Court File and Parties
Citation: Cree Construction v. Kashechewan, 2015 ONSC 1989 Court File No.: 17037/10 Date: 2015-03-26 Ontario Superior Court of Justice
Between: Cree Construction and Development Company Ltd., Plaintiff – and – Kashechewan First Nation, Defendant
Counsel: Guy Wainwright, for the Plaintiff (Defendant by counterclaim) Philip Tunley, for the Defendant (Plaintiff by counterclaim)
Decision on Costs
E.J. Koke S.C.J.
[1] I released a 34 page written decision in these proceedings on February 2, 2015 and invited the parties to make further written submissions with respect to costs. What follows is my decision with respect to the costs, and the reasons therefore.
Background
The Actions
[2] The plaintiff construction company, Cree Construction and Development Company Ltd. ("Cree Construction") entered into a Canadian Construction Document Committee ("CCDC") contract with the defendant Kashechewan First Nation (the "First Nation") for the construction of 20 housing units in the community of Kashechewan, Ontario. The contract price was $4,506,482.00, together with a contingency allowance of 10% ($450,648.20).
[3] Cree Construction arranged to ship construction materials to the site by barge in October and November of 2007. Construction commenced the following July. The plaintiff stopped work in May, 2009, and eventually abandoned the site, at which time it had partially completed 15 units. It had been paid $2,838,043.90.
[4] Cree Construction commenced action against the First Nation on April 9, 2010. It claimed that a further sum of $2,284,543.49 was due and payable in relation to these 15 partially completed units. It attributed the increased construction costs to changes which were made to the building plans, to extras resulting from unstable soil conditions, and to delays in the construction schedule for which it held the First Nation responsible.
[5] Thereafter the First Nation completed construction of the 15 unfinished units and constructed the five units which had not been started by Cree Construction.
[6] The First Nation took the position that Cree Construction has been paid what it was owed pursuant to the contract. It submitted that it was not responsible for any delays and that the extras which had been claimed represented work and materials which were included as part of the contract.
[7] The defendant issued a counterclaim against the plaintiff on April 12, 2012. It claimed the sum of $728,864.18. It alleged that Cree Construction had been overpaid for the work it completed at the time it abandoned the site and that the costs of completing the construction of the 20 houses exceeded the fixed price set out in the contract. It also claimed general damages on behalf of the residents of the community for the delays which resulted from the failure of the plaintiff to complete construction in a timely manner.
[8] The trial took place before me in Cochrane, Ontario over a period of 9 days in March, 2014 and a further 4 days in October, 2014. Final submissions where heard in Parry Sound, Ontario on November 17, 2014.
The Decision
[9] With respect to the main action, Cree Construction's contractual claims were dismissed in their entirety. I found that the First Nation was not in breach of any of the terms of the contract and in fact, as of the date Cree Construction abandoned the contract, the First Nation had actually overpaid Cree Construction by $183,615.67. The extras claimed by Cree Construction comprised work and materials which formed part of the contract and the First Nation was not responsible for any alleged delays.
[10] With respect to the counterclaim, I found that the First Nation was entitled to damages in the sum of $111,320.90, representing costs of completion over and above the contract amount.
[11] In the end, I did not order that Cree Construction pay any money to the First Nation. A certificate of substantial completion had been issued on January 16, 2012. I found that upon the issuance of the certificate Cree Construction became entitled to payment of a holdback totalling $294,936.41. This sum was applied against the amount which comprised the overpayment and against the costs of completion.
The Settlement Offers
[12] In late July and early August 2013, the parties exchanged written offers to settle. Cree Construction's offer provided that it was prepared to settle the proceedings on the basis that the First Nation pay it $2,000,000 with respect to the claim and that the counterclaim be dismissed without costs. The First Nation's offer provided that both parties consent to a dismissal of the claim and the counterclaim, and execute a full and final release, the form of which to be agreed upon.
[13] Neither of the offers was accepted.
Consideration of Relevant Factors
Results of the Proceedings
[14] The First Nation was successful in both the main action and the counterclaim. With respect to the main action, Cree Construction failed to prove any breach of the construction contract by the defendant, as alleged. With respect to the counterclaim, the First Nation was awarded significantly less than the amount claimed but was successful in arguing that it had sustained additional costs to complete the project which totalled $111,320.90.
The Settlement Offers
[15] In my view, Cree Construction obtained a judgment less favourable than the terms set out in the defendant's offer to settle in both the main action and the counterclaim. Even if I take into consideration that the release of the holdback monies in 2012 resulted in an order that no monies were payable by either of the parties, this result simply mirrors the result which would have been achieved if the First Nation's offer had been accepted. In the end, after the trial the result for Cree Construction was not more favourable than it would have been if it had accepted the settlement offer.
[16] Cree Construction argues that the Offer by the First Nation required the parties to sign a full and final release and the court decision did not provide for such a release. It argues that as a result Cree Construction remains free to pursue other claims between the parties which are the subject of an arbitration agreement.
[17] In my view, the reference to a full and final release in the offer to settle must be interpreted in the context of the proceedings. The release only applied to the issues in the proceedings, and not to issues which might become the subject of arbitration. The issues in the proceedings are now subject to the principle of Res Judicata.
The Experience of the Lawyer entitled to Costs and Rates charged.
[18] Mr. Tunley, who was lead counsel for the First Nation was called to the bar in 1986, which is 28 years prior to the completion of the action. He has significant experience as a commercial litigator and in cases involving native issues. He practices with Stockwoods LLP, a law firm which is based in downtown Toronto.
[19] The First Nation's assessment of costs is based on an actual hourly rate for Mr. Tunley of $575.00 and a partial indemnity rate of $350.00.
[20] Cree Construction argues that since the action originated in Northern Ontario and was tried at the district seat in Cochrane, the First Nation should have considered engaging local counsel, who would have charged a lower hourly rate.
[21] The First Nation submits out that the actual rates charged by Stockwoods LLP represent a significant discount from the rates it generally charges to a corporate/commercial client for contract litigation work of this value and complexity. For Mr. Tunley, the hourly rate would have been $700.00 in 2010 increasing to $850.00 currently. The First Nation was given a discount because of considerations relating to the ability of the client to pay and the importance of ensuring that First Nations can access justice, especially when they are sued.
[22] I am generally sympathetic to the argument that rates charged should reflect local rates. However, I note that the issues in this case were of considerable complexity, requiring familiarity with construction law principles and the interpretation of construction contracts, as well as contractual and equitable principles. There was also a considerable amount of money at stake for the First Nation, the total contract having a value of almost $5,000,000.00. I note as well that Stockwoods LLP provided a significant discount to the First Nation and brought the litigation to a successful conclusion. In the circumstances I am not prepared to question the First Nation's decision to employ counsel from Toronto, nor am I prepared to question the hourly rates which were charged.
The amount of costs that an unsuccessful party could reasonably be expected to pay.
[23] As discussed above, these proceedings involved a contract having a value of approximately $4,500,000.00 to $5,000,000.00. The amount claimed at trial by the plaintiff was $2,284,543.49. The trial, including final submissions involved 14 days of testimony and argument. There were lengthy pre-trial examinations and numerous exhibits. The First Nation requests that it be awarded its costs for the action in the total after-tax amount of $263,984.97. In my view, given the length of the proceedings, the complexity of the issues and the amount of money involved, the amount requested is an amount which Cree Construction could reasonably have anticipated.
The importance of the Issues
[24] In my view, the issues were very important from the perspective of the First Nation. Kashechewan First Nation is an impoverished community located on the shores of James Bay. It has many unmet social and economic needs and even a modest judgment could have effectively prevented it from pursing economic development and employment opportunities for its members off-reserve.
[25] The issues are also of public importance, in terms of the effective use of public funding received from Indian Affairs. Following the abandonment of the project by Cree Construction, the First Nation successfully took on the completion of the project within budget, using its own labour and construction management resources. By successfully defending the claim by Cree Construction it vindicated the public interest.
The conduct of any party that tended to shorten or lengthen the proceedings
[26] In my view, the matter proceeded before me in an efficient and effective manner. Counsel were well organized and demonstrated a high degree of cooperation.
[27] I am aware that following the commencement of the proceedings the parties engaged in arbitration proceedings and motions related thereto. These proceedings and the results therefrom are summarized in my decision in these proceedings, and in my view they assisted in defining the issues in the proceedings and benefited both parties.
Discussion
[28] In this case I see no reason to depart from the principle that costs should follow the event. As I pointed out above, the First Nation was successful on all issues in defending the claim, and demonstrated it incurred additional costs in completing the project, over and above the cost set out in the fixed contract.
[29] Equally significant in my view is the fact that the entire proceedings were rendered unnecessary by virtue of the First Nation's settlement offer. If this offer had been accepted the parties would have been left in the same position they were in following my decision, with neither party owing the other any money.
[30] The review of the Costs Brief filed by the First Nation establishes to my satisfaction that partial indemnity costs for the entire proceedings are properly calculated at $188,759.50, exclusive of HST. This assessment is based on discounted rates not only for Mr. Philip Tunley who is lead counsel but also discounted rates for his associates.
[31] The First Nation argues that it is entitled to substantial indemnity costs in relation to its counterclaim, on the basis that Cree Construction did not accept the settlement offer filed in relation thereto. It argues that the portion of partial indemnity costs attributable to the counterclaim should be increased by a factor of 1.5.
[32] I am not prepared to order that substantial indemnity costs be paid with respect to the First Nation's counterclaim. As I pointed out in my decision, much of the evidence in support of the claim for replacement materials, tools and equipment was confusing, contradictory, and poorly documented. My assessment of this claim, as well as the claim for additional contract administration costs and safeguarding costs was based on more of a common sense analysis than it was on the evidence of the witnesses who were called to support the claim. The claim for general damages was dismissed because no credible evidence was tendered in relation thereto. The First Nation claimed a total of $728,864.18 and was only awarded $111,320.90.
[33] A review of the materials filed in the First Nation's costs brief also establishes to my satisfaction that its disbursements are properly calculated at $25,090.95.
Decision
[34] The First Nation is awarded costs in relation to the claim and counterclaim as follows:
Partial Indemnity Fees for Claim and Counterclaim.....$188,759.50 Disbursements.........................................$25,090.95 Total.................................................$213,850.45
[35] Cree Construction is to pay the above amount within 30 days.
E.J. Koke S.C.J.
Released: March 26, 2015