ONTARIO

SUPERIOR COURT OF JUSTICE

CITATION: Cleanol Integrated Services Ltd. v. Johnstone, 2015 ONSC 1818

COURT FILE NO.: CV-11-431927[1]

DATE: March 18, 2015

BETWEEN:

CLEANOL INTEGRATED SERVICES LTD

L. O’Connor, for the plaintiff

Tel: 416-365-1110; Fax: 416-365-1876

Plaintiff (defendant by counterclaim)

• and -

QUINTIN JOHNSTONE

J. Arnold, for the defendant[2]

Tel: 416-640-0508; Fax: 416-848-0200

Defendant (plaintiff by counterclaim)

HEARD: August 7,8,12,19,20,22,26,27,28

and September 2, 3,10 and 12, 2014

DECISION RELEASED: February 2, 2015

Master C. Albert

Costs of Action and Reference

Background

1. Cleanol registered a construction lien for $68,017.51 and issued a claim for $175,656.97 for supplying services and materials to renovate Mr. Johnstone’s condominium unit. In response Mr. Johnstone counterclaimed for $240,000.00. He also issued an action against Ms Yueh and Mr. Giampietro personally (CV-13-472728: Johnstone v. Yueh and Giampietro).

2. Following an eleven day trial[3] and multiple witnesses I Cleanol proved its entitlement to $57,657.31 after deducting the $6,359.00 that Mr. Johnstone achieved on his counterclaim. Mr. Johnstone did not pursue his personal action against Ms Yueh and Mr. Giampietro at trial[4].

3. The February 6, 2012 judgment of reference of Justice Grace in action CV-11-431927 and the July 24, 2013 judgment of reference of Justice Brown in action CV-13-472728 require me, as reference master, to determine costs of the actions. As the references were conducted together, and as the Johnstone action was a reiteration of his counterclaim in the main action but made against the principal and vice president of Cleanol, and as Mr. Johnstone did not pursue a remedy against these defendants personally at trial, only one set of costs is appropriate.

Cleanol’s Position on Costs

4. Cleanol, in its reply costs submissions, clarifies that it is seeking costs in its favour on a partial indemnity scale up to May 6, 2014[5] fixed at $81,159.50, and costs on a substantial indemnity scale for the period after May 6, 2014 fixed at $152,052.56, plus expert fees and transcript costs of $69,058.44, for a total costs claim of $302,270.50. This amount includes a disbursement account of $8,950.77 for items such as and registry office fees, photocopying and deliveries. Cleanol’s disbursement statement contains an arithmetic error: the total amount of the disbursements claimed, namely $4,202.24, was added twice when Cleanol calculated HST. The correct total for disbursements (excluding expert and transcript fees, claimed separately) is $4,748.53, reducing Cleanol’s costs claim to $298,068.26.

Mr. Johnstone’s Position on Costs

5. Mr. Johnstone’s position is that each party should bear their own costs of the action, based on divided success and ambiguous offers to settle.

Costs award

6. For the reasons that follow, having carefully reviewed the costs outlines and written submissions on costs filed by the parties, and having considered the factors relevant to fixing costs, I find that an appropriate award of costs in this case is $107,350.00 for fees plus $25,000.00 for experts fees plus $4,748.53 for disbursements for a total of $137,098.53 inclusive of HST, payable by Quintin Johnstone to Cleanol Integrated Services Ltd.

General principles

7. Generally costs are awarded to the successful party. There is no reason to depart from this practice in this case. Cleanol succeeded and is entitled to costs unless there is some reason to deprive Cleanol of costs having regard to the relevant factors.

8. Costs in a proceeding under the Construction Lien Act, R.S.O. 1990, c.C.30 (the “Act”) as in an ordinary action, are in the absolute discretion of the court[6]. In fixing costs the court must consider the facts and circumstances of the particular case. It is not a mechanical exercise. The court must be fair and reasonable in exercising its discretion to award costs. There are many relevant factors.

Factors relevant to fixing costs

9. Rules 57.01(1), 49 and 1.04 describe factors for the court to consider when fixing costs. The list is non-exhaustive and includes:

a) Offers to settle: Was any offer to settle served that would give rise to a presumption of costs on a substantial indemnity scale?

b) Indemnity: The successful party is entitled to reasonable indemnification taking into account the experience of the lawyer, the rates charged and the amount of time spent.

c) The complexity of the proceeding is relevant.

d) The importance of the issues is relevant.

e) Degree of success: The amount claimed and recovered in the claim and the counterclaim is another relevant factor.

f) Reasonable expectation of the payor: What quantum of costs should the unsuccessful party reasonably expect to pay?

g) Conduct: Did the conduct of one or both parties shorten or unnecessarily lengthen the proceeding or otherwise cause costs to escalate? Were unnecessary steps taken?

h) Proportionality: Are the costs claimed proportionate to the importance and complexity of the issues and to the amount involved in the proceeding[7]?

10. Section 86 of the Act provides that costs are ultimately in the discretion of the court. In particular subsection 86(2) provides that:

“(2) Where the least expensive course is not taken by a party, the costs allowed to the party shall not exceed what would have been incurred had the least expensive course been taken.”

11. I have considered each of the relevant factors in exercising discretion and determining an appropriate costs award in this case.

Offers to Settle

12. The policy underlying rule 49 is that if the result after trial shows that it would have been better for the party receiving the offer to have accepted the offer, then the party that made the offer is entitled to a more favourable disposition of costs than if the offer had not been served. Rule 49 creates an incentive for parties to make and to accept reasonable offers to settle or face the consequences.

13. Where a plaintiff makes an offer that the defendant rejects and the plaintiff achieves a better result at trial then the presumption is that the plaintiff is entitled to partial indemnity costs up to the date of the offer and substantial indemnity costs thereafter, subject to the court's discretion.

14. Where a defendant makes an offer that the plaintiff rejects and at trial the plaintiff achieves judgment for less than the amount offered, then the presumption is that the plaintiff is entitled to partial indemnity costs up to the date of the offer and the defendant is entitled to partial indemnity costs from the date of the offer.

15. Three offers to settle were served in this case. None of them were accepted. The question is whether either party achieved a more favourable result at trial than was offered in a settlement offer, inviting the cost presumptions of rule 49.10, and if so whether the court should exercise its discretion to award costs differently. The difficulty in this case is in assessing the value of an offer where the costs component of the offer is unknown. Mr. Johnstone argues that the offers to settle were ambiguous. Cleanol argues that certainly costs would be awarded in its favour and on that basis Cleanol achieved a better result than at least one of the offers.

Mr. Johnstone's July 30, 2014 offer

16. On July 30, 2014, just over seven days before the August 7, 2014 opening of trial, Mr. Johnstone offered to settle by paying Cleanol $60,000.00 inclusive of principle, costs and interest. Mr. Johnstone did not achieve a better result at trial. The amount awarded, including prejudgment interest[8], is $60,322.81. In assessing the value of the offer Cleanol's partial indemnity costs up to July 30, 2014 must be considered. Cleanol achieved a better result at trial, so this offer does not qualify for the rule 49 presumption as to cost consequences.

Cleanol's March 6, 2014 offer

17. On March 6, 2014 Cleanol offered to settle upon Mr. Johnstone paying $61,215.00 to Cleanol for its claim plus expert fees of $42,825.00 plus 60 percent of its legal costs quantified as of the date of the offer at $89,965.00 plus costs incurred after the date of the offer up to the date of acceptance using the same formula. The total value of this offer is $194,005.00. Cleanol did not achieve a better result at trial. This offer does not qualify for the rule 49 presumption as to cost consequences.

Cleanol's May 6, 2014 offer

18. On May 6, 2014, three months before the start of the trial, Cleanol offered to accept $25,000.00 to settle the litigation plus prejudgment interest[9] plus costs on a partial indemnity scale (not quantified), either as agreed or to be assessed, plus disbursements plus full reimbursement of experts’ reports quantified at $64,324.87[10]. The total value of this offer, excluding costs, is $95,148.52 made up of the principle sum of $25,000.00 plus prejudgment interest of $1,075.12 up to the date of the offer plus expert reports (excluding transcript fees) of $64,324.87 plus disbursements of $4,748.53. Whether Cleanol achieved a better result at trial cannot be calculated without knowing the costs component of the trial award. However, for comparison purposes I assume that costs assessed up to May 6, 2014 would be the same whether assessed for the purpose of a settlement or for the purpose of trial.

19. Assuming that the court awards costs on a partial indemnity scale up to the date of the offer and allows expert fees of at least $64,324.87 then the result achieved at trial is better than the amount offered. However, for reasons that follow, the expert fees allowed are well below the amount that Cleanol demanded in its offer to settle. The total of the recovery on the claim plus expert fees offered ($25,000.00 + $64,324.87 = $89,324.87) compared to the total amount allowed for recovery plus expert fees ($57,657.31 + $25,000.00 = $82,657.31), disbursements being the same in both cases, shows that Cleanol did not better its offer by going through with the trial. The May 6, 2014 offer does not qualify for the rule 49 cost presumption.

20. In any event, given the other factors relevant to determining costs in this case and given the court’s discretion under section 86 of the Act and section 131 of the Courts of Justice Act, in my view an award of substantial indemnity costs after the date of the May 6, 2014 offer would not be appropriate. Cleanol was entirely unsuccessful on its “quid pro quo” claim, which formed the larger part of the claim it advanced to trial. This portion of its claim consumed much of Cleanol’s trial preparation expense and trial time, including the evidence of multiple witnesses, voluminous document books and uncertified transcripts of tape recorded conversations.

21. Had Cleanol abandoned its “quid pro quo” claim early in these proceedings and advanced to trial only on its lien claim then it would have been in a position to successfully argue that it is entitled to substantial indemnity costs. Having pursued the quid pro quo claim to the bitter end, unsuccessfully, it would be inappropriate to require Mr. Johnstone to pay substantial indemnity costs on a case that would have had a much greater opportunity to settle had Cleanol abandoned that part of its claim before trial. For these reasons, had the rule 49 cost presumption applied, I would have exercised my discretion regarding the appropriate scale of costs and would not have awarded Cleanol costs on a substantial indemnity scale following the May 6, 2014 offer to settle.

Indemnity: Hourly rates and experience

22. Cleanol’s primary lawyer was called to the bar in 1974. One issue is whether Cleanol required a lawyer of such seniority for this case. In the Costs Outline filed the actual amount charged for the primary lawyer’s time is reported at different amounts in different parts of the Costs Outline. It is unclear whether the actual rate charged to the client fluctuated between $300.00 and $600.00.

23. The partial indemnity rate claimed for Cleanol’s primary lawyer, which is the rate that is relevant to my findings on costs, is consistent throughout at $350.00 per hour. I find that the partial indemnity rate is reasonable. While the case may not have warranted a primary lawyer of 40 years’ experience, the hourly rates claimed for his services on a partial indemnity scale reflect rates that are reasonable and consistent with rates charged for a case conducted in the City of Toronto of this type and complexity by a lawyer in the ten to twenty year range of experience. On that basis no adjustment to the rates claimed is warranted based.

24. Several other lawyers and law clerks docketed time to this file at various rates. I find that the rates charged on a partial indemnity scale for all of the lawyers and law clerks who worked on the file are reasonable.

25. The more difficult issue is whether the amount of time claimed is excessive given the matters and amounts in issue. Cleanol claims costs based on 610.9 hours for its primary lawyer, including eleven trial days[11]. The costs claim also includes 51.4 hours spent by other lawyers and 174.7 hours spent by law clerks on the file. In total I find that the time spent on this file was excessive and I draw the inference that the least expensive course was not taken by Cleanol in preparing and presenting its case, a factor specifically relevant to construction lien cases by reason of section 86(2) of the Act..

26. One example is the duplication of exhibits at trial: rather than submitting photographs once in an exhibit book at trial, Cleanol prepared and filed blow-ups of photographs already in evidence. Another example is the use of the expert, Revay, for the purpose of reciting portions of websites, codes and by-laws that did not require an expert. Yet another example is the amount of trial time and the extent of the documents filed regarding taped conversations and uncertified transcripts of these conversations, evidence that was not helpful to Cleanol’s case.

27. The case did not warrant over 800 hours of legal time. In fixing costs in this case I have taken my findings that the legal time claimed by Cleanol is excessive in the circumstances.

Complexity

28. Cleanol’s assertion of a quid pro quo agreement added complexity to the case. Cleanol was not successful on that issue. The balance of the case was of medium complexity and involved issues that arise in many construction lien cases.

29. Cleanol, in its costs outline, suggests that the case was complex because it involved a very large amount of documentation requiring 15 to 20 bound volumes. My pretrial directions were clear: only documents necessary for trial should be included in a document book. The document books in this case included a significant number of documents were either not required or were repetitive.

Importance of the matter and Degree of Success

30. The case was important to the parties but not beyond. Cleanol was partially successful, achieving $57,657.31 of its $175,656.97 claim and resisting most of Mr. Johnstone’s $240,000.00 counterclaim.

Reasonable expectation of the payor

31. Access to justice requires that a costs award be in the reasonable expectation of the unsuccessful party. The key concept is reasonableness.

32. The costs provisions of the Construction Lien Act, the Courts of Justice Act and the rules should reasonably have informed Mr. Johnstone to expect to pay costs if unsuccessful. The costs incurred by him should also reasonably have informed him as to the quantum of costs to expect the successful party to claim.

33. The costs outline filed on behalf of Mr. Johnstone before knowing the outcome of the litigation shows costs on a substantial indemnity scale of $196,952.91 made up of $161,650.00 for fees plus HST on fees plus disbursements of $14,288.41, including one expert report at a cost of $10,913.81. Mr. Johnstone ought reasonably to have expected that Cleanol would incur a similar amount for its legal fees on a substantial indemnity scale.

34. On a partial indemnity scale Mr. Johnstone’s costs as reflected in his costs outline are reported to be $144,739.84 made up of $115,443.75 for fees plus HST on fees plus disbursements of $14,288.41, including one expert report at a cost of $10,913.81.

35. On that basis, if costs in favour of Cleanol are fixed on a partial indemnity scale, Mr. Johnstone’s reasonable expectation ought to have been in the range of $144,739.84. That reasonable expectation is one of the factors that the court considers in fixing costs.

Conduct of the parties and wastefulness: Were unnecessary steps taken?

36. Cleanol relies on my costs decision in Thyssenkrupp Elevator v 1147335 Ontario Inc.[12] wherein I cited the court of appeal regarding the purpose of a costs award:

3. As noted by the Court of Appeal in 1465778 Ontario Inc. v 1122077 Ontario Ltd.[13], Feldman, J.A. writing for the court, costs in a civil action serve several purposes:

“Traditionally the purpose of an award of costs within our ‘loser pay’ system was to partially or, in some limited circumstances, wholly indemnify the winning party for the legal costs it incurred. However, costs have more recently come to be recognized as an important tool in the hands of the court to influence the way the parties conduct themselves and to prevent abuse of the court’s process. Specifically the three other recognized purposes of costs awards are to encourage settlement, to deter frivolous actions and defences, and to discourage unnecessary steps that unduly prolong the litigation”.

(emphasis added)

37. Mr. Johnstone asserts that Cleanol wasted time on discoveries and ought to have completed discoveries in one day. Given the lengthy list of deficiency items claimed in Mr. Johnstone’s Scott Schedule and the timing of discoveries in relation to reducing the counterclaim firstly to $142,363.01 on November 28, 2013 and then to $50,000.00 at the opening of trial, the amount of time taken for discoveries was not unreasonable. However, I agree with Mr. Johnstone that the issue of bank records could have been explored at discovery, eliminating the preparation, summonses and trial time taken up at trial on the issue of bank records. I have taken this factor into account in fixing costs.

Fees claimed for expert reports and attendance at trial

38. On the issue of the conduct of the parties and whether any steps were taken that were unnecessary a comment about the time, expense and utility of the expert evidence adduced by Cleanol at trial is warranted.

39. Cleanol incurred costs of two experts’ reports to respond to Mr. Johnstone’s large counterclaim: the Revay report and the Morrison Hershfield report. The reports were obtained by Cleanol to respond to Mr. Johnstone’s allegations of deficiencies, incomplete items and permits.

40. Eight months before trial Mr. Johnstone reduced his $240,000.00 counterclaim (at least twelve categories of items subdivided into over 60 individual items) to $142,363.01. Then, at the opening of trial, Mr. Johnstone further reduced his counterclaim to $50,000.00 made up of a $13,500.00 claim for two deficiencies ($5,940.96 for fireplace granite plus $7,571.00 for the stair railing) plus $28,000.00 for permits plus $9,000.00 for delay.

41. Mr. Johnstone succeeded on only two of the items claimed: $3,647.00 for the backsplash (conceded by Cleanol) and $2,712.00 for the stair railing (based on quantification evidence of Mr. Giampietro). Cleanol had retained the services of the two experts earlier in the litigation to prepare reports to respond to the many complaints listed in Mr. Johnstone's initial Scott Schedule. The reports were completed on October 2, 2013 (ReVay) and October 31, 2013 (MH), prior to Mr. Johnstone reducing his counterclaim by almost $100,000.00 on November 28, 2013.

42. The Revay and Associates Limited report: Cleanol claims $17,521.13 for expert fees for the Revay report and for Paul Sandori's attendance at trial. The report was unhelpful. There is no clear statements of the instructions given to the expert. The report recites evidence given by other witnesses and information supplied by others. The only opinions that Mr. Sandori provides that are relevant to issues before the court pertain to permits. At paragraphs 12 and 13 he addresses a permit issue relating to work done outside the unit by the condominium board’s plumber. That work was not relevant to Cleanol's work inside the unit. The ReVay report also addresses whether a permit was required for the two holes drilled by a specialist engineering company within the unit. If the opinion on that discreet issue was relevant I question whether it was necessary or reasonable at a cost of $17,521.13.

43. Mr. Sandori discusses at length in his report the concept of “luxury”, not as an expert but as a lay person. That is not expert evidence. At paragraph 26 he opines that the renovation added “considerable value” to the unit. He is not a real estate valuator and his opinion on value is imprecise and outside his professional expertise. It was not necessary for this trial. Mr. Sandori then discusses delay, reciting much of the evidence of Mr. Johnstone’s complaints about delay and setting out common sense “opinions” that did not require an expert. In effect this part of his report usurps the function of the trier of fact in arriving at conclusions on the issue of delay.

44. On the issue of deficiencies, again Mr. Sandori in his report recites the evidence of communications between the parties and findings of the expert retained by Mr. Johnstone. He opines at paragraph 57 that many of the deficiencies’ complained about are common on all construction projects and are covered by a contractor’s post-completion warranty. That opinion is helpful but expert evidence was not required to adduce evidence of a contractor’s post-construction warranty. Mr. Sandori opines at paragraph 58 on the quality of the work and the workmanship. This opinion is within his expertise. He recites code provisions at paragraphs 59 and 60 on the issue of permits and permit drawings for use in a condominium unit renovation. However he acknowledges at paragraph 62 that opining on whether stamped permit drawings were necessary in the Johnstone renovation was outside the scope of his retainer.

45. In my view the Revay report was largely unhelpful and unnecessary. On the basis of proportionality the $17,521.13 spent to obtain it was excessive. It would not be appropriate to pass the cost of this expert report on to Mr. Johnstone and require that he reimburse Cleanol for it. No costs are allowed for the Revay report.

46. The Morrison Hershfield report: Cleanol claims $46,803.74 for expert fees for the October 31, 2013 expert report and attendance at trial of Simeon Posen of Morrison Hershfield (“MH”). This expert was retained to respond to the August 4, 2013 report[14] of Mr. Johnstone’s expert, Ivan Martinovic of GRG Building Consultants, listing multiple deficiencies.

47. The MH report addresses each of the 112 items complained about by Mr. Johnstone and addressed in the GRG report and provides an analysis and opinion on each item. Had Mr. Johnstone proceeded to trial with these 112 items (all but 2 of which were withdrawn prior to or at the opening of trial) the MH report would have been helpful to the court in assessing the veracity of each of the deficiencies complained about by Mr. Johnstone. Mr. Johnstone reduced his counterclaim by almost $100,000.00 within a month of MH releasing its report.

48. Mr. Posen provided his opinion on item 31 that a Plexiglas retrofit for the staircase railing would be appropriate. Mr. Johnstone recovered $2,712.00 of the $7,571.00 claimed for this item because the staircase railing did not meet code requirements and I found that for the purpose of quantifying damages the Plexiglas retrofit was more appropriate than complete replacement of the railing.

49. Mr. Posen provided his opinion on item 70, a complaint that the granite backsplash had not been installed, that he observed that a brick backsplash had been installed. An expert’s opinion was not required to adduce this evidence. Cleanol conceded a credit for this item after acknowledging that it had not installed the granite backsplash.

50. Mr. Johnstone claimed $5,940.96 for the fireplace granite. The MH report addresses this issue at items 19 and 20. The expert’s opinion is that the granite was too delicate for mitered corners. This opinion was helpful. He provided no opinion on whether a butt joint was a reasonable solution. An opinion on this issue would have been helpful but it was not sought.

51. Cleanol needed evidence to respond to the multiple and detailed complaints advanced by Mr. Johnstone to support his $240,000.00 counterclaim. It was not unreasonable for Cleanol to retain an expert for this purpose and given that almost all of the complaints were withdrawn before or at the opening of trial. I draw the inference that the MH report contributed to Mr. Johnstone’s decision to abandon many of his counterclaim items.

52. My concern with the MH report is whether it was reasonable for Cleanol to have incurred the expenditure of $46,803.74 for the expert's report and trial attendance. In my view the quantum spent is disproportionate to the amount in issue. Even if the counterclaim had continued as a $240,000.00 counterclaim, the cost of the report was disproportionate. A successful litigant does not have carte blanche to incur excessive expert expenses. It is not reasonable in the circumstances of this case to require Mr. Johnstone to cover the actual cost of the MH report. Certainly Cleanol could have imposed parameters on the expert that would have allowed MH to provide a helpful opinion in a more cost-effective manner. Cleanol must bear some responsibility for the excessive cost of this expert. I find that a reasonable quantification of costs for this expert for the purpose of a costs award is $25,000.00 including HST.

Fees claimed for evidence pertaining to tape recordings

53. In support of its unsuccessful claim for profit and overhead of $107,639.46 based on what Cleanol characterized as a quid pro quo agreement, Cleanol tape recorded and transcribed conversations that took place at numerous meetings.

54. Mr. Johnstone argues that these tapes were unnecessary, irrelevant and disproportionate to the amount in issue. I agree. The transcripts of these audio recordings, taken without the knowledge of others present at the meetings, took up volumes of document books and a significant amount of court time listening to them. Any costs associated with recording these conversations, including transcribing them, trial preparation and trial time taken to listen to them, is excised from a costs award in favour of Cleanol.

Evidence-in-chief repetitious and unnecessarily lengthy

55. It is not unusual in a construction lien reference to conduct the trial as a hybrid trial with affidavit evidence-in-chief of some witnesses and oral evidence-in-chief at trial of other witnesses. My usual practice in trials where evidence-in-chief is by affidavit is to allow oral cross-examination and oral redirect examination at trial but not oral evidence-in-chief at trial. Cleanol persuaded me that in this case the court should allow oral evidence-in-chief at trial of its main witnesses.

56. The affidavit evidence-in-chief of Cleanol's main witnesses, Ms Yueh and Mr. Giampietro, was unnecessarily lengthy and went beyond clear and concise statements of facts relied upon to prove Cleanol's case. The affidavits were filled with hearsay, opinion and editorial comment. The time taken to prepare the affidavits and the time required to read and respond to the affidavits was excessive.

57. Having convinced the court to hear oral evidence-in-chief of deponents at trial, Cleanol conducted examinations at trial that were repetitive of the affidavit evidence-in-chief. The trial time taken up for repetitive evidence was not required. I have taken this factor into account in fixing costs.

58. I found that the cross-examinations conducted by Mr. Johnstone's counsel at trial were focused and did not take up time unnecessarily.

Affidavit evidence served and withdrawn

59. Mr. Johnstone listed 15 trial witnesses and served affidavit evidence in chief from 13 of them. At trial he withdrew 9 of these witnesses. He sought to withdraw a tenth but Cleanol objected. This is relevant to costs because Cleanol was required to review and prepare to respond to the evidence of these nine witnesses, including preparation for cross-examination and preparation of reply evidence. I have taken into account in fixing costs that Mr. Johnstone was responsible for causing Cleanol to incur legal costs that would have been avoidable had he not listed these witnesses and served their affidavit evidence in chief as part of his trial evidence.

Proportionality

60. The amount Cleanol claims for costs is almost five times the amount recovered at trial.

61. One concern I have in determining costs and assessing proportionality in this case arises from the amount of time spent by Cleanol’s lawyers. It is disproportionate to the amount and matters in issue. Cleanol’s primary lawyer spent 610.9 hours on the file, including 11 trial days. Three other lawyers spent a total of 51.4 hours and two law clerks spent a total of 174.7 hours on the file. The grand total of the time spent to prepare and present the case is 837 hours.

62. Even before the principle of proportionality was explicitly incorporated into section 1.04 of the Rules it was an intrinsic component of the Construction Lien Act. Sections 67(1) and 86(2) of the Act provide:

67(1). Summary Procedure: The procedure in an action shall be as far as possible of a summary character, having regard to the amount and nature of the liens in question.

86(2). Where the least expensive course not taken: Where the least expensive course is not taken by a party, the costs allowed to the party shall not exceed what would have been incurred had the least expensive course been taken.

63. Read together these provisions express the expectation that lien proceedings will be streamlined and proportionate to the matters in issue.

64. The Rules apply except where inconsistent with the Construction Lien Act. Rule 1.04, as recently amended, provides:

1.04(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

65. Cleanol spent a considerable amount of time on maters irrelevant to the outcome of the trial or on issues in which Cleanol did not succeed. For example, the time and expense of transcribing uncertified audio tapes was disproportionate to the utility of the tapes and, in any event, Cleanol failed at trial on the issue for which the evidence had been prepared. Another is the amount of time spent and expense claimed for discoveries in a case where Cleanol’s recovery is within the rule 76 threshold.

66. Mr. Johnstone argues that Cleanol's conduct was highly adversarial, disproportionate to the amount in issue and caused the proceeding to take so long. My observation throughout this reference is that both parties acted in a manner that was highly adversarial. When parties conduct litigation in this manner they are presumed to be prepared to pay for it: Cleanol must take responsibility for the costs associated with over-preparing its case and asserting its unwinnable "quid pro quo" claim and Mr. Johnstone must take responsibility for his tactic of advancing and then reducing a large counterclaim made up of many unwinnable items.

67. Cleanol relies on cases where the court has acknowledged that costs may initially appear disproportionately high compared to the amounts in issue, but were warranted because the time spent to prepare and present the case was necessary. Cleanol argues that in this case, as in those cases, the successful party should not be penalized. A critical part of the decisions that Cleanol relies on is whether the party claiming costs acted reasonably and proportionately. The cases that Cleanol relies on are distinguishable.

68. Cleanol cites my decision in Thyssenkrupp Elevator v 1147335 Ontario Inc.[15] in support of the proposition that where the defendant's conduct causes the plaintiff's costs to escalate and the plaintiff has no choice but to incur legal expense to achieve its claim, then what may appear to be a disproportionately high costs award is not, in fact, disproportionate. The distinguishing factor in the Thyssenkrupp case is that there the lien claimant was almost 100 percent successful and the owner's conduct had caused costs to escalate. Thyssenkrupp had no other means of collecting the debt for elevator repairs other than litigation. In the present case Cleanol was only 33 percent successful, having failed on its quid pro quo claim. The conduct of both Cleanol and Mr. Johnstone caused costs to escalate. The Thyssenkrupp case does not apply.

69. Similarly, in the construction lien cases of Sherwood v Ulanov[16], Crownwood Construction Ltd. v Omartech Construction Inc.[17] and Luxterior Design Corp. v Janna Gelfand, Mark Gelfand and The Toronto Dominion Bank[18], relied on by Cleanol for the same proposition, the plaintiffs had done everything reasonable to streamline the cases and reduce costs and the conduct of the defendants had caused costs to escalate. That is not the case here. Cleanol is as responsible as Mr. Johnstone for causing costs to escalate.

70. In fixing costs I am mindful of the amount of costs that would reasonably be proportionate to a case of this type and complexity, taking into account the degree of Cleanol’s success. This is a case where a significant reduction from the partial indemnity costs incurred is warranted on the basis of proportionality.

Conclusion

71. In conclusion I find that Cleanol is entitled to costs of the action on a partial indemnity scale. Weighing all of the factors discussed I find that a reasonable and appropriate amount for fees is $95,000.00[19] plus HST for a total of $107,350.00 for fees inclusive of HST. I further find that Cleanol is entitled to recover a reasonable amount for the expert report of Morrison Hershfield, required to respond to the many deficiency items claimed by Mr. Johnstone. I fix that amount at $25,000.00 inclusive of HST. For reasons explained Cleanol is not entitled to recover for the Revay report. I further find that Cleanol is entitled to recover its disbursements of $4,748.53, inclusive of HST. The total allowed for fees, disbursements and experts including HST is $137,098.53.

72. Costs are fixed at $137,098.53 in favour of Cleanol Integrated Services Ltd. payable by Quntin Johnstone. I regard this amount as fair and reasonable in the circumstances and an amount that ought reasonably have been in the expectation of Mr. Johnstone as the party responsible to pay costs.

73. The parties must contact my assistant[20] to arrange an appointment to settle the final reference report. At least one week in advance of the appointment Cleanol must circulate and file a draft report in the prescribed form in hard copy and in electronic format.

Master C. Albert .

March 18, 2015

CITATION: Cleanol Integrated Services Ltd. v. Quintin Johnstone, 2015 ONSC 1818

COURT FILE NO.: 11-CV-431927

DATE: March 18, 2015

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Cleanol Integrated Services Ltd.

Plaintiff (defendant by counterclaim)

• and -

Quintin Johnstone

Defendant (plaintiff by counterclaim)

COSTS OF ACTION

Master C. Albert

Released: March 18, 2015

[1] Action CV-13-472728 (Johnstone v Yueh and Giampietro) was referred by judgment of reference dated July 24, 2013 and heard together with construction lien action CV-11-431927.

[2] A. Zweig also appeared as counsel for the defendant to present submissions at the end of trial

[3] 9 full days and 4 half days

[4] Counsel reported that action CV-13-472828 settled but the court file shows the file as “active”.

[5] May 6, 2014 is the date of an offer to settle that Cleanol relies upon in its costs submissions

[6]Courts of Justice Act, R.S.O. 1990, c.C.43, s.131; Construction Lien Act, R.S.O. 1990, c.C.30, s.86

[7]Rule 1.04

[8] Prejudgment interest runs from July 15, 2011, being the date Cleanol registered its claim for lien, to February 2, 2015, being the date my decision was released, at the rate of 1.3 percent for a total amount of prejudgment interest of $2,665.50 {[$57,657.31 x 1.3%]/ 365} x 1298 days = $2,665.50 prejudgment interest up to February 2, 2015 ($2.05 per diem)}, bringing the value of the plaintiff’s award to $60,322.81. An additional $2.02 per diem for prejudgment interest will apply from February 3, 2015 to the date the report is signed and post-judgment interest will apply thereafter.

[9] {[$25,000 x 1.3%] /365} x 1208 days = $1,075.12

[10] Transcript costs have been deducted from expert fees reported in the plaintiff’s revised costs outline: $69,058.45 - $4,733.58 = $64,324.87.

[11] 9 full days plus 4 half days

[12] 2013 ONSC 2452 at para. 3

[13] 2006 35819 (ON CA), 2006 CarswellOnt 6582, 216 O.A.C. 339, 82 O.R. (3d) 757, 275 D.L.R. (4th) 321, 38 C.P.C. (6th) 1

[14] At trial Mr. Johnstone tendered a second report of GRG dated May 28, 2014 on the issue of the fireplace installation.

[15] 2013 ONSC 2452

[16] 2011 ONSC 4712 (Master Albert)

[17] 2006 20683 (Master Albert)

[18] 2014 ONSC 990 (Master Wiebe)

[19] This amount reflects 250 hours of legal time at $350.00 plus 100 hours of clerk time at $75.00 for a total of $95,000.00 in fees, plus HST at 15% on fees = $107,350.00

[20] Assistant Trial Co-ordinator David Backes, tel: 416-212-9783