Delco Automation Inc. v. Carlo’s Electric Limited, 2015 ONSC 1364
COURT FILE NOS.: 08-CV-42928 and 08-CV-42975
DATE: 2015/03/03
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
COURT FILE NO.: 08-CV-42928
Delco Automation Inc.
Plaintiff
– and –
Carlo’s Electric Limited and
Carlo Fornasier
Defendants
AND BETWEEN:
James MacGillivray, for the Plaintiff
Stephen Schwartz, for the Defendants
COURT FILE NO.: 08-CV-42975
Delco Automation Inc.
Plaintiff
– and –
Carlo’s Electric Limited
Defendant
James MacGillivray, for the Plaintiff
Stephen Schwartz, for the Defendant
HEARD: (By written submissions)
DECISION ON COSTS
Justice patrick smith
[1] On December 10, 2014 I released my decision with respect to both actions and requested counsel for the parties to provide written submissions with respect to the issue of costs.
[2] I have now received and reviewed those submissions.
[3] There is no question that Delco was successful in both actions. Counsel for the Defendants admits that costs should follow the event and that the written offers made by the Plaintiff dated April 8, 2014 should attract the cost consequences of Rule 49 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[4] The central issue in dispute is the quantum of costs sought by the Plaintiff.
General Principles of Costs
[5] An award of costs is a matter in the discretion of the court by virtue of s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, which provides:
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 costs shall be paid.
[6] In Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330, the Ontario Court of Appeal set out the three fundamental purposes of modern costs rules:
to indemnify successful litigants for the cost of litigation;
to encourage settlements; and
to discourage and sanction inappropriate behaviour by litigants.
[7] Rule 57 of the Rules of Civil Procedure sets out the factors to be considered by a court when exercising its discretion under s. 131 of the Courts of Justice Act. The rule places emphasis on the result in the proceeding and any written offer to settle when considering the other factors enumerated in the rule.
[8] The text of Rule 57.01(1) provides, in part, as follows:
Factors in discretion
57.01 (1) 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,
(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 on any party that tended to shorten or lengthen unnecessarily the duration of the proceeding; …
The Conduct of CEL and Carlos Fornasier
[9] Counsel for the Plaintiff submits that costs from the inception of the actions should be awarded on a full indemnity scale in view of the behaviour and conduct of CEL and Carlos Fornasier which included, inter alia, the fabrication of written quotes and deliberate destruction of hardcopy files and/or concealment of documentation that was unfavorable to their case.
[10] Elevated costs are to be awarded in only two circumstances. In Davies v. Clarington (Municipality), 2009 ONCA 722 at para. 28, Madam Justice Epstein described the two circumstances as follows:
The first involves the operation of an offer to settle under rule 49.10, where substantial indemnity costs are explicitly authorized. The second is where the losing party has engaged in behaviour worthy of sanction.
[11] In Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3, McLachlin J. (as she then was) described the type of conduct that would attract an elevated cost awards “… where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties.”
[12] Notwithstanding my concerns and comments regarding the credibility of CEL and Mr. Fornasier, I am of the view that the conduct exhibited, while extremely troubling, does not meet the test set out by the Supreme Court and accordingly the request for costs on an elevated scale from the inception of the action is denied.
[13] Costs are therefore awarded on a partial indemnity basis from the commencement of the actions to April 8, 2014, being the date that written offers to settle were made, and thereafter on a substantial indemnity basis.
The Issue of the Quantum of Costs
[14] The costs sought by the Plaintiff on the basis of the finding above total $159,003.92 in the Brampton action and $88,125.65 in the Collins Bay action.
[15] Counsel for the Defendants does not question the hourly rates of counsel for the Plaintiff. The sole argument advanced by the Defendants is that the quantum of costs claimed in both actions is too high based upon the principles of reasonableness and fairness.
[16] Counsel for the Defendants submits that the quantum of the costs claimed should be reduced: 15% on the Brampton action and 25% for the Collins Bay action.
[17] The Ontario Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), stated that the fixing of costs does not begin or end with the calculation of hours multiplied by rates. The overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case rather than an amount fixed by the actual costs incurred by the successful party. The expectation of the parties concerning the amount of costs is also a relevant consideration.
[18] The Court of Appeal also endorsed this concern in Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), [2002] O.J. No. 4495 (Ont. C.A.) at para. 4, when it 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 parties rather than any exact measure of the actual costs of the successful litigant.
[19] The principle of proportionality also bears comment. It is essentially a principle of common sense and is fundamental to a fair and just costs award.
[20] This principle was considered in the case of Buchanan v. Goetel Communications Corp., [2002] O.J. No. 3063, where Ferguson J. had this to say at paras. 10 and 11:
Having said all that, the bottom line is that the proposed costs are excessive. They are excessive from two perspectives: costs of this magnitude will make litigation inaccessible as a method of dispute resolution; costs of this magnitude are also disproportionate to the value of the legal work necessary to represent a client in this dispute.
If counsel do not use more restraint in deciding how much to invest in litigation they will put both the bar and the courts out of business which will profoundly harm the public whom we both serve.
[21] Of general concern are the overall escalating costs of litigation and the broader issue of whether costs may play a contributory role in restricting access to justice.
[22] The quantum of costs claimed by the Plaintiff is significant; however, the actions were complex, requiring significant pre-trial preparation and trial time.
[23] Further, as mentioned above and in my reasons for judgment, the conduct of CEL and Carlos Fornasier, while not scandalous, reprehensible and outrageous, was extremely troubling and undoubtedly unnecessarily lengthened the trial and escalated the legal costs that the Plaintiff was forced to expend in successfully litigating both actions. For those reasons, I am not prepared accede to the request of counsel for the Defendants to reduce the costs claimed.
[24] Costs are therefore awarded as follows:
(a) for the Brampton action $159,003.92
(b) for the Collins Bay action $88,125.65
[25] Counsel have properly brought to my attention that, in para. 228 of my decision, I stated that Mr. Fornasier was personally liable for judgments in both actions. This was an error. Mr. Fornasier was only named as a personal Defendant in the Collins Bay action; hence there can be no finding of personal liability against him in the Brampton action. My decision is therefore amended accordingly nunc pro tunc.
Patrick Smith J.
Released: March 3, 2015
Delco Automation Inc. v. Carlo’s Electric Limited, 2015 ONSC 1364
COURT FILE NOS.: 08-CV-42928 and 08-CV-42975
DATE: 2015/03/03
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Delco Automation Inc.
Plaintiff
– and –
Carlo’s Electric Limited and Carlo Fornasier
Defendants
AND BETWEEN:
Delco Automation Inc.
Plaintiff
– and –
Carlo’s Electric Limited
Defendant
DECISION ON COSTS
P. Smith J.
Released: March 3, 2015