ONTARIO
SUPERIOR COURT OF JUSTICE
CITATION: Walker v. DaimlerChrysler, 2015 ONSC 1429
COURT FILE NO.: CV-08-2662-00
DATE: 2015-03-04
B E T W E E N:
JAMES B. WALKER & CO. LTD. TRUSTEE IN BANKRUPTCY FOR THE ESTATE OF MOHAMMAD SAFIKHANI AND NOT IN ITS PERSONAL CAPACITY
John W. Bruggeman, for the Plaintiff
Plaintiff
- and -
DAIMLERCHRYSLER CANADA INC., DAIMLER TRUCKS, NORTH AMERICA LLC, FREIGHTLINER CANADA LIMITED, DAIMLERCHRYSLER FINANCIAL SERVICES CANADA INC., and DONALD CURRIE TRUCKS INC.
Craig Colraine, for the Defendants, Daimler Trucks North America LLC and Freightliner Canada Limited
Michael Hochberg, for the Defendant Donald Currie Trucks Inc.
Defendants
Price J.
COSTS ENDORSEMENT
Nature of the Proceeding
[1] Mr. Safikhani, a trucker, sued Currie Trucks, which had sold him his truck, and Daimler Trucks, which had manufactured the truck, for damages for alleged defects. Daimler Financial, which financed Mr. Safikhani’s purchase of the truck, re-possessed the truck, sold it, and counter-claimed against Mr. Safikhani for the balance owing on its loan.
[2] Mr. Safikhani, who says that he was unable to earn income with the truck because it was defective, made an assignment in bankruptcy. The Trustee administered the bankruptcy summarily, discharged Mr. Safikhani, and then continued the action on behalf of Mr. Safikhani’s creditors, based on a Litigation Agreement he had signed with Mr. Safikhani. The Trustee, on behalf of the bankrupt estate, thereby became the plaintiff in the action.
[3] The Trustee moved for a timetable for setting this action down for trial. Daimler Trucks moved to have the action dismissed on the ground of delay and on the ground that the Trustee had failed to comply with undertakings. Daimler Trucks also moved to have Mr. Kostyniuk’s firm removed as the Trustee’s solicitor in the action on the ground that it previously represented Mr. Safikhani and was therefore in a conflict of interest with the creditors, including Daimler Financial, a company related to Daimler Trucks, and on the ground that the Litigation Agreement was invalid.
[4] The Trustee complied with his undertakings by the time the motion was heard, so the only issue in that motion is who should be responsible for the costs and the amount, which issues were reserved to me for determination.
[5] The Court released its decision on December 12, 2014, dismissing Daimler Trucks’ motion to dismiss the action, and setting out a timetable for setting the action down for trial by June 15, 2015. The order directed that Daimler Trucks and Currie Trucks would pay the costs of the motion to dismiss for delay and the motion to remove Mr. Kostyniuk as solicitor on a partial indemnity scale, to be agreed upon or fixed by the court if the parties were unable to agree. The parties were unable to agree on the costs issue, thereby making this further order necessary.
POSITIONS OF THE PARTIES
[6] The Trustee advises that he has reached agreement with respect to costs with Currie Trucks, so its Costs Outline does not contain time spent dealing with that defendant’s materials. The Trustee seeks costs against the other defendants on a partial indemnity scale in the amount of $46,430.97, inclusive of HST and disbursements. Daimler Trucks ask the court to reconsider ordering it to pay partial indemnity costs toe the Trustee in view of the Court’s recent decision in Mayhew v. Paddon & York Inc., where the Court, while dismissing the motions of the defendant and Third Party to dismiss an action for delay, awarded costs to the unsuccessful party in view of the plaintiff’s conduct, which caused delay and unnecessary costs to the parties. Daimler Trucks does not seek its own costs but seeks an order that no costs be payable or that they be fixed with a substantial reduction having regard to the plaintiff’s contribution to the delay, and that the costs be payable only in the cause.
ANALYSIS AND LAW
General principles
[7] Boswell J. set out the general principles governing costs assessments in George v Landels, where he stated:
The award of costs is governed by section 131 of the Courts of Justice Act, R.S.O. 1990 c. C.43 and by Rule 57.01 of the Rules of Civil Procedure. Section 131 provides for the general discretion to fix costs. Rule 57.01 provides a measure of guidance in the exercise of that discretion by enumerating certain factors that the court may consider when assessing costs. In addition, the Court must always be mindful of the purposes that costs orders serve. As Perell J. summarized in 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (S.C.J.), at para. 10:
Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements (internal citations omitted).
Ultimately, in determining an amount for costs, the overriding principles are fairness and reasonableness.[1] In assessing what is fair and reasonable in the circumstances, the Court does not engage in a mechanical exercise, but takes a contextual approach, applying the principles and factors discussed above, to settle on a figure that is fair and reasonable in all the circumstances.[2]
[8] The Court is guided by the factors set out in Rule 57.01(1) of the Rules of Civil Procedure. The Court may consider, among other factors, the following:
(a) The complexity of the proceeding;
(b) The importance of the issues;
(c) The conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(d) Any offers to settle;
(e) The principle of indemnity;
(f) The concept of proportionality, which includes at least two factors:
(i) The amount claimed and the amount recovered in the proceeding; and,
(ii) 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;
(g) Any other matter relevant to the question of costs.
Importance and complexity of the motion
[9] The motion had importance to the parties because, had the Trustee been unsuccessful, he would have been precluded from pursuing the action any further and would have been exposed to liability for the costs of the action. The importance of the action was limited to the litigants; it did not involve issues of importance to the public.
[10] The motions involved issues of moderate complexity. While the action is a fairly conventional product liability action concerning an allegedly defective truck engine, it has become complicated by Daimler Financial’s re-possession of the truck, and the ensuing bankruptcy of Mr. Safikhani, and by Daimler Truck’s allegation of a conflict of interest of Mr. Kostyniuk’s law firm and by issues concerning disclosure of information. By the time the motions were heard, the matter was moderately complex.
[11] The defendants amended their notice of motion twice and proceeded with amended amended notice of motion, relying on four affidavits and a revised reply affidavit of Mr. Birenbaum. The Trustee notes that the changes required him to respond with repeated preparation of facta and books of authorities. The defendants cross-examined Mr. Kostyniuk, Mr. Safikhani, and the Trustee. The Trustee cross-examined Mr. Birenbaum as to what happened to the truck once it was re-possessed, what inspections were done of it, and the price at which it was re-sold. These issues were relevant to whether the defendants were prejudiced by the delay in the proceeding which ensued following Mr. Safikhani’s bankruptcy. Upon completion of the cross-examination, and after Mr. Birenbaum delivered a Reply Affidavit, the Trustee’s counsel submitted further questions in writing to him dealing with Daimler Truck’s subsidiary, Detroit Diesel’s role in the manufacture, repossession, and re-sale of the truck.
Reasonableness and offers to settle
[12] The general rule is that costs follow the event and will be awarded on a partial indemnity scale.[3] In special circumstances, costs may be awarded on a higher scale, but those cases are exceptional and generally involve circumstances where one party to the litigation has behaved in an abusive manner, brought proceedings wholly devoid of merit, and/or unnecessarily run up the costs of the litigation.[4]
[13] In the present case, none of the parties tendered any offers to settle that would affect the determination of costs.
[14] I find that the defendant’s motion to set aside the Order to Continue was unnecessary and added to the costs. The order was a procedural step which should have been consented to. Once obtained, it was unreasonable, in the circumstances, for the defendants, having pointed out the need for the order, to object to the delay in obtaining it and to move to set it aside.
[15] I find that it was also unreasonable for the defendants, prior to the hearing of the motions by me, to deliver a factum in which they relied on a number of paragraphs from Mr. Birenbaum’s reply affidavit which had been struck out by Justice Edward’s order dated January 22, 2014. When their breach of the order was communicated to them, the defendants revised their factum to comply with the order, but their oversight added unnecessarily to the Trustee’s costs.
[16] I find that it was also unreasonable for the defendants to have amended their Notice of Motion further by seeking to have Mr. Kostyniuk’s law firm removed on the ground of an alleged conflict of interest. There has no basis for this allegation, as the interests of Mr. Safikhani and the Trustee were not opposed, and the motion to have Mr. Kostyniuk’s firm removed on this basis, with the ensuing cross-examination of him, further delayed the proceeding and added unnecessarily to its costs.
[17] The defendants have asked the Court to reconsider its award of costs to the Trustee on the basis of the court’s decision in Mayhew v. Paddon & York Inc. (“Mayhew”) and Brock University v. Gespro Ont. Inc. (“Brock”). In Mayhew, Morawetz RSJ stated:
[30] On the first issue, as to whether the plaintiffs’ delay has been intentional and contumelious, I am satisfied, based on my review of Mr. Shea’s affidavit, that the Plaintiffs have provided an explanation. Some delay arose as a result of the health challenges faced by Mr. Brooks. There is also evidence that the Plaintiffs communicated with Gowlings and demonstrated an intention to move the litigation forward, but the responsible lawyer did not take meaningful action.
[31] In my view, the foregoing constitutes an explanation for the delay. It is not a good explanation, but it is an explanation. [Emphasis added]
[18] In Brock, Master Wiebe stated:
- While Gespro was not successful in opposing the Brock motion for an order setting aside the administrative dismissal order, I do not think that it was unreasonable in opposing this motion given the substantial delay that Brock did not adequately explain. [Emphasis added]
[19] At paragraphs 36 and 37 of my reasons dated December 12, 2014, I concluded:
The unreasonableness of delay must be evaluated in the context of the reasons for the delay and the impact it had on the defendants. In the circumstances of the present action, and having regard, especially, to the intervening bankruptcy of Mr. Safikhani, and of Mr. Kostyniuk’s efforts in October 2011 to move the action forward, the defendants’ resistance to those efforts, and the steps taken by Mr. Safikhani and the Trustee to overcome the procedural obstacles to proceeding, I do not find the delay to have been inordinate or unreasonable.
[20] In urging the Court to reconsider its decision to award costs to the plaintiff, based on two decisions in which the findings were favourable to the defendants, the defendants are seeking to re-litigate issues that were determined at the hearing. This reflects on an intransigence that also characterized the defendants’ conduct in the motions themselves.
[21] The Trustee acknowledges that Daimler Trucks is entitled to its costs on a partial indemnity scale with respect to its motion for answers to undertakings. I agree with the Trustee that there was no reprehensible conduct that would justify an award of costs on a substantial indemnity scale.
Indemnity - The hourly rates charged
[22] In determining the appropriate hourly rates to be assigned to the lawyers involved in the motion, the court follows the approach taken by Aitkin J. in Geographic Resources.[5] That is, the starting point is the successor of the Costs Grid, namely, the “Information for the Profession” bulletin from the Costs Sub-Committee of the Rules Committee (the “Costs Bulletin”), which can be found immediately before Rule 57 in the Carthy or Watson & McGowan editions of the Rules, sets out maximum partial indemnity hourly rates for counsel of various levels of experience.
[23] 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.[6] The upper limits in the Costs Bulletin are generally intended for the most complex and important of cases. Having regard to the complexity of the motion, Mr. Farooq, who was senior counsel at the hearing, is entitled to the maximum hourly rate for a lawyer of between 10 and 20 years’ experience.
[24] The Costs Bulletin, published in 2005, is now dated. Aitkin J. considered adjusting the Costs Subcommittee’s hourly rates for inflation, as Smith J. did in First Capital (Canholdings) Corp. v. North American Property Group,[7] but the unadjusted rates of the lawyers in her case were only slightly less than the actual fees they charged, so she elected to use their unadjusted rates. Normally, however, it is appropriate to adjust the hourly rates in the Costs Bulletin to account for inflation since 2005.
[25] Based on the Bank of Canada Inflation Calculator, available online at http://www.bankofcanada.ca/rates/related/inflation-calculator/, the current (2014) equivalent of the hourly rates in the Costs Bulletin are $93.52 for law clerks, $263.03 for lawyers of under 10 years’ experience, $350.71 for lawyers of between 10 and 20 years’ experience, and $409.16 for lawyers of over 20 years’ experience.
[26] The court is guided by the rates in the Costs Bulletin, not the actual hourly rates charged. The actual rates charged are relevant only as a limiting factor, in preventing the costs awarded from exceeding the actual fees charged. The Costs Subcommittee’s rates apply to all lawyers and all cases, so everyone of the same level of experience starts at the same rate.
[27] The court adjusts the hourly rate, or the resulting fees, to reflect unique features of the case, including the complexity of the proceeding, the importance of the issues, and the other factors set out in Rule 57.01(1). If an excessive amount of time was spent, or too many lawyers worked on the file, the court reduces the resulting amount of fees accordingly. As long as the resulting amount does not exceed the amount actually charged to the client, the actual fee that the client agreed to pay is irrelevant.
[28] Mr. Kostyniuk, Q.C. was called to the Bar in 1968 and according to the Costs Bulletin, he was therefore entitled to claim a maximum hourly rate in 2005, on a partial indemnity scale, of $350, which translates to $409.16 today. I round that rate to $410.00. Mr. Bruggeman was called in 1998 and was entitled to a maximum hourly rate in 2005 of $300, which translates to $350.71 today, which I round to $350. Ms. Pribytkova was called in 2011 and was entitled to an hourly rate in 2005 of $225, which translates to $263.03 today, which I round to $265.
Indemnity - The time spent on the motions
Trustee’s motion to set a timetable
[29] Mr. Kostyniuk, Q.C. spent 8.5 hours which, at his hourly rate of $410, would be valued at $3,485. Mr. Bruggeman spent 4.7 hours which, at his rate of $350, would be valued at $1,645. Ms. Pribytkova spent 15.8 hours which, at her rate of $265, would be valued at $4,187. The combined total would be $9,317.
Defendants’ motions to set aside order to continue and to remove counsel
[30] Mr. Kostyniuk spent 9.4 hours which, at his hourly rate, would be valued at $3,854. Mr. Bruggeman spent 44 hours which, at his rate, would be valued at $15,400. The combined total would be $19,284.
Defendants’ motion to strike Mr. Safikhani’s and the Trustee’s affidavits and the Trustee’s motion to strike Mr. Birenbaum’s affidavit
[31] On these motions, Mr. Kostyniuk spent 2.3 hours which, at his hourly rate, would be valued at $943. Mr. Bruggeman spent 22.9 hours, which would be valued at $8,015. The combined total would be $8,958.
Motions heard September 15, 2014
[32] On these motions, and for the tasks set out in reference to them in the Trustee’s Costs Outline, Mr. Kostyniuk spent 7.95 hours which, at his hourly rate, would be valued at $3,259.50. Mr. Bruggeman spent 43.50 hours which would be valued at $15,225. The combined total would be $18,484.50.
[33] The combined cost of all of the motions, based on the time spent by counsel, at their adjusted hourly rates, is $56,043. The Trustee claims $38,028 for his counsel’s fees, which represents a reduction of 32% from the time spent, and an additional $1,410 for counsel fee at the hearing. The total amount claimed, including HST and disbursements, the latter amounting to $1,813.20, amounts to $46,430.97.
The defendants’ motion for answers to undertakings
[34] The defendants’ counsel, Debbie Jorgensen, who was called to the Bar in 2004 and Eva Melamed, who was called in 2007, were entitled to claim a maximum hourly rate, in today’s dollars, of $265. They spent a total of 12.5 hours, which translates to a value of $3,312.50. The defendants claim $2,522.40 for their time, which represents a reduction of 24%.
[35] The Trustee has not offered dockets or a bill of costs in relation to the fees and disbursements which his own counsel charged to respond to the defendants’ motion for answers to undertakings. Motions for answers to undertakings may attract costs on a substantial indemnity scale.[8] However, they do not invariably do so. Master Beaudoin, for example, who awarded costs at the higher scale in OZ Optics Ltd. v. Timbercon Inc.,[9] declined to do so in Lowrey v. Merrill Lynch Canada Inc., even though he awarded costs of $3,875 in the latter case, which involved only two refusals and a “handful of undertakings.” In the present case, there were no orders to comply with undertakings breached, and the undertakings were, in fact, complied with before the hearing of the motion, both of which factors militate against costs on a higher scale. In the circumstances, I do not find that costs on a substantial indemnity scale are warranted in the present case.
Proportionality and the reasonable expectation of the unsuccessful parties
[36] Mr. Safikhani debts to Daimler Financial, as reported in the bankruptcy, amounted to $81,747.79. Mr. Safikhani seeks damages in the amount of $850,000 in his action. The Litigation Agreement compromised the creditors’ interests in the action to 50% of the recovery, which amounts to $425,000.
[37] I find that the $46,430.97 claimed as costs in these motions (inclusive of HST and disbursements), is proportionate to the amount in issue in the action.
[38] The Court asked counsel at the outset of the hearing what costs each was seeking if successful on the motions (apart from the motion for undertakings, which had been determined previously). Counsel for Daimler Trucks replied that this client was seeking in excess of $62,000 on a partial indemnity scale. Counsel for the Trustee replied that he would be seeking costs of approximately $46,000 on a partial indemnity scale.
[39] The multiplicity of the motions that were heard defies a comparison with the amounts awarded for costs in similar motions in other cases. I have, however, considered the fact that the amounts claimed are within the range of the amounts stated at the outset of the hearing, and find that, at least entering upon the hearing, the parties had knowledge of these amounts as the costs they might reasonably be required to pay if they were unsuccessful.
Any other matters relevant to the determination of costs
a) Disbursements
[40] In fixing costs, the court need not undertake a line by line analysis of the hours or expenses claimed, nor should it second guess the amounts claimed unless they are clearly excessive or overreaching.[10] The defendants have not asserted that the amounts claimed for disbursements are unreasonable and accordingly, I do not propose to reduce the amount payable in relation to them.
Conclusion and Order
[41] For the foregoing reasons, it is ordered that:
- With respect to the Trustee’s failure to answer undertakings, the Trustee shall pay to the defendants their costs, on a partial indemnity scale, in the amount claimed, namely, $2,924.36, consisting of the following:
a) Fees: $2,522.40
b) HST: $ 327.91
c) Disbursements: $ 74.05
- The defendants shall pay to Trustee his costs of the other motions, on a partial indemnity scale, in the amount claimed, namely, $46,430.97, consisting of the following:
a) Fees of $38,028.00 + $1,410 counsel fee = $39,438.00
b) HST: = $ 5126.94
c) Disbursements: = $ 1,813.20
d) HST on disbursements: = $ 52.83
- Each of the parties shall pay to the other pre-judgment interest on the costs to be paid at the rate of 3% per year from December 12, 2014.
Price J
RELEASED: March 4, 2014
CITATION: Walker v. DaimlerChrysler, 2015 ONSC 1429
COURT FILE NO.: CV-08-2662-00
DATE: 2015-03-04
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
JAMES B. WALKER & CO. LTD. TRUSTEE IN BANKRUPTCY FOR THE ESTATE OF MOHAMMAD SAFIKHANI AND NOT IN ITS PERSONAL CAPACITY
Plaintiff
- and –
DAIMLERCHRYSLER CANADA INC., DAIMLER TRUCKS, NORTH AMERICA LLC, FREIGHTLINER CANADA LIMITED, DAIMLERCHRYSLER FINANCIAL SERVICES CANADA INC., and DONALD CURRIE TRUCKS INC.
Defendants
COSTS ENDORSEMENT
Price J.
Released: March 4, 2015
[1] Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.); and Moon v. Sher (2004), 2004 39005 (ON CA), 246 D.L.R. (4th) 440 (C.A.)
[2] Gratton-Masuy Environmental Technologies Inc. (c.o.b. Ecoflow Ontario) v. Building Materials Evaluation Commission, 2003 8279 (ON SCDC), [2003] O.J. No. 1658, at para. 17
[3] Bell Canada v. Olympia & York Developments Limited et. al. (1994), 1994 239 (ON CA), 17 O.R. (3d) 135 (C.A.)
[4] Standard Life Assurance Company v. Elliott (2007), 2007 18579 (ON SC), 86 O.R. (3d) 221 (S.C.J.)
[5] Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041, paras. 7 and 11 to 16
[6] “Information for the Profession” bulletin (“the Costs Bulletin”) from the Costs Sub-Committee of the Rules Committee (that the Costs Sub-Committee of the Rules Committee issued to replace the Costs Grid, which it repealed in 2005). The Costs Bulletin has advisory status only and not statutory authority, as it was not included in the Regulation that repealed the Costs Grid.
[7] First Capital (Canholdings) Corp. v. North American Property Group, 2012 ONSC 1359, 2012 ONSC 1359 (S.C.J.)
[8] OZ Optics Ltd. v. Timbercon Inc., 2006 1674 (ON SC), per Master Beaudoin, as he then was, para. 7; See also: Donnelly v. Donnelly, 2004 9296 (ON SC), per Howden J. at para. 17
[9] Lowrey v. Merrill Lynch Canada Inc., 2003 22376 (ON SC). See also: Abdul-Ghani v. Zappia, 2011 ONSC 6325, and Gowdie v. Warby, 2011 ONSC 960, per Lauwers J., as he then was, at paras. 26 and 27; Grant v. Great Atlantic and Pacific Co. of Canada, 2004 28049 (ON SC), per Master Hawkins, at para. 27; Doobay v. Diamond, 2007 37465 (ON SC), per Master Sproat; Cannon v. Funds for Canada Foundation, 2014 ONSC 953, per Master Dash, at para. 20
[10]Fazio v. Cusumano 2005 33782 (ON SC), 2005 CarswellOnt 4518 (S.C.J.), at para. 8