ONTARIO

SUPERIOR COURT OF JUSTICE

DATE: 20140903

B E T W E E N:

OGBU & BLIUS ENGINEERING INC., ANTHONY OKAFOR, JUNE CONVAY both personally and on behalf of THE ESTATE OF ALICE CONVEY and GRANDRIVER HOME IMPROVEMENTS, BUILDING PRODUCTS, SUPPLIES & SERVICES LTD.

Self-represented

Plaintiffs

• and -

OKAY ANYADIEGWU, also known as Hyacinth, and PATIENCE WHYTE

William S. O’Hara, for the Defendant Patience Whyte

Defendants

HEARD: October 3, 2013
at Brampton, Ontario

Costs Endorsement

Price J.

NATURE OF MOTION

[1] The defendant Patience Whyte, a lawyer, requests her costs of defending this action following the dismissal of the action on October 3, 2013, on the ground of delay.

ISSUE

[2] The court must determine the amount of costs that the plaintiffs should pay to Ms. Whyte following the dismissal of the action against her.

POSITIONS OF THE PARTIES

[3] Ms. Whyte claims her costs on a substantial indemnity scale in the amount of $59,017.64, inclusive of disbursements and tax on the ground that the plaintiffs made allegations of improper conduct seriously prejudicial to her character or reputation without any reasonable evidentiary foundation.

[4] In the alternative, Ms. Whyte claims her costs on a partial indemnity scale in the amount of $39,634.14, inclusive of disbursements and tax.

[5] The plaintiffs have not responded to Ms. Whyte’s submissions and have not filed submissions of their own regarding the costs to be awarded to Ms. Whyte.

ANALYSIS

General Principles

[6] As a general principle, costs are in the discretion of the court.[^1] Determining costs is not a mechanical exercise. The overall objective is “to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.”[^2] This is a “fundamental concept in fixing or assessing costs.”[^3]

[7] The Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario articulated the principles that govern costs assessments. Armstrong J.A. stated: “When the court awards costs, it shall fix them in accordance with sub-rule 57.01(1) and the Tariffs…Subrule (1) lists a broad range of factors that the court may consider in exercising its discretion to award costs under s. 131 of the Courts of Justice Act.”[^4]

[8] The Court must, first and foremost, be fair and reasonable when exercising its discretion to award costs. As Armstrong J.A. noted in Boucher, the parties’ expectation concerning the amount of a costs award is a relevant factor to be considered. Armstrong J.A. refrained from attempting to articulate a more detailed or formulaic approach, noting that the notions of fairness and reasonableness are embedded in the common law which judges have been applying for centuries to the facts of particular cases.[^5]

Factors to be Considered when Assessing Costs

[9] Rule 57.01(1) contains a non-exhaustive checklist of factors that guide the Court in its reasoning when awarding costs in the exercise of its discretion under section 131 of the Courts of Justice Act. It provides, in part:

57.01(1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the Court may consider…

(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;

(c) the complexity of the proceeding;

(d) the importance of the issue;

(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;

any other matter relevant to the question of costs. [Emphasis added.]

[10] I will review the factors that I consider most relevant in arriving at the appropriate costs order in the present case.

a) Indemnity

[11] Costs normally follow the event, meaning that the court orders the unsuccessful party to pay the costs of the successful party on a partial indemnity scale.[^6] In exceptional cases, especially where there has been unreasonable conduct by a party, the court may deprive the successful party of her costs, or order the unsuccessful party to pay costs on a higher scale.

b) Hourly Rates and Experience

[12] Ms. Whyte’s lawyer, William S. O’Hara, was called to the Bar in Ontario in 1984 and had been practicing law for 29 years when the action was dismissed. He was assisted by Anna Husa, who was called to the Bar in 2002 and had 11 years of experience, by Sarah Peterson and Terry Reid, both of whom were called to the Bar in 2011, and had 2 years of experience when the action was dismissed, and by Students-at-Law, Brenda Rego and Melissa Baur, and a Law Clerk, Linda D. Robinson. Ms. Whyte claims an hourly rate of $205 on a partial indemnity scale for Mr. O’Hara, $170 per hour for Ms. Husa, $115 for Terry Reid, and $110 for the Students-at-Law and Law Clerks.

[13] The “Information for the Profession” bulletin from the Costs Sub-Committee of the Rules Committee (the “Costs Bulletin”) suggests maximum hourly rates (on a partial indemnity scale) of $80.00 for law clerks, $225.00 for lawyers of less than 10 years’ experience, $300.00 for lawyers of between 10 and 20 years’ experience, and $350.00 for lawyers with 20 years’ experience or more.[^7] These limits were generally intended for the most complex and important of cases. These rates should be adjusted to account for inflation, as the Costs Bulletin, issued in 2005, is now dated. The equivalent of the partial indemnity hourly rates for the lawyers and Law Clerks who worked on the file are as follows, based on the Inflation Calculator of the Bank of Canada:

[14] William S. O’Hara: $ 352.10

[15] Anna Husa: $ 352.10

[16] Terry Reid: $ 264.08

[17] Sarah Peterson: $ 264.08

[18] Students and Clerks: $ 93.89

[19] I find that the hourly rates claimed for the lawyers are reasonable and, in fact, conservative, having regard to the current equivalent of the amounts recommended by the Costs Bulletin.

c) Hours Spent

[20] While Ms. Whyte has submitted a Costs Outline, it provides only global amounts that each of her lawyers spent for the categories “Discovery of Documents and Examinations for Discovery”, “Motions”, “Trial Preparation”, and “Bill of Costs/Costs Submissions”. While summaries are given above each category, listing the types of tasks that each category comprises, there is no particularization of the tasks spent in this action.

[21] This court has held, on more than one occasion, that when one party attacks another’s costs as excessive, but does not put its own dockets before the court, the attack “is no more than an attack in the air.”[^8] At the same time, a claim by one party, unsupported by its own lawyers’ dockets, is equally untenable, especially where, as here, the court has received no Costs Outline from the opposing party and the judge who is asked to assess the costs has had little involvement in the action.

[22] In the present case, Ms. Whyte states that her lawyers and law clerk spent 95.5 hours in the discovery of documents and examinations for discovery. The transcripts of the discoveries have not been filed and there has been no particularization provided for the time actually spent in examinations or how the 95.5 hours was spent. Ms. Whyte states that her lawyers spent 27.3 hours in motions, but have not particularized what kind of motions they were, or how much time was spent on each motion, and whether an award of costs was made by the motion judges in each case. In the one motion I heard, which was to dismiss the action for delay, I ordered the plaintiffs to pay costs in the amount of $2,000. The Costs Outline does not segregate the time spent on this motion from the time claimed for motions as a whole. Ms. Whyte says that her counsel spent 34.7 hours in trial preparation. While the court file discloses that the plaintiffs delivered their Trial Record and the parties attended an Assignment Court (on May 28, 2012) and a Pre-Trial Conference (on July 4, 2013), the action was dismissed three months later and the Costs Outline does not particularize when the trial preparation took place.

[23] In Murano et al. v. Bank of Montreal et al (1998) 5633 (ON CA), [1998] O.J. No. 2897, 41 O.R. (3d) 222, Morden, A.C.J.O., on behalf of the Court of Appeal, dismissed an appeal from a costs award made by Adams J., who fixed the costs following a 15 day trial. In doing so, the Associate Chief Justice set out guidelines as to when a judge should fix the costs of an action. He noted that the power to fix costs is conferred by s. 131(1) of the Courts of Justice Act and rule 57.01(3) of the Rules of Civil Procedure which, respectively read:

131(1) Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.

57.01(3) In awarding costs, the court may fix all or part of the costs with or without reference to the Tariffs, instead of referring them for assessment, and where the costs are not fixed, they may be assessed under Rule 58.

[24] He then continued:

Having regard to the unqualified wording of s. 131(1) and rule 57.01(3), it would not be sensible to impose, in advance of considering any particular case, hard and fast limits on when or how the power to fix costs should be exercised. The following considerations, however, should be helpful:

(1) A judge should not fix costs on his or her own motion. If a judge is minded to fix costs, or if one party asks the court to do so, the parties should be given the opportunity to make submissions on whether costs should be fixed.

(2) With due respect to the contrary view expressed by Henry J. in Apotex Inc. v. Egis Pharmaceuticals (1991) 2729 (ON SC), 4 O.R. (3d) 321 at p. 322, 37 C.P.R. (3d) 335 (Gen. Div.), I do not think that a judge has an unfettered discretion to fix costs. The power should only be resorted to when the judge, having received the parties’ submissions, is satisfied that he or she is in a position to do procedural and substantive justice in fixing the costs instead of directing that they be assessed by an assessment officer.

(3) Having decided to fix costs, the judge should, of course, conduct an appropriate hearing on the question of the amount to be fixed. Depending on the circumstances, this could properly take the form of the receipt of written submissions from the parties. (Emphasis added)

[25] Morden, A.C.J.O., in Murano, noted that Adams J. accepted the following statement of Feldman J. in Tri-S Investments v. Vong as a proper description of the judge’s function in fixing costs:

A judge’s function in fixing costs (as contrasted with the role of an assessment officer on a full assessment) is to perform a summary analysis of the cost of the services of counsel for the successful party, then to apply the party/party scale of indemnification to that figure. The purpose of the summary analysis is for the trial or motions judge, familiar with the nature of the proceeding as well as with the substantive and procedural complexity, to ensure that the magnitude of the claimed costs is in keeping with what is warranted in the circumstances. I do not view it to be the court’s function when fixing costs to second-guess successful counsel on the amount of time that should or could have been spent to achieve the same result, unless the time spent is so grossly excessive as to be obvious overkill. (Emphasis added)

[26] The Associate Chief Justice agreed with Adams J.’s acceptance of Henry J.’s statement of the purpose of solicitor-and-client costs in Apotex, wherein Henry J. had stated that the judge in fixing costs of a proceeding is not assessing costs as if he were performing the functions of a master or officer to whom the court has referred costs to be assessed but is rather determining “what the services devoted to the motion or other proceeding are worth according to the submissions of counsel, his own experience, and with some regard to what could be taxed on the party and party scale.” Morden, A.C.J.O. continued:

I accept this approach subject to some qualification. It is one thing to say that the fixing of costs is not an assessment item by item according to the tariffs as would be done by an assessment officer, which I accept. It is quite another to countenance not reviewing a “catalogue of itemized charges”. Claims for solicitor-and-client costs in any matter of complexity are invariably broken down into items describing the services performed and the amounts charged for them. These must be reviewed by the judge, as must their total. In this regard, I think that the approach of Haines J. in Worsley v. Lichong is the correct one. In para. 5, he said:

… I believe the fixing of costs still requires a critical examination of the work undertaken in order to determine that the costs claimed have been reasonably incurred and reflect what the court considers to be proper and appropriate in the circumstances, given the complexity and significance of the proceedings, held up against the backdrop of full indemnification. (Emphasis added)

[27] The Associate Chief Justice additionally approved the following Austin J. in Ligate v. Abick (1991) 7346 (ON SC), 5 O.R. (3d) 332 at p. 335, who stated:

The main advantage of the fixing procedure is its expedition…the avoidance of delay in the determination of the costs part of the proceeding. This should not be bought at the price of a less than reasonable procedure. Robert D. Malen, at p. 94 of the article to which I have referred, has rightly observed that the amount of costs involved in some cases are of a very substantial amount and that “something more than a ‘summary analysis’ is required.” (Emphasis added)

[28] In the present case, Ms. Whyte has not provided dockets or other sufficient material that would permit me to undertake even a summary analysis of the time spent by her counsel.

d) Complexity

[29] The plaintiffs’ amended statement of claim was comprised of 67 paragraphs and 21 pages. It dealt with allegations of negligence in over 11 actions. While Ms. Whyte states, in her Costs Outline, that the action was complicated by investigations and research into the merits of all of the underlying actions, all of which had to be conducted without her counsel being able to discover the plaintiffs, she has not set out even a summary of the investigations or research that had to be undertaken.

e) Importance of the Matter

[30] Ms. Whyte has stated that the plaintiffs’ claim that she was negligent and breached the fiduciary duties she owed to them were serious allegations for a lawyer, who relies on her reputation and integrity. While the action raised issues that were important to the parties, Ms. Whyte does not argue that the issues were of importance to the public.

f) Improper or Unnecessary: The Scale of Costs

[31] Costs are normally awarded to a successful party on a partial indemnity scale; however, the court has the discretion to order costs payable on a substantial indemnity scale in exceptional cases.[^9] Such costs are a sanction for reprehensible conduct by a party during the litigation, particularly where there have been allegations of fraud or improper conduct seriously prejudicial to the character or reputation of a party and subsequently found to be unwarranted.[^10] Such an award is appropriate where the allegations go to the heart of the integrity of those maligned.[^11]

[32] The Supreme Court, in Hamilton v. Open Window Bakery Ltd., set out the principles governing awards of costs on a substantial indemnity scale.

In Young v. Young, 1993 SCC 34, [1993] 4 S.C.R. 3, at p. 134, McLachlin J. (as she then was) for a majority of this Court held that solicitor-and-client costs "are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties". An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and-client costs, since not all such attempts will be correctly considered to amount to "reprehensible, scandalous or outrageous conduct". However, allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception. When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent (as Wilkins J. found), costs on a solicitor-and-client scale are appropriate: see, generally, M.M. Orkin, The Law of Costs (2nd ed. (loose-leaf), at para. 219.[^12] [Emphasis added.]

[33] Ms. Whyte argues that the plaintiffs should be required to pay her costs on a substantial indemnity scale because they have made unsuccessful allegations of improper conduct seriously prejudicial to her character without any reasonable evidentiary foundation. She notes that courts have held that such conduct by a plaintiff is particularly blameworthy when the allegations are aimed at the integrity of a lawyer or other professional. She relies, in this regard, on Unisys Canada Inc. v. York Three Associates Inc.

[34] In Unisys, the Court of Appeal upheld the trial judge’s award of costs to the defendant, George Cancilla, a lawyer, who was the directing mind of the defendant corporation. Mr. Cancilla was awarded his costs his costs on a solicitor and client scale from the date when the plaintiff amended its claim “to allege misconduct tantamount to fraud”. Finlayson J.A. stated:

We would not interfere with the exercise of discretion by the trial judge in this case given that Unisys failed to prove its allegation that Cancilla acted dishonestly when he formed and used York Three to commit unlawful acts. In the circumstances the trial judge was justified in ordering Cancilla’s costs on a solicitor-and-client basis from the date the statement of claim was amended to allege that Cancilla engaged in conduct tantamount to fraud… to the conclusion of the action.[^13] (Emphasis added)

[35] In Unisys, the trial judge had the opportunity, over the course of a trial, to assess the plaintiff’s allegations in the context of the evidence heard at trial. In the present case, I have not had the benefit of such evidence.

[36] Polowin J., in Kaymar Rehabilitation Inc. v. Champlain Community Care Access Centre, noted that not all cases in which allegations of misconduct are made and not proven will result in awards of costs on a substantial indemnity scale. She stated:

While unproved allegations of breach of trust, conspiracy, misrepresentation, breach of fiduciary duty and the like may attract an award of costs on a substantial indemnity scale, the making of such allegations does not lead automatically to the conclusion that the unsuccessful party should be held liable for substantial indemnity costs: see Albert Bloom Ltd. v. Bentinck (Township) Chief Building Official (1996), 29 O.R. (3d) 681; aff’d (1996), 31 O.R. (3d) 317 and Banque Indosuez v. Canadian Overseas Airlines Ltd. (1990), 40 C.P.C. (2d) 33 B.C.S.C.; aff’d (1992) CarswellBC 2212 (B.C.C.A.) The courts have recognized that a party, believing itself to be wronged, has a right to litigate vigorously, even if ultimately unsuccessfully, so long as its behaviour does not rise to the reprehensible, scandalous or outrageous threshold. In Banque Indosuez the following was stated at paragraph 13:

13. In Pax Management Ltd. (30 September 1988), Vancouver C845807 (B.C. S.C.), Spencer J. held that the test established by precedent was whether the allegations were made maliciously or without foundation. He held further that solicitor/client costs should not be awarded merely because serious allegations such as fraud were unsuccessful. COA’s defence and counterclaim were weak but I cannot say that they were advanced recklessly or with an improper motive. COA took a view of the events which I rejected in strong terms, but I can understand how it might have arrived at its grounds of defence and counterclaim. Ultimately, COA forced careful scrutiny of the matters surrounding the purchase and sale of the aircraft. Given the complex relationship between the Bank and COA, that was not a strategy which ought to attract solicitor/client costs.[^14] (Emphasis added)

[37] There have been cases which arose upon the discontinuance of a legal proceeding in which costs were awarded on a solicitor and client, or substantial indemnity scale. In Mele v. Thorne Riddell, there were unfounded allegations of fraud or improper conduct seriously prejudicial to the character or reputation of professional persons in the course of carrying out their professional duties.[^15] In Gupta v. Nguyen, the court awarded substantial indemnity costs as punishment for improper conduct[^16]; and in Marino v. L-Jalco Holdings Inc., serious allegations were made against a solicitor of negligence and breach of fiduciary duty.[^17]

[38] The plaintiffs do not allege that Ms. Whyte acted dishonestly or engaged in unlawful acts. They allege that she:

(a) Failed to keep the plaintiffs fully informed of all material facts relating to their actions (para. 59);

(b) Misrepresented to the plaintiffs the status of their actions (para. 59);

(c) Failed to represent the plaintiffs’ best interest (para. 59);

(d) Placed her personal interests ahead of the interests of the plaintiffs (para. 59);

(e) Placed the plaintiffs in positions where their actions failed (para. 59);

(f) Failed to account to the plaintiffs for retainers paid (para. 59);

(g) Failed to ensure Mr. Anyadiegwu was serving clients of the firm in a conscientious, diligent and efficient manner (para. 59);

(h) Otherwise breached her fiduciary duties owed to the plaintiffs (para. 59);

(i) Breached the retainer agreement through breaches of contract and by reason of the acts of negligence (para. 60).

[39] In UPM-Kymmene Corp. v. UPM-Kymmene Miramichi Inc. (2002) 11098 (ON SC), Lax J. declined to award costs on a substantial indemnity scale. She stated:

Costs on the higher scale have been awarded in cases that involve a breach of fiduciary duty, but each case turns on its own facts. In this case, I was highly disapproving of Mr. Berg’s conduct. However, I am not persuaded that a punitive award of costs is either necessary or desirable. It is my view that this is a case where the strong language of the Judgment as well as the attention it received achieves the dual objectives of deterrence and punishment. I therefore decline to order costs on a substantial indemnity scale throughout the trial.[^18] (Emphasis added)

[40] In the present case, the action did not proceed to trial, and I did not have the benefit of evidence that disclosed to what degree the plaintiffs’ allegations were reckless and unjustified. Because the plaintiffs did not allege fraud or acts of dishonesty, and they made their allegations of breach of fiduciary duty in the context of contractual claims that Ms. Whyte failed to discharge her duties to them in a diligent manner, it would not be appropriate to punish them with an award of costs on a higher scale.

Order

[41] Based on the foregoing, it is ordered that:

1. The plaintiffs shall pay Ms. Whyte her costs of the action, on a partial indemnity scale, in an amount to be determined by an Assessment Officer based on the hourly rates set out in Ms. Whyte’s Costs Outline, which I have found to be reasonable, within 30 days following such assessment.

Price J.

Released: September 3, 2014

COURT FILE NO.: CV-07-01263-00
DATE: 20140903

ONTARIO
SUPERIOR COURT OF JUSTICE

B E T W E E N:

OGBU & BLIUS ENGINEERING INC., ANTHONY OKAFOR, JUNE CONVAY both personally and on behalf of THE ESTATE OF ALICE CONVEY and GRANDRIVER HOME IMPROVEMENTS, BUILDING PRODUCTS, SUPPLIES & SERVICES LTD.

Plaintiffs

and –

OKAY ANYADIEGWU, also known as Hyacinth, and PATIENCE WHYTE

Defendants

COSTS ENDORSEMENT

Price J.

Released: September 3, 2014

[^1]: Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131.
[^2]: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.).
[^3]: Gratton-Masuy Environmental Technologies Inc. v. Building Materials Evaluation Commission, 2003 8279.
[^4]: Boucher, at para. 26.
[^5]: Boucher, at paras. 37–38.
[^6]: Bell Canada v. Olympia & York Developments Ltd. (1994), 1994 239 (ON CA).
[^7]: “Information for the Profession” bulletin from the Costs Sub‑Committee of the Rules Committee.
[^8]: Risorto v. State Farm Mutual Automobile Insurance Co. (2003), 2003 43566 (ON SC).
[^9]: 131843 Canada Inc. v. Double “R” Toronto Ltd. (1992), 7 C.P.C. (3d) 15; Murano v. Bank of Montreal (1998) 5633 (ON CA).
[^10]: Reichmann v. Vered, 2004 39940 (ON SC).
[^11]: Bobrow v. Institute of Chartered Accountants of Ontario.
[^12]: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9.
[^13]: Unisys Canada Inc. v. York Three Associates Inc. et al., 2001 ONCA 7276.
[^14]: Kaymar Rehabilitation Inc. v. Champlain Community Care Access Centre, 2010 ONSC 6614.
[^15]: Mele v. Thorne Riddell, 1997 12124 (ON SC).
[^16]: Gupta v. Nguyen, 2006 17935 (ON SC).
[^17]: Marino v. L-Jalco Holdings Inc.
[^18]: UPM-Kymmene Corp. v. UPM-Kymmene Miramichi Inc., 2002 11098 (ON SC).