ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF the Construction Lien Act, R.S.O. 1990, c.C.30
BETWEEN:
SUB-TERRAIN DIRECTIONAL DRILLING LTD.
Frederick J. Matthews, for the plaintiff,
Tel.: 416-367-0680,
Fax: 416-367-0429.
Plaintiff
- and -
CARNELLO CIVIL CONSTRUCTION LIMITED, YORK UNIVERSITY, YORK UNIVERSITY DEVELOPMENT CORPORATION and FOUR SEASONS SITE DEVELOPMENT LTD.
Julian Binavince, for the defendant, Carnello Civil Construction Limited,
Tel.: 905-850-5087,
Fax: 905-850-3397.
Defendants
Master C. Wiebe
COSTS AND INTEREST DECISION
I. INTEREST
[1] On August 22, 2014 I issued reasons for judgment granting Sub-Terrain a breach of contract judgment against Carnello in the amount of $7,065.78 on a $43,403.30 claim for lien. I declared the Sub-Terrain claim for lien expired and ordered the posted security returned to Four Seasons..
[2] Concerning prejudgment interest, Sub-Terrain submits that, as the sub-contract document as between Carnello and Sub-Terrain, namely the “quote & contract” dated June 6, 2012, specified a monthly rate of 2% on invoices unpaid after 30 days, the provisions of section 4 of the Interest Act, R.S.C., 1985, c. I-15, are engaged. This section specifies that where a contract rate of interest is stated to be for a period of less than a year, “no interest exceeding the rate or percentage of five per cent per annum shall be chargeable . . .” As stated, this provision sets a limit of 5% per annum on the 2% per month contract rate.
[3] Carnello submits that the prejudgment interest specified by the Courts of Justice Act (“CJA”), R.S.O. 1990, c.C.43, section 128 applies by virtue of an agreement between the parties. Mr. Matthews stated in his written submissions that this agreement was based on his misguided belief that the 2% per month rate appeared first in the Sub-Terrain invoices and not, as stated above, in the contract document. Because this was an agreement between lawyers, I am prepared to relieve Sub-Terrain from it, if in fact section 4 of the Interest Act applies.
[4] In that regard, I note that Adam Palleschi did not deny that the June 6, 2012 document formed the subcontract between the parties. There was a consensus in the evidence that the document captures the agreement between the parties with the exception of the exclusion of the 300 mm lockable PVC pipe. I, therefore, find that the stated interest rate of 2% per month formed a part of the contract between the parties and that section 4 of the Interest Act is engaged.
[5] I, therefore, find that the applicable prejudgment and post-judgment interest rate is 5% per annum to be calculated from October 9, 2012, the date that is 30 days after the date of the invoice that led to the judgment, namely September 9, 2012. Calculated to the date of judgment, August 22, 2014, this produces a prejudgment interest entitlement of $661.09.
II. COSTS
[6] My jurisdiction to award costs is set by section 86 of the Construction Lien Act (“CLA”), R.S.O., c.C.30. Within that jurisdiction, I am entitled to, and precedent makes it clear that I should, pay attention to the provisions of the Rules of Civil Procedure concerning costs, particularly Rules 57.01 and 49.10. I have done so.
[7] In their final costs submissions, Carnello seeks $14,465.45 in partial indemnity costs, and Sub-Terrain seeks $2,142.28 in partial indemnity costs. The parties made various submissions in support of their positions. I will deal with them as follows.
(i) Reasonable expectation of the parties
[8] The respective costs outlines of the parties were not revised by the parties in their final costs submissions other than by Mr. Binavince who seeks another $500 in partial indemnity costs for the preparation of the costs submissions. The outlines show fee rates and disbursements that are not unreasonable for the level of experience of trial counsel and the work that was done. Furthermore, the outlines are not significantly dissimilar in quantum.
[9] I have, therefore, no hesitation in concluding, as I do, that the partial indemnity costs claimed by the parties are within their respective reasonable expectations and are otherwise reasonable.
(ii) Offers to settle
[10] This, in my view, is a significant factor. It is undisputed that Carnello made offers to settle to Sub-Terrain on May 30, 2014 and June 6, 2014, both of which clearly exceeded the amount Sub-Terrain will recover under my judgment. May 30, 2014 is earlier than 7 days before the hearing. It is not clear whether these offers were in writing, but both parties indicated that Rule 49.10 was relevant. I, therefore, assume that the offers were in writing.
[11] Any mandatory aspects of Rule 49.10 do not bind my discretion under CLA section 86. Otherwise, I must take it into consideration by virtue of CLA section 67(3) as the rule to this extent is no inconsistent with the CLA. Furthermore, and in any event, I must pay close attention to this rule for the simple reason that the court wants to encourage parties to settle their cases, and to do so as early as possible. This rule is structured to achieve that result.
[12] The rule would apply to the May 30, 2014 offer to settle. Being an offer from the defendant, Carnello, the operation of the rule would be as follows: Sub-Terrain would be entitled to its partial indemnity costs to the date of the offer and Carnello would be entitled to its partial indemnity costs after the date of the offer.
[13] The parties’ respective costs outlines give some, but not clear, guidance as to when the claimed costs were incurred. I agree with Mr. Matthews that the last three items in the Carnello fee schedule would appear to post-date the May 30, 2014 offer. With tax, these three items total $5,968.68, which is about 40% of the total partial indemnity costs claimed by Carnello. The timing of the claimed disbursements is not at all clear. I apply the 40% rate to the claimed disbursements, which is $454.82. Therefore, I find that Carnello would be entitled to partial indemnity costs of $6,423.50 by operation of the Rule 49.10.
[14] The timing of Sub-Terrain’s claimed partial indemnity costs is clearer. Under fee items, the Sub-Terrain costs outline shows the receipt of the Carnello offers to settle as the 11th item. The partial indemnity costs shown up to and including the 11th item total $9,450. All of the shown disbursements of $1,847.78 are dated and pre-date May 30, 2014. Therefore, I find that Sub-Terrain would be entitled to partial indemnity costs of $11,297.78 by operation of Rule 49.10.
[15] Setting off the two entitlements against each other produces a net partial indemnity costs entitlement in favour of Sub-Terrain in the amount of $4,874.28. I will take this into consideration in awarding costs.
(iii) Small Claims Court
[16] Carnello submitted that, given the fact that my judgment declared the Sub-Terrain lien expired and granted Sub-Terrain breach of contract damages within the monetary jurisdiction of the Small Claims Court, I should follow the provisions of either Rule 57.05 or CJA section 29. Rule 57.05 states that the court “may” deny the plaintiff costs if the recovery falls within the monetary jurisdiction of the Small Claims Court, which my judgment clearly does. CJA section 29 states that an award of costs in the Small Claims Court “shall not” exceed 15% of the amount claimed. Mr. Binavince’s argument was that Sub-Terrain should not have registered a claim for lien in the first place and should have pursued a Small Claims Court action instead (presumably for an amount under $25,000). Mr. Matthews for Sub-Terrain, while not expressly accepting this proposition, made argument as to what to consider if I decided to follow it.
[17] I have decided not to do so. The relevant statutory provision is CLA section 86(2), which requires that I not award costs in excess of the costs of the “least expensive course” a party could have taken instead of the one that was taken. To find that Sub-Terrain should have taken the course of a Small Claims Court action instead of a lien proceeding would require that I find that Sub-Terrain had no reasonable grounds for believing that its extra claim was valid. I do not so find. While I had trouble with the credibility of Sub-Terrain witnesses, I made no finding that Sub-Terrain’s assertion of the extra claim was done in bad faith or fraudulently. There was after all the Replacement Extra document which carried Carnello’s signature. Carnello raised no issue of fraud or bad faith in argument. I note also that Carnello is not seeking more than partial indemnity costs and not substantial indemnity costs, as would be its right under CLA section 86(1) if I found that Sub-Terrain had knowingly registered an invalid claim for lien.
[18] Once a claim for lien is preserved in good faith, there are limited options open to a party. Perfection of a construction lien can only be done in the Superior Court. After perfection, the established procedure to follow in Toronto to avoid the automatic lien expiration provisions of CLA section 37 is to get a judgment of reference and an order for trial. Attendance at the first trial management conference is, therefore, unavoidable. The first trial management conference in this case happened on June 17, 2013, namely a year prior to the eventual trial.
[19] Could Sub-Terrain have pursued a Small Claims Court action after the reference was underway? At the first trial management conference, arguably Sub-Terrain could have sought a stay of the lien action in order to allow a Small Claims Court action to commence; but that is an unusual order and one that either side could have suggested and did not. It is also questionable whether the trial would have been expedited any further than it was, had that course of action been followed. Furthermore, there were interlocutory steps that both sides agreed to in the lien reference that appear to have benefitted the trial and may not have been available in the Small Claims Court.
[20] I am, therefore, not prepared to penalize Sub-Terrain with an award of costs scaled down to what it would have recovered in the Small Claims Court.
(iv) Proportionality
[21] I agree that there must be some adjustment to the award on account of the doctrine of proportionality. That doctrine as described in Rule 1.04(1.1) requires the court to make orders that are proportionate to the importance and complexity of the issues and the amount involved. Proportionality is a non-binding factor to be considered in a construction lien trial when awarding costs.
[22] In this case, the importance and complexity of the issues were moderate at best, and the amount in issue was not great and the result but 16% of the claimed amount. It would be consistent with the doctrine of proportionality to award costs in a case such as this in the same proportion as the amount recovered is to the amount claimed, namely 16%.
[23] 16% of Sub-Terrain’s claim for partial indemnity costs is $20,785.28 x 16% = $3,325.96. I will take this into consideration in awarding costs.
(v) Result
[24] Mr. Binavince argued that the result of the trial required that I award Carnello the bulk of its full indemnity costs claim. I agree that Carnello was successful on all of the issues that consumed the trial, namely the issues of the validity and timeliness of the extra claim. Consideration must be given for this result in the costs award.
[25] However, I am not prepared to allow the result to outweigh the offers to settle and the guidance given by Rule 49.10 in that regard, and the fact that Sub-Terrain succeeded to some extent on its claim. The court must encourage early and meaningful settlements.
(vi) Involvement of Four Seasons
[26] Carnello conceded that it created an unnecessary confusion in late 2013 when it required the involvement of Four Seasons in this action and at a trial management conference on October 7, 2013. Soon thereafter Carnello confirmed in writing that Four Seasons was not required.
[27] Carnello is prepared to credit $500 to Sub-Terrain on account of this confusion. Mr. Matthews argued for a credit of $750. I agree with Mr. Matthews.
(vii) Carriage costs
[28] Mr. Matthews argued that Sub-Terrain should be credited with $2,692.28 in “carriage costs.” Carriage costs are granted to a party for legal and litigation services performed to advance the claims of all lien claimants concerning an improvement, such as the creation and participation in a vetting committee.
[29] Mr. Matthews argued that, since Carnello sheltered under Sub-Terrain’s claim for lien, it was therefore spared costs such as the preparation of a statement of claim, the preparation and registration of a certificate of action, the obtaining of a judgment of reference, and the obtaining of an order for trial. He argued that these were in the nature of “carriage costs” for which Sub-Terrain should be credited.
[30] I do not agree with the breadth of this proposition. Costs saved by sheltering are a function of the CLA. Costs such as a obtaining of a judgment of reference and an order for trial and the service of a notice of trial, would arguably be in the nature of carriage costs, as these services advance the claims of all liens on the subject improvement.
[31] It is difficult to decipher these costs from the Sub-Terrain costs outline. I am prepared to award Sub-Terrain the total amount of $1,000 for these “carriage” related costs.
(viii) Costs award
[32] Weighing all of these factors, I have concluded that Carnello must pay Sub-Terrain partial indemnity costs in the amount of $2,000 (inclusive of tax). I so rule.
[33] The parties are to agree on a form of report to be submitted to me for review, approval and execution. If they cannot so agree, they can schedule an appointment before me to settle the form of the report.
MASTER C. WIEBE
Released: December 4, 2014
COURT FILE NO.: CV-12-469562
DATE: December 4, 2014
ONTARIO
SUPERIOR COURT OF JUSTICE
In the matter of the Construction Lien Act, R.S.O. 1990, c. C.30
BETWEEN:
Sub-Terrain Directional Drilling Ltd.
Plaintiff
- and -
Carnello Civil Construction Limited, York University, York University Development Corporation and Four Seasons Site Development Ltd.
Defendants
INTEREST AND COSTS DECISION
Master C. Wiebe
Released: December 4, 2014