nordheimer J. noted in Basedo v. University Health Network, [2002] O.J. No 597 (S.C.J.), “it is not the role of the court to second guess the time spent by counsel unless it is manifestly unreasonable in the sense that the total time spent is clearly excessive or the matter has been overly lawyered.” This general rule is moderated, however, by two factors:

(a) First, it must be remembered that the assessment of costs is not simply a mechanical exercise. In Gratton-Masuy Environmental Technologies Inc. (c.o.b. Ecoflow Ontario) v. Building Materials Evaluation Commission, 2003 8279 (ON SCDC), [2003] O.J. No. 1658, at para. 17, the Divisional Court expressed the principle as follows:

The amount at which costs are to be fixed is not simply an arithmetic function dependent on the number of hours worked and the hourly rates employed but, rather, the party paying the costs should be subjected to an order which is fair and predictable. In other words, the party required to pay costs must not be faced with an award that does not reasonably reflect the amount of time and effort that was warranted by the proceedings.

(b) Second, the overarching principles engaged in the assessment of costs are fairness and reasonableness: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.); and Moon v. Sher (2004), 2004 39005 (ON CA), 246 D.L.R. (4th) 440 (C.A.).

[8] There is no fixed inventory of factors to be included in the assessment of what is fair and reasonable in any given case. A contextual analysis is always necessary. At least part of the assessment – and an important part in my view – includes having regard to the factors listed in Rule 57.01. Those factors include the following:

(0.a) the principle of indemnity;

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

(a) the amount claimed and the amount recovered in the proceeding;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs.

Positions of the Parties

[9] As I indicated, the Defendant is seeking approximately $61,000 in fees, disbursements and taxes. Some of the important factors relied on by the Defendants in arriving at the figure sought include the following:

(a) They made an offer to settle on April 30, 2013. It provided for a payment to the Plaintiffs of $31,750, together with an undertaking to move some ductwork in their basement ceiling, if the offer was accepted by May 1, 2013. Thereafter, the offer reduced to $25,000 and was open for acceptance until 2 minutes after the commencement of the trial. The Defendants were successful in obtaining a dismissal of the action altogether, without any payment to the Plaintiffs – a result clearly more favourable than their offer;

(b) The Plaintiffs commenced a motion for summary judgment, which they subsequently abandoned. Lauwers J. awarded them $6,750 in costs thrown away, but also ordered that they could seek to recover the balance of their costs in the action. Those costs, on a partial indemnity scale are $6,910;

(c) Two pre-trial conferences were necessitated in this case, due to Mr. Raitman’s failure to attend the first; and,

(d) The Plaintiffs refused to attend to be examined for discovery, necessitating a motion. The service of the motion provoked the Plaintiffs’ attendance. The costs of the motion have not be adjudicated.

[10] The Plaintiffs urge the Court to award no costs. They allege improper and unethical conduct on the part of the Defendant’s counsel. They submit that they are paying a large mortgage on their home, they have a fourteen year old daughter, and a costs award will be a very hard burden on them.

Discussion

[11] This case is a glaring example of the truly unfortunate consequences that can happen when unsophisticated litigants attempt to represent themselves in Court. Eberhard J. had it exactly right when she endorsed at an interlocutory motion, “There is a history of procedural missteps”. She urged the Plaintiffs to obtain legal advice, as did McKelvey J. and Master Brott. The Plaintiffs suggest that they did obtain such advice, but their actions certainly reflect a lack of understanding combined with poor judgment.

[12] Litigating is, at its heart, an exercise in risk management. It is imperative that litigants properly assess the strengths and weaknesses of their case – in other words, their litigation risks. Proceeding to trial means that the litigants’ rights and interests are being referred to a third person (the trial judge) for determination. There is always inherent risk in such a process. The obvious risk is that the adjudicator will not see the world in the same manner that any given litigant does. Assessing litigation risks is much easier to do with the benefit of experienced legal advice. But electing to proceed without counsel does not absolve a litigant from the exercise of risk management. Here, the Plaintiffs ought to have recognized that their claim had real difficulties, given the wording of the agreement of purchase and sale. They ought to have been able to “do the math” and recognize that a loss at trial would occasion significant costs. Their submission that costs will be “a very hard burden on us” is something they must have considered prior to making the decision to reject the reasonable offer of the Defendant and elect instead to proceed to trial.

[13] The Court is naturally sympathetic to the Plaintiffs. They did not get what they had hoped in terms of the construction of their home. I recognized in my reasons for judgment that they were right to be unhappy about the aesthetic appeal (or lack thereof) of their basement. The home builder let them down, albeit not in a manner that attracts any liability. But the rulings of the Court can not be based on sympathy. They must follow the rule of law.

[14] In this instance the Defendant was entirely successful at trial. It is entitled to its costs. I find that the Defendant’s offer to settle complied with the Rules and that it obtained a result more favourable than the offer at trial. I award the Defendant its partial indemnity costs to the date of the offer and its substantial indemnity costs thereafter. I make no adjustment for allegations of unethical conduct on the part of the Defendant’s counsel as I am entirely unsatisfied that those allegations have any substance to them.

[15] While it is not the Court’s function to parse through the time spent by counsel, fixing an award of costs is not a mechanical exercise either. It is not simply the application of an hourly rate to a stated number of hours.

[16] Having regard to the factors set out in Rule 57.01, I find that this was an action of modest complexity. It really turned on the interpretation of the agreement of purchase and sale, which, in my view, was reasonably clear. It was an issue of significant importance to the Plaintiffs, given that the house cost them approximately $700,000 and they have to live with their disappointing basement. I would not describe anyone’s conduct in this case as unethical or improper or vexatious. I do believe that there were missteps on the part of the Plaintiffs, as Eberhard J. found, and that the costs of the action were increased somewhat because the Plaintiffs were without counsel.

[17] In the final analysis, and in light of the fact that this is a simplified rules action, my view is that the issue of proportionality takes on the most prominent focus of all the factors listed in Rule 57.01. This concept is central to the determination of what is fair and reasonable in the circumstances. It includes an inquiry about what a successful party, acting reasonably, might expect to receive in costs and what a losing party, also acting reasonably, might expect to pay. I have to factor into the inquiry that fact that costs are being awarded on a substantial indemnity basis from and after April 30, 2013.

[18] In my view, a fair and reasonable award of costs is $50,000 all inclusive, payable by the Plaintiffs to the Defendant within 30 days.

Boswell J.

Released: January 17, 2014

CORRIGENDA

1. The Defendant as set out in the Citation on page 1 has been corrected to read:

“Medallion Development Corporation”