Court File and Parties

COURT FILE NO.: CV-10-414999-00A1

DATE: 20140605

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Sanofi Pasteur Limited, Plaintiff

– AND –

UPS SCS, Inc., Honeywell Limited, Honeywell International Inc., Automation Components Inc., Industrial Technical Services (ITS) Inc., Airon HVAC Service Ltd., Airon HVAC and Control Ltd., and Enercorp Instruments Ltd., Defendants

BEFORE: E.M. Morgan J.

COUNSEL:
Shawn K. Faguy, for the Plaintiff

Kathryn Podrebarac and Alan Melamud, for the Defendant, UPS SCS, Inc.

David Young, for the Defendants, Airon HVAC Service Ltd. and Airon HVAC and Control Ltd.

Megan Shortreed, for the Defendants, Honeywell Limited and Honeywell International Inc.

Linda Matthews and Dustin Milligan, for the Defendant, Industrial Technical Services (ITS) Inc.

HEARD: December 2-3, 2013 and February 12, 2014, with written submissions on costs

AMENDED COSTS ENDORSEMENT

[1] On April 30, 2014, I issued my judgment resulting in the dismissal of the Plaintiff’s claim against all Defendants. I invited written submissions on costs, which I have now received from all counsel.

[2] The parties have agreed on the amount to be paid by the Plaintiff to each of the Defendants as costs of the summary judgment motion. As costs of the motion, the Plaintiff shall pay, inclusive of disbursements and HST, the following:

UPS SCS, Inc. (“SCS”) – $62,500;

Airon HVAC Service Ltd. and Airon HVAC and Control Ltd. (“Airon”) – $18,500;

Honeywell Limited and Honeywell International Inc. (“Honeywell”) – $26,000; and

Industrial Technical Services (ITS) Inc. (“ITS”) – $24,095.

[3] In addition, the Defendants all seek costs of the action since its inception. Counsel for the Plaintiff takes issue with the Defendants’ entitlement to those costs, and argues in his written submissions that, “At no point in the Endorsement does Mr. Justice Morgan state that the costs of the action should be submitted to him.”

[4] Counsel for the Defendants, of course, disagree, pointing out that summary judgment dispenses with the entire action, and therefore stands in the place of a judgment at trial. A trial judge would, in the ordinary course, address costs of the entire action, and not just the proceedings that were specifically before him or her.

[5] The reported cases in Ontario demonstrate that summary judgment motions have been treated like trial judgments for the purposes of costs. That is, the costs of the entire action preceding the motion – with the exception of those interim motions on which costs have already been granted or denied – are fixed by the court. In Kelly v St. Michael’s Hospital, 2009 CarswellOnt 638, for example, the court granted summary judgment for the defendant and, in awarding costs, stated (at para. 4):

Counsel for these defendants were involved in pleadings, document discovery, examinations for discovery, attendance at examinations for discovery, trial scheduling court as well as extensive preparation for trial and preparation for summary judgment motion. Keeping in mind the guiding principles of the Rules of Civil Procedure there is no doubt that this was a complex proceeding which was of significant importance to the defendants…

[6] I agree with the Defendants that where summary judgment dismisses the action, it is the costs of the action in its entirety that are at issue. To hold otherwise would allow a party who brings an unsuccessful claim to cause the opposing side to incur substantial costs with no means of compensation.

[7] SCS, who was the primary Defendant in the sense that it had the direct contractual relationship with the Plaintiff, seeks over $460,000 (including disbursements, before tax) as costs of the action. Citing Canadian National Railway Co. v Royal and Sun Alliance Insurance Co. of Canada, [2007] OJ No 2765 (Ont CA), counsel for SCS submits that this sum represents 65% of its actual fees and that this is an appropriate indicator of partial indemnity costs.

[8] The Plaintiff submits that this figure has been inflated due to what it asserts has been the Defendants’ tardiness in bringing the motion. Citing Project 360 Investments Ltd. v Toronto Police Services Board, [2009] OJ No 3316 (SCJ), where several years elapsed between issuance of the claim and the service of the motion to strike, and Crozier Estate v James, 2014 ONSC 1704, where the moving party waited over a year from discoveries before moving to compel undertakings, counsel for the Plaintiff contends that delay in bringing a motion undermines a claim for costs by the successful moving party.

[9] In my view, the Defendants cannot be faulted for the timing of the summary judgment motion. They waited until discoveries were completed, which in this complex, multi-party action took considerable time. Further, there was a substantial fact-finding component to the defenses mounted by the Defendants, including attendances at SCS’s facilities by the various experts, a thorough review of SCS’s Building Automation System, testing of the temperature sensors at issue in the action, etc. Numerous experts had to be retained and instructed, and the experts had to perform a number of technical tests. Further, a large volume of documents had to be produced and reviewed. The parties, including the Plaintiff itself, pursued the matter in a very thorough way, and all doubtless expected it to be expensive.

[10] In addition to SCS’ request for just over $450,000, Honeywell seeks just over $162,000, Airon seeks just over $150,000, and ITS seeks just over $79,000. All of these costs requests are calculated on a partial indemnity scale. Overall, they add up to a very large bill for the Plaintiff.

[11] Costs are discretionary under section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. A number of factors to be considered in exercising that discretion are listed in Rule 57.01 of the Rules of Civil Procedure, RRO 1990, Reg 194, including the principle of indemnity for the successful party, the complexity of the matter, and the expectations of the unsuccessful party. Overall, the court is required to consider what is “fair and reasonable” in fixing costs, having regard to perspective of all of the parties: Boucher v Public Accountants Council (Ontario) (2004), 2004 14579 (ON CA), 71 OR (3d) 291 (Ont CA), at paras 26, 38. The successful party must be fair in what it charges the unsuccessful one, who must in turn be reasonable in its expectations of what it will be liable to pay.

[12] While I do not know what was in the Plaintiff’s mind, its submissions on costs suggest that it may not have so readily agreed with the Defendants on the costs of the motion had it realized that they would all be seeking costs of the action as well. That is not to say that the Defendants are not entitled to their costs of the action – which, as indicated above, they are – but it may reflect that the Plaintiff’s expectations were significantly lower than the Defendants’ requests.

[13] Of course, the Defendants’ expectations must be reasonable to be taken seriously, and having sued for over $8 million and having fought hard for several years in a large and complex case with multiple Defendants, the Plaintiff must have expected the overall costs of the action to be considerable. Furthermore, the Plaintiff knew that the technological aspects of its claim required the Defendants to go to considerable efforts in retaining experts and producing expert reports, which substantially increased both the lawyers’ fees in instructing the experts and reviewing their work and the disbursements incurred in hiring the experts.

[14] I would exercise my discretion to reduce each of the Defendants’ costs requests by 25% in order to bring them in line with what I think the Plaintiff’s reasonable expectations might have been. In addition to the amounts payable in respect of the motion as noted in paragraph 2 above, the Plaintiff shall pay the following amounts to the following Defendants, inclusive of all disbursements and HST:

SCS – $337,500;

Honeywell – $121,500;

Airon – $112,500; and

ITS – $59,250.

[15] I have also received correspondence requesting costs from certain of the Defendants against each other, as well as by and against various third and fourth parties who did not participate in the motion before me.

[16] There will be no costs awarded against any of the Defendants in respect of cross-claims by other Defendants. Those cross-claims for indemnification and other damages will doubtless disappear with the dismissal of the main action, but no one was successful or unsuccessful in the cross-claims in the usual sense of that term.

[17] For the same reason, there will be no costs awarded against any of the Defendants in favour of any of the third or fourth parties. Any claims brought by the Defendants against others were not unsuccessful, and do not lead to costs awards, in the way that the Plaintiff’s claim was unsuccessful.

[18] To the extent that third or fourth parties make any claim for costs against the Plaintiff, the Plaintiff must have a full opportunity to respond. As matter now stand, I do not know whether I have heard from all of the third and fourth parties that wish to make such claims.

[19] I require any request from a third or fourth party to be in the form of a Costs Outline and short written submissions, to be sent to me within two weeks of the date of this endorsement. Counsel for the Plaintiff is to respond in writing to those third and/or fourth party submissions within two weeks thereafter. In order to facilitate this, I would ask counsel for all parties here to ensure that any third and fourth parties of which they are aware receive as soon as possible, through their respective counsel or otherwise, a copy of this costs endorsement.

Morgan J.

Date: June 11, 2014