SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: CV-12-464383
DATE: 2015/03/05
RE: TIF Mechanical Limited (“TIF”) v. Massimiliano Ortoli (“Ortoli”) and Nicolina Lobello (“Lobello”);
BEFORE: MASTER WIEBE;
HEARD: December 9, 2014;
DECISION: March 5, 2015;
COUNSEL: Stephanie Mandin for Ortoli and Lobello;
Mordy Mednick for TIF Mechanical Limited.
COSTS DECISION
I. INTRODUCTION
[1] This is a motion by Oroli and Lobello (together “the Defendants”) for the costs of a TIF motion for leave that was scheduled by me and did not take place.
II. BACKGROUND
[2] At the trial management conference of March 10, 2014, I advised the parties that my time in construction lien court would be cut in half as of July 1, 2014 with only the first two weeks of every month in my calendar being made available for construction lien matters from that day onward. I advised that this would make it more difficult to get timely trial time with me. I advised that as of March 10, 2014, I did not have available trial time in my calendar before October, 2015. The parties agree to consider what they could do in the circumstances to move the case forward expeditiously.
[3] At the trial management conference of June 23 and 24, 2014, Mr. Mednick for TIF advised that he had instructions to bring a motion for summary judgment and that he believed a judge could hear such a motion before the end of 2014. After examining my calendar and the calendars of the parties, I confirmed that such a motion could not be heard by me before the fall of 2015. After a brief adjournment, I confirmed that I could delegate my authority to hear the proposed motion for summary judgment to a judge after granting TIF leave under the Construction Lien Act (“CLA”) to bring such a motion.
[4] I then prepared a schedule for the TIF motion for leave. The schedule established the date of November 17, 2014 (at 5:00 p.m. for 1 hour) as the date for the argument before me. It also set a deadline of August 20, 2014 for the delivery of TIF’s motion material. It set the deadline for the Defendants responding motion material of October 22, 2014. I ordered that the material for the leave motion be the same as the motion material for the eventual motion for summary judgment. I made no orders advancing the reference at this trial management conference due to this issue.
[5] On the date of the deadline for TIF’s material, August 20, 2014, Mr. Mednick advised the court by letter, copying counsel for the Defendants, Ms. Mandin, that he now had instructions not to proceed with the motion for leave. He requested that I schedule another trial management conference as soon as possible. I scheduled such a trial management conference for November 4, 2014. It took place on November 4 and 10, 2014.
[6] On October 31, 2014, Ms. Mandin delivered a Pre-trial Brief in which she asserted a claim by the Defendants for full-indemnity costs of the withdrawn motions in the amount of $11,599.45. The Bill also showed an amount of $9,472.23 in substantial indemnity costs and $7,345 in partial indemnity costs.
[7] At the trial management conference of November 4, 2014, both parties asked for a settlement conference with Master Sandler. There was a history to this issue. At the trial management conference of March 10, 2014, I advised the parties of the option of holding a settlement conference with Master Sandler, and told them that, if they chose to do so, it should be done quickly as Master Sandler was retiring at the end of 2014. At the trial management conference of June 23, 2014, Ms. Mandin advised that the Defendants were prepared to have such a settlement conference. However, TIF opposed the idea. At the trial management conference of November 4, 2014 TIF advised that it now wanted the settlement conference. However, Master Sandler was no longer available, and I did not order the settlement conference as a result.
[8] At the trial management conference on November 10, 2014 I scheduled the trial of this action to take place over 12 days in November and December, 2015. I double-booked the trial for 12 earlier days in May and June, 2015. I also set a schedule for submissions and argument on the Defendants’ claim for costs of the withdrawn motions.
[9] Mr. Mednick delivered the Costs Submissions of the Plaintiff, TIF Mechanical on December 1, 2014. He argued that I make no order as to costs. The only explanation given for TIF’s decision not to proceed with motion was that it had reflected on my comments at the June trial management conference about the test for leave.
[10] I heard argument on this matter by phone on December 9, 2014. With my leave, Ms. Mandin delivered a case decision she referred to in argument following the argument on December 9, 2014. With my leave, Mr. Mednick delivered a letter on December 12, 2014 presenting argument on this case.
III. ISSUES
[11] Here are the issues to be addressed:
a) What is the court’s jurisdiction concerning this issue?
b) Are the claimed costs within the reasonable expectation of TIF?
c) Are the claimed costs disproportionate?
d) Should the costs award be limited to “thrown away” costs?
e) Are full or substantial indemnity costs merited?
IV. ANALYSIS
a) What is the court’s jurisdiction concerning this issue?
[12] My jurisdiction to award costs in lien proceedings is found in CLA section 86. This section gives the court a broad discretion to award costs, including substantial indemnity costs. The only limitation on my discretion to award costs in CLA section 86 is the requirement in section 86(2) not to award more costs than what the “least expensive” course of action would have cost. It has been held that to the extent the Rules of Civil Procedure concerning costs (particularly the factors in Rule 57.01(1)) are not mandatory, the court in a lien proceeding can and should take those rules into consideration; see Dean Construction Co. v. M. J. Dixon Construction Ltd., 2011CarswellOnt 8856 (Ont. Master), additional reasons 2011 CarswellOnt 8977 (Ont. Master), additional reasons 2011 CarswellOnt 8862 (Ont. Master).
[13] Mr. Mednick points out that the provisions of Rule 37.09(3) concerning the entitlement to costs of a responding party upon the abandonment of a motion are not engaged in this case, as the the notice of motion was not served before the motion was abandoned by TIF. I agree with this point. This does not, however, denigrate from my general discretion to award costs.
b) Are the claimed costs within the reasonable expectation of TIF?
[14] One of the factors for consideration by the court under Rule 57.09(1) is the reasonable expectation of the unsuccessful party. Mr. Mednick placed great emphasis on this point, citing the case of Boucher v. Public Accountants Council (Ontario) 2004 CanLII 14579 (ON CA), 2004, 48 CPC (5th) 56 at paragraph 38. This factor is closely associated with the principle of proportionality, namely the principle that the costs award should reasonably reflect the amount of time and effort “that was warranted by the proceeding;” see Gratton-Masuy Environmental Technologies Inc. v. Ontario (Building Materials Evaluation Commission) 2003 CarswellOnt 1564 (Ont. Div. Crt.) at paragraph 17.
[15] Mr. Mednick argued that it was not within the reasonable expectation of TIF for the Defendants to incur any costs prior to receipt of the TIF motion material. He pointed first to Rule 37.09(3) which creates an entitlement to costs of an abandoned motion only upon receipt of the notice of motion. He went further and argued that any legal costs incurred by the Defendants prior to the service of the TIF motion material were excessive and unreasonable. He argued that only with the motion material in hand could the Defendants decipher the real issues in the motion and begin proper preparation of the responding material. Up to that point, any preparation would be speculative at best. That was why, according to Mr. Mednick, the court gave the Defendants two months to prepare responding material.
[16] Ms. Mandin responded by arguing that the issues between the parties were not speculative at the time the leave motion was scheduled on June 24, 2014. The parties had completed productions, some discoveries and a Scott Schedule and had exchanged expert reports. There was considerable evidence “on the table” which, along with the pleadings, would be relevant to any leave motion for a motion for summary judgment. The only additional matters to be reviewed were the tests for the two motions. All of this could be properly done before the motion material was served. Furthermore, Ms. Mandin also pointed out that she advised Mr. Mednick and the court at the June, 2014 trial management conference that she had a trial scheduled for the first part of October, 2014, which significantly limited the time that was available to her to prepare responding material. This made it imperative, she argued, for the Defendants to prepare for the motions as much as possible as soon as the motions were scheduled by me on June 24, 2014.
[17] Ms. Mandin relied heavily on the decision of Master Dash in Beatrice Leaseholds Ltd. v. Shainhouse [2013] O.J. 4074 (Ont. Master). In this case, a plaintiff made allegations in writing about the defendant’s lawyer and obtained a scheduling order from the master for a motion to have the defendant’s lawyer removed. One of these allegations concerned an allegation of fraud against the lawyer. The plaintiff then withdrew the motion on the date set for the delivery of the motion material. Master Dash held that, while the case did not give rise to a prima facie entitlement for the defendant to costs of the abandoned motion due to Rule 37.09(3), he would award such costs anyway. He held that Rule 1.04(1) required the court to extend by analogy the provisions of the rules to cases not expressly captured by the rules to insure a just result. He concluded that the plaintiff’s actions had amounted to “making a motion” for the purposes of this rule, and he awarded costs of the abandoned motion to the defendant. Mr. Mednick tried to distinguish this case on the grounds that the plaintiff had made allegations of fraud against the defendant’s lawyer which the lawyer was unable to refute due to the abandonment. He argued that TIF had raised no such allegations of fraud at any time prior to the abandonment of the TIF motion in this case.
[18] I agree with Ms. Mandin on this point. On June 24, 2014 Ms. Mandin did indeed advise Mr. Mednick and the court of the difficulties with her fall schedule. My directions indicate that fact. Any reasonable moving party would as a result have concluded that the Defendants in this case would start preparing for the motion as soon as possible. Furthermore, I note that Mr. Mednick was quite clear at the June 24, 2014 trial management conference in expressing his client’s confidence in and determination to bring the motion for summary judgment, and to do so as expeditiously as possible. His client refused to participate in a settlement meeting at that time. The only reasonable conclusion to draw from this was that the motions were on a firm route to determination.
[19] I also make a comment about Beatrice. I do not read that decision as narrowly as Mr. Mednick would like me to read it. Master Dash stated that his ruling applies to any case where the moving party states that it wants to bring a motion, sets out the issues, obtains a schedule for the motion, and then abandons the motion before serving the notice of motion; see Beatrice at paragraph 18. While I was not made aware of any written correspondence from Mr. Mednick to Ms. Mandin concerning the issues of the motions, I conclude that such correspondence was not necessary. At the June 24, 2014 trial management conference Mr. Mednick stated that TIF had decided to bring the motion based on the evidence it had obtained to date. To that date, there had been productions, a Scott Schedule, discovery and expert reports. The state of the evidence was sufficient to convince TIF at that point to bring the motions. I find that it was also sufficient to give the Defendants sufficient notice of the issues in the motions and material to begin immediate preparation, particularly in light of the restrictions in Ms. Mandin’s fall calendar. I, therefore, find Beatrice to be authority directly on point here.
[20] I, therefore, find that TIF should have reasonably expected in the circumstances of this case that the Defendants would have started preparing for the motion well in advance of the deadline for service of the motion material by TIF.
c) Are the claimed costs disproportionate?
[21] Proportionality is a factor that must be brought to bear as well. It is a factor that is contained in the express limitation on my discretion to award costs in CLA section 86(2), namely the restriction not to award costs other than the costs of the “least expensive course” of action would have cost.
[22] Proportionality is defined by Rule 1.04(1.1) as the requirement to make orders that are “proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.” Concerning complexity, I am at somewhat of a disadvantage here since I am not intimately aware of the issues that would have governed the motions. The issues for the motion were not argued before me. Ms. Mandin’s Brief does though contain lengthy Scott Schedules and expert reports. At minimum, it would appear that there would have been some level of complexity to the motions. The importance of the motions cannot be denied, as they contained the potential of disposing of the TIF claim and the Defendants’ counterclaim in their entirety. As to the amounts involved, the case is not an unsubstantial one, as the plaintiff claims a lien for $485,136.37 and the Defendants claim a counterclaim of about $750,000. The stakes of the motions were high.
[23] Mr. Mednick’s main argument here was one of analogy with other cases. He presented three decisions where motions had been abandoned after (not before) the exchange of motion material. These cases were Royal Bank v. Verdone Homes (Guelph Ltd.) 1995 CarswellOnt 4697 (Ont. Gen.Div.), Skycharter v. Eaton Corp. 2005 CarswellOnt 329 (Ont. Master) and Costa v. Lourenco 2012 CarswellOnt 10548 (Ont. S.C.J.). In these cases, the court awarded between $3,500 and $6,250 in costs. He argued that the claim by the Defendants for costs in excess of $11,000 was therefore disproportionate, excessive and unreasonable given the results of these cases. I note that responding parties were implicated in the bringing of the motions in Royal Bank and Skycharter. In Royal Bank the moving party obtained a costs order as a result. In Skychartere there was no order as to costs. I also not that the $6,250 in costs awarded to the responding party in Costa was 83% of what had been claimed. I do not find these cases persuasive for Mr. Mednick’s point.
[24] I do not deny the Defendants costs on the basis of proportionality.
[25] Mr. Mednick relied upon the Court of Appeal decision in Moon v. Sher, 2004 CanLII 39005 (ON CA), 2004 CarswellOnt 4702 (Ont. C.A.) to argue that the Defendants’ Bill of Costs is simply excessive for the work of preparing for these motions. I do not agree that it is per se excessive. Ms. Mandin’s time is shown as 23.3 hours and a junior lawyer’s time is shown as 5.40 hours. This is between 3 and 4 seven hour days. For motions of this size and potential impact on the litigation, such preparation time is not per se excessive. Some discount may be necessary on account of the failure to break the time down as between tasks, which would have given me a better idea of what specifically was done.
d) Should the costs award be limited to “throwm away” costs?
[26] As I advised counsel, the issue of “thrown away” costs is vital. Thrown away costs are costs that have been rendered useless to a party in the litigation by virtue of the conduct of the other party; see Legacy Leather International Inc. v. Ward, 2007 CarswellOnt 527 (Ont. S.C.J.) at paragraph 9. This often becomes an issue when a trial is adjourned and a party has incurred costs for trial preparation that will have to be repeated.
[27] Mr. Mednick argued that in this case, with a trial scheduled for November, 2015 (and double-booked for dates in May and June, 2015), what would be fair and reasonable compensation for the Defendants would be an award of costs limited to the costs of the Defendants that were “thrown away,” namely wasted. Costs incurred for the preparation of the motion that will benefit the Defendants at trial should, accordingly to this argument, be deferred to trial and be awarded at the end of trial in light of the result. Ms. Mandin did not seriously contest this point.
[28] Mr. Mednick went on to argue that the only evidence of the work by Ms. Mandin’s firm is contained in the Defendants’ Bill of Costs and that this Bill of Costs does not break down the time claimed for the identified work. He argued that the work described in the Bill of Costs includes work which will benefit the Defendants at trial, such as “review of Plaintiff’s Affidavit of Documents, answers to undertakings and transcripts.” Because the Bill of Costs does not break down the claimed costs in accordance with the claimed work, Mr. Mednick argued for at least a significant discount of the claim for costs to an amount that I estimate to be sufficient to cover the costs “thrown away.”
[29] There is merit to this argument. I am mindful that these motions were in the context of an ongoing trial management process leading to a trial in 2015, perhaps as early as May, 2015. Costs of a motion that assists a party in preparing for trial should be determined at the end of trial in light of the results of the trial. That is certainly the case with a motion for leave to bring a summary judgment motion, a motion where all of the issues and the evidence in the case would be brought forward.
[30] I, therefore, rule that the costs awarded to the Defendants at this time as compensation should be limited to the costs that were “thrown away.”
[31] In reviewing the Defendants’ Bill of Costs, I note that some of the described work would qualify as “costs thrown away.” Such work would include research into the tests on the motions for leave and summary judgment. It may include some hidden costs, such as the work of reviewing evidence that will have to be repeated in preparation for trial. The Bill also contains reference to correspondence, which also may contain wasted costs. The costs incurred for the June, 2014 trial management conference may also qualify as thrown away. However, not all of the described work appears to be wasted. Some of the work of reviewing the evidence will be useful for the trial. Without a breakdown of the costs claimed in accordance with the work done, the best I can do is to make a rough estimate of the costs thrown away, which I will do.
[32] Mr. Mednick argued that any costs shown for work done on the motion for summary judgment should not be recognized as the motion for summary judgment was not in issue. I disagree. I specifically ordered that the material at the motion for leave should contain the motion material for the motion for summary judgment.
f) Are full or substantial indemnity costs merited?
[33] In my view, there is also a serious issue of the conduct of TIF in this matter. Mr. Mednick argued that an award of substantial or full indemnity costs should only be made where there is misconduct on the part of a party, such as fruitless litigation and abuse of process. He argued that this scale of costs is used only in rare and exceptional cases “to mark the court’s disapproval of the conduct of a party in the litigation;” see Davies v. Clarington (Municipality), 2009 ONCA 722, 2009 CarswellOnt 6185 (Ont. C.A.) at paragraph 30.
[34] I agree with this proposition. I also note that lien proceedings should be of a summary character (see CLA section 67(1)) and that CLA section 86(1)(b)(ii) expressly authorizes the court to make an order as to costs against a “person” who prejudices or delays the conduct of a lien action, including an order for substantial indemnity costs.
[35] In this case, I find that TIF’s conduct was tantamount to an abuse of process and fruitless litigation. TIF admitted that it did not examine the grounds for the motion for leave before it required at the June, 2014 trial management conference that I put the reference in abeyance and schedule a motion for leave for a motion for summary judgment, motions that had the potential of putting the reference in abeyance for as much as a year.
[36] Furthermore, and most significantly, TIF openly refused at the June trial management conference to participate in a settlement conference with Master Sandler in light of its chosen strategy. A settlement conference was an option that was available at that time. Later, after TIF abandoned the motion, the parties agreed to request the settlement conference with Master Sandler at the November, 2014 trial management conference. However, Master Sandler was no longer available. TIF’s conduct, therefore, prejudiced the holding of a settlement meeting.
[37] Mr. Mednick argued that TIF was under financial pressure in the spring and summer of 2014, but there was no evidence of that before me. He argued also that the delay in the reference that resulted from TIF’s conduct (namely about 5 months) did not delay the trial, which is scheduled to take place within the trial timeframe that was available in March, 2014. I do not accept that point, as trial scheduling is a fluid process that is affected radically by the resolution of other cases. To understand the impact of the delay caused by TIF’s motion, one would have to determine what trial time was available for this trial on June 24, 2014, which was not done.
[38] This conduct must, therefore, be disapproved by the court. The costs award must reflect that disapproval in order to deter such conduct.
V. CONCLUSION
[39] Considering all of these factors, I have concluded that TIF must pay the Defendants costs of the abandoned motions in the amount of $7,500 within 30 days of the date of this order.
[40] This award is my estimate of the Defendants’ costs that were thrown away plus a factor for deterrence as discussed above. Furthermore, this order is without prejudice to the Defendants’ right to claim recovery for the remainder of its costs of these motions at the end of trial.
MASTER C. WIEBE
Released: March 5, 2015
COURT FILE NO.: CV-12-464383
DATE: 2015/03/05
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
TIF Mechanical Limited
Plaintiff
- and -
Massimilliano Ortolli and Nicolina Lobello
Defendants
COSTS DECISION
Master Charles Wiebe
Released: March 5, 2015