ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-10-0439
DATE: 2014-07-04
B E T W E E N:
Finn Way General Contractor Inc.,
Roderick W. Johansen, for the Plaintiff
Plaintiff
- and -
S. Ward Construction Inc.,
Guy A. Wainwright, for the Defendant
Defendant
HEARD: Via Written Submissions
Mr. Justice D. C. Shaw
Decision On Costs
[1] Reasons for Judgment in this action were released on March 5, 2014. Costs were reserved pending receipt of written submissions from the parties. The submissions have been received and reviewed.
Background
[2] This was an action for breach of contract brought by a general contractor, Finn Way General Contractor Inc. (“Finn Way”), against one of its subcontractors, S. Ward Construction Inc. (“Ward”), relating to the construction of an addition to McCausland Hospital in Terrace Bay and the renovation of the hospital’s kitchen.
[3] Finn Way was granted judgment against Ward for damages for breach of contract in the sum of $372,829.61.
[4] In its statement of claim, Finn Way claimed damages of $750,000. In its submissions at trial after the conclusion of the evidence, Finn Way claimed costs of completion and delay of $620,512.40, less credit for $118,000, representing the available contract funds under two Purchase Orders, for a net claim of $502,512.40.
[5] Ward brought a counterclaim. Prior to the commencement of trial, Ward abandoned its counterclaim.
[6] The trial took six days.
[7] Finn Way seeks costs on a partial indemnity scale in the amount of $44,825 for fees and $5,432.11, for disbursements, plus HST.
[8] Counsel for Finn Way, Mr. Johansen, has 27 years of experience in the area of construction litigation. His hourly rate to his client is $350. He claims a partial indemnity rate of $275 per hour.
[9] Finn Way’s Bill of Costs shows 6.3 hours for pleadings and an affidavit of documents; 23.6 hours for discoveries of two days – one in Kapuskasing and one in Thunder Bay; 5 hours related to the pre-trial conference; 2.8 hours for satisfaction of undertakings; .9 hours for attendance at Assignment Court; and 124.4 hours for preparation for and attendance at six days of trial, including closing arguments. The total time set out in the Bill of Costs is 163 hours.
[10] Ward does not contest Finn Way’s entitlement to costs on a partial indemnity scale but disputes the amount claimed. Ward contends that fees and disbursements of $19,294.12, plus HST, would be a reasonable amount.
Submissions
(a) Finn Way
[11] Finn Way submits that the hours docketed demonstrate that the claim was handled efficiently.
[12] Finn Way submits that Ward would have understood that significant costs would be incurred in the litigation of wide ranging, document intensive, reasonably complex construction issues where the amount in issue was significant and Finn Way was awarded a significant portion of its claim.
[13] Finn Way submits that Ward’s unsuccessful objections to evidence from Finn Way’s site supervisor, Kelly Sundell, and its chief estimator, Gordon Smith, and its failure to admit that the kitchen was within the scope of its work tended to increase the length of the trial.
[14] Finn Way submits that it is entitled to its costs of defending the abandoned counterclaim, which amount was $1,575 on a partial indemnity basis.
(b) Ward
[15] Ward submits that the amount recovered is substantially below the $750,000 claimed as damages in the statement of claim and well below Finn Way’s assertion at the commencement of trial that it was seeking approximately $900,000. Ward submits that because it was successful in achieving this reduction in damages, the final amount of Finn Way’s costs should be reduced by one-third.
[16] Ward submits that based on Mr. Johansen’s actual hourly rate of $350, partial indemnity costs should be one-third lower at $230 per hour. Ward submits that the time expended for discoveries, of 23.6 hours, is excessive and should be reduced to 14 hours. Similarly, it submits that trial preparation and attendance at trial should be reduced to 60 hours and 30 hours, respectively.
[17] Ward submits that because it was not provided with a summary of the evidence of Mr. Sundell until 4:30 pm on the Friday before the commencement of trial, contrary to an undertaking given on discovery of Finn Way, Finn Way’s time claimed should be reduced by two hours.
[18] Ward takes issue with a number of Finn Way’s disbursements, namely claims for an execution certificate, a notice of motion and an “ACL license fee”, which Ward says were not warranted, plus photocopying costs of $3,187.41 and laser printing of $203.25, for which no details were provided.
Discussion
[19] In Serra v. Serra (2009), 2009 ONCA 395, 66 R.F.L. (6th) 40 (Ont. C.A.), at p. 42, the Court of Appeal reiterated the fundamental purposes which modern costs rules are designed to foster, as set out in Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330 (Ont. C.A.), at para. 22:
(1) to partially indemnify successful litigants for the costs of litigation;
(2) to encourage settlement; and
(3) to discourage and sanction inappropriate behaviour.
[20] In Anderson v. St. Jude Medical Inc., 2006 85158 (ON SCDC), [2006] O. J. No. 508 (Ont. Div. Ct.), at para. 22, the Divisional Court set out the principles to be applied by the court in exercising its discretion (citations omitted):
- The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in Rule 57.01(1).
- A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant.
- The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: Rule 57.01(1)(O.b).
- The court should seek to avoid inconsistency with comparable awards in other cases. “Like cases [if they can be found], should conclude with like substantive results.”
- The court should seek to balance the indemnity principle with the fundamental objective of access to justice.
[21] The Court of Appeal has made it clear that in assessing costs the overriding principle is one of reasonableness and that the failure to follow that principle can produce a result that is contrary to the fundamental objective of access to justice (Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.), at p. 302.
[22] In Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), [2002] O.J. No. 4495 (Ont. C.A.), at para. 4 the Court of Appeal did not make a specific finding with respect to the amount of time spent or the rates charged by counsel, and stated:
“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 party rather than any exact measure of the actual costs of the successful litigant.”
[23] Rule 57.01(1) of the Rules of Civil Procedure provides:
“57.01 (1) Factors in discretion - In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(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;
(b) the apportionment of liability;
(c) the complexity of the proceeding;
(d) the importance of the issues;
(e) the conduct on any party that tended to shorten or 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 solicitor; and
(i) any other matter relevant to the question of costs.”
[24] Rule 1.04 (1.1) of the Rules of Civil Procedure provides:
1.04 (1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.
[25] I agree with the submissions of Ward that the partial indemnity rate of $275 claimed for Mr. Johansen should be reduced. Substantial indemnity costs are defined by the Rules as costs awarded in an amount that is 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A. Partial indemnity costs are defined as costs awarded in accordance with Part I of Tariff A. Partial indemnity costs are therefore costs awarded in an amount that is 2/3 of substantial indemnity costs.
[26] Mr. Johansen’s Hourly rate charged to his client, of $350 per hour, is reasonable for counsel of his experience. An award of $350 per hour would constitute full indemnity. A substantial indemnity rate would approach 90% of the actual solicitor client rate. See Riddell v. Conservative Party of Canada, [2007] O.J. No. 2577 (S.C.J.), at para. 38. A partial indemnity rate in this case would be in the area of $210 per hour, based on 2/3 of substantial indemnity costs. However, as noted by the Court of Appeal, a mechanical approach to hours spent multiplied by hourly rates is not the proper approach. Hours spend and hourly rates are but two of the factors in arriving at a costs award that is fair and reasonable.
[27] Ward submits that the time claimed by Finn Way for discovery preparation, attendance on discoveries, trial preparation and attendance at trial is excessive. However, an attack on the quantum of costs as excessive, without producing one’s own Bill of Costs is, as stated by Winkler J., as he then was, in State Farm Mutual Automobile Inc. Co. (2003), 2003 43566 (ON SC), 64 O.R. (3d) 135 (S.C.J.), “no more than an attack in the air.”
[28] To similar effect is the comment of Nordheimer J. in Hague v. Liberty Mutual Insurance Co., 2005 13782 (ON SC), [2005] O.J. No. 1660 (S.C.J.), at para. 15, where he observed that in determining the reasonable expectations of the parties as to costs, the unsuccessful party is not required to reveal what their own costs were, but if they choose not to do so, “… they may impair their ability to make any meaningful submission on this aspect of the process.” In my Reasons for Judgment, setting out the procedure for delivering submissions on costs, I set a limit of five pages for submissions, exclusive of any bill of costs the defendant may have wished to file for comparison purposes. Ward has not filed its own bill of costs. I therefore have Ward’s criticism of excessive time incurred by Finn Way’s counsel without knowing the time docketed by Ward’s own counsel in preparing for and attending on discoveries and trial. Because of that, the criticism loses some of its force.
[29] In view of the document intensive nature of this action and the numerous issues that had to be addressed, I do not accept Ward’s argument that Finn Way should be limited to one hour of preparation for every hour of examination for discovery.
[30] Ward contends that costs of attendance at trial should be limited to the actual sitting time on each of the six days of trial. At a partial indemnity rate of $210 per hour, this would result in a counsel fee each day of approximately $1,000 to $1,200. In my opinion, this would be unreasonably low. I accept Finn Way’s submission that preparation was required at the end of each day, out of court, for the next day’s evidence. Seventy hours of docketed time, during a six day trial where the amount in issue was significant, where the issues were relatively complex and where the claim was vigorously and capably defended, do not strike me as excessive.
[31] Finn Way is also entitled to preparation time prior to the commencement of trial, reflective of the amount in dispute and the complexity of the matter.
[32] The disclosure of the summary of Mr. Sundell’s evidence on the eve of trial was late, albeit it was served as soon as Finn Way received it. I permitted Mr. Sundell to testify at trial, over the objection of Ward, subject to taking the late disclosure into account with respect to any eventual cost award. I will take this into account, along the lines submitted by Ward, reducing the time otherwise allowable to Finn Way.
[33] In its statement of claim, Finn Way claimed damages of $750,000. At the conclusion of trial it sought damages, net of credits, of $502,512.40. It was awarded damages of $372,829.61. Ward seeks a reduction of Finn Way’s costs by one-third to reflect that Finn Way did not obtain judgment for the amount claimed in its statement of claim or the larger amount of $900,000 Finn Way asserted it was seeking at the opening of trial.
[34] In my view, Finn Way was substantially successful at trial. Ward had some success in limiting some aspects of the claims for completion costs and success on the claim for costs of delay. Ward’s success in limiting the claim for damages is a factor to consider in assessing costs. It is not, however, so significant as to warrant a reduction of Finn Way’s costs by one-third.
[35] With respect to Ward’s objections to certain of the disbursements claimed by Finn Way, I agree that there is no explanation given for the claims for execution certificates, a notice of motion and an “ACL license fee”, and those claims are disallowed.
[36] The photocopying charges of $3,186.41 and the laser printing charge of $203.25 are problematic. There are no details given for those charges – no indication of how many pages were photocopied or the cost per page, no explanation of what the laser printing relates to. On the other hand, it is obvious that significant photocopying had to be done. Documents were photocopied for exhibits at trial. Copies of those documents also had to be prepared for Finn Way’s counsel and opposing counsel, and working copies were made for the court. Counsel exchanged affidavits of documents and copies of the documents listed therein. Legal Aid allows a photocopy disbursement of 10¢ per page. In some cases, courts have allowed photocopying at 25¢ per page. Because no details have been provided, I will not allow the $3,186.41 claimed for photocopying. However, because it also would not be reasonable to ignore that there was extensive photocopying, and acknowledging, as noted in Orkin, The Law of Costs, at s. 219.6(7), that the assessment of photocopying is often a matter of “rough justice” or “sensible approximation”, I will allow Finn Way $1,000 for photocopying. I will not allow the disbursement for laser printing.
[37] The disbursements claimed are therefore reduced to $2,625.
[38] Having regard to the factors discussed, I am of the opinion that it is fair and reasonable to award Finn Way partial indemnity costs of this action in the sum of $30,000 for fees, plus H.S.T., and $2,625 for disbursements, plus applicable H.S.T.
___”original signed by”
The Hon. Mr. Justice D. C. Shaw
Released: July 4, 2014
COURT FILE NO.: CV-10-0439
DATE: 2014-07-04
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Finn Way General Contractor Inc.,
Plaintiff
- and -
S. Ward Construction Inc.,
Defendant
DECISION ON COSTS
Shaw J.
Released: July 4, 2014
/mls