CITATION: Henderson (Trustee of) v. Pitters, 2015 ONSC 2
COURT FILE NO.: 09-13221 (Hamilton)
DATE: 2015/01/05
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Lannie Henderson (by his trustee in bankruptcy, MSI Spergel Inc.), Jerry LaPorte, Nicola Jane Robinson and Nemesis Entertainment Complex Inc. (Plaintiffs) v. Holly Pitters, Kirk Pitters, Gabriel Kirchberger, Darling Court Developments Inc., Cathy Oden, GK York Management Services Inc., Club Nemesis and New Vision Entertainment Complex (Defendants)
BEFORE: The Honourable Mr. Justice R.A. Lococo
COUNSEL: James A. Brown, for the Plaintiffs
Ian Gerald T. Smits, for the Defendants, Gabriel Kirchberger, Darling Court Developments Inc., Cathy Oden and GK York Management Services Inc.
Holly Pitters and Kirk Pitters, Defendants, on their own behalves
HEARD: By written submissions dated November 13 to November 27, 2014
E N D O R S E M E N T – C O S T S
I. Introduction
[1] The plaintiffs leased a commercial property from Darling Court Developments Inc. for use as a nightclub. In this action, they claimed in excess of $150,000 plus punitive damages for civil conspiracy, breach of contract and unjust enrichment against Darling Court and other defendants. Their action was dismissed after a nine day trial without a jury. Compensatory damages were assessed at $100,000 had any of the defendants been found liable. Darling Court’s counterclaim for $8,494.94 in unpaid rent was allowed. Costs were left to be determined based on written submissions.[^1]
[2] Darling Court and related defendants have claimed costs in the amount of $52,453.68, consisting of fees of $44,427.50, disbursements of $2,073.90 and tax of $5,952.28. The amount claimed was calculated on a partial indemnity basis up to May 2, 2014 and on substantial indemnity basis thereafter. On that date, those defendants made an offer to settle that provided for dismissal of the action against them without costs if accepted by May 10, 2014. If accepted thereafter, the plaintiffs would be required to pay costs of $5,000 to those defendants.
[3] The defendants Holly Pitters and Kirk Pitters (who I will refer to as the Pitters) also submitted a bill of costs, outlining their time and disbursements relating to the action over a six year period. They were not represented by counsel throughout. They seek costs on a full indemnity or substantial indemnity basis, citing in particular objectionable conduct by Lannie Henderson, a former plaintiff, as justifying an enhanced award of costs.
[4] In his submissions, plaintiffs’ counsel conceded that successful defendants are generally entitled to their costs, but argued that partial indemnity was the appropriate scale of costs in this case. He argued that there is nothing in the plaintiffs’ conduct that would justify the awarding of costs of a substantial or full indemnity basis. In his submission, it was necessary and reasonable for the plaintiffs bring the action since they had no other recourse after being forced out of business. In all the circumstances, he argued that the total cost award should not exceed $10,000.
[5] Because the Pitters were not represented by counsel, their claim for costs raises different considerations than the costs claim by Darling Court and related defendants. I will therefore deal with the cost claims of each category of defendants separately below.
II. Costs claim by Darling Court and related defendants
[6] Dealing first with the claim for costs by Darling Court and related defendants, I agree with the plaintiffs that the appropriate scale of costs in this case is partial indemnity costs throughout.
[7] As a general rule, a successful party has a reasonable expectation of being awarded costs in the absence of special circumstances.[^2] As noted by the Ontario Court of Appeal in Foulis v. Robinson,[^3] costs are usually paid on partial indemnity scale; it is only in the rare and exceptional case that costs are awarded on a substantial indemnity basis, based on egregious or reprehensible conduct. I agree with the plaintiffs that there is nothing in the general conduct of the plaintiffs that would justify an enhanced scale of costs in this case. As well, although the plaintiffs were ultimately unsuccessful, I do not consider it unreasonable for them to have brought this action.
[8] In reaching this decision, I also took into account the offer to settle by Darling Court and related defendants, which, if accepted, would have resulted in dismissal of the action without costs. Rule 49.10 of the Rules of Civil Procedure[^4] provides for special rules relating to offers to settle. That rule was introduced in order to promote settlement offers. Where applicable, Rule 49.10 provides a “bonus” to the plaintiff or defendant who makes an offer to settle and later achieves a result at trial that is as favourable as or more favourable than the terms of the offer. Where the plaintiff made the offer to settle (subrule 49.10(1)), the plaintiff’s bonus is to receive substantial indemnity costs from the date of offer to settle (instead of receiving partial indemnity costs). Where the defendant made the offer to settle (subrule 49.10(2)), the defendant’s bonus is to receive partial indemnity cost from the date of offer (instead of paying the costs of the otherwise successful plaintiff from that date).
[9] The operation of rule 49.10 was described in greater detail in the 1990 decision of the Ontario Court of Appeal in S & A Strasser Ltd. v. Richmond Hill (Town).[^5] In that case, the Court of Appeal noted that the rationale of rule 49.10 as previously described only makes sense if the subrule 49.10(2) applies to the situation where the plaintiff succeeds in its action, but the result falls short of the terms of the defendant’s offer to settle. Subrule 49.10(2) does not apply where the plaintiff’s action is dismissed outright. The Court of Appeal concluded its discussion of the rationale of subrule 49.10(2) as follows:
That rationale does not fit a case where the plaintiff is totally unsuccessful because, without the rule, the defendant is normally entitled to party-and-party costs. The words in the rule "and the plaintiff obtains a judgment as favourable" make it clear that the rule has no application where the plaintiff fails to recover any judgment.[^6]
[10] In the Strasser case, the trial judge awarded solicitor-and-client costs against the plaintiff from the outset of the action following dismissal of the plaintiff’s claim. The trial judge did so based on the plaintiff’s failure to accept the defendant’s offer to settle that would have provided the plaintiff with an award of $30,000 on a claim that was originally $1 million but had been reduced to $70,000 prior to trial. On appeal, the Court of Appeal held that it was appropriate in these circumstances to provide a “bonus” to the defendant in the form of solicitor-and-client costs, but only from the date of the offer to settle, with party-and-party costs being awarded to the defendant prior to that date.[^7] In doing so, the Court was applying the rationale behind rule 49.10, but derived its authority to do so from rule 49.13 of the Rules of Civil Procedure when read together with the opening words of subrule 57.01(1). Rule 49.13 permits the court, when determining costs, to “take into account any offer to settle made in writing, the date the offer was made and the terms of the offer.” The Court of Appeal also held that there was no other justification for awarding enhanced costs based on the plaintiff’s conduct in that case.[^8]
[11] Applying the reasoning in the Strasser case, it may be argued that I have the discretion to award substantial indemnity costs to Darling Court and related defendants from the date of their offer to settle. However, in reaching the decision not to do so, I also took into account a subsequent decision of the Ontario Court of Appeal in McBride Metal Fabricating Corp. v. H & W Sales Co.[^9] In McBride, as in Strasser, the court case considered whether to award enhanced costs in reliance on rule 49.13 where rule 49.10 did not apply. In McBride, the Court of Appeal cited with approval the prior decision of Justice Fedak of this court in Dyer v. Melinda Snyder Partnership Inc.,[^10] holding that solicitor and client costs should not be awarded under rule 49.13 unless there has been “egregious or reprehensible conduct that warrants sanction.”[^11] The Court of Appeal in McBride went on to state as follows:
Apart from the operation of rule 49.10 (introduced to promote settlement offers), only conduct of a reprehensible nature has been held to give rise to an award of solicitor and client costs. In the cases in which they were awarded there were specific acts or a series of acts that clearly indicated an abuse of process, thus warranting costs as a form of chastisement. The conduct of the parties relating to the circumstances giving rise to the litigation or to their actions during the trial can be used to justify an award of costs.[^12]
[12] Given my finding that substantial indemnity costs are not otherwise justified based on the plaintiffs’ conduct in this case, it follows that the costs award against the plaintiffs should be on a partial indemnity throughout, on reasoning in the McBride decision. As well, if it is necessary for me to do so, the decision in Strasser may be distinguished on its facts. In that case, the offer to settle was clearly and significantly more favourable to the plaintiffs than the result achieved at trial (dismissal of the action). That was not the case in the action before me. In this action, the result under the offer to settle was the same as the result at trial except for the payment of costs, with the latter being avoided in their entirety only by accepting the offer within a few days. Regrettably for the plaintiffs, they chose to go to trial, but in the absence of other reprehensible conduct, I am unable to conclude that this decision should lead to an award of substantial indemnity costs.
[13] Taking the cost outline filed by Darling Court and related defendants and recalculating their costs on a partial indemnity basis using the same calculation method, the total amount of their fees is reduced to $32,701.50 before tax, resulting in total partial indemnity costs (including disbursements and tax) of $39,203.30. In reviewing the costs outline, I considered the time spent and amounts charged to be generally reasonable. However, in the fixing of costs, I am not bound by the calculation of hours and time rates.[^13] In order to arrive at a result that is fair and reasonable to all parties, I am entitled to take into account other factors set out in subrule 57.01(1) of the Rules of Civil Procedure, including the reasonable costs expectations of the unsuccessful party.[^14]
[14] Taking the matters outlined above into account, I fix the costs of Darling Court and related parties on a partial indemnity basis at $35,000 including disbursements and tax, payable by the plaintiffs within 30 days of taking out the judgment incorporating this costs award.
III. Costs claim by the Pitters
[15] As previously indicated, the Pitters submitted a bill of costs, outlining their time and disbursements relating to the action over a six-year period. The bill of costs indicated that they have spent a total of 333 hours on the matters relating to the litigation, including correspondence, researching case law, legislation and rules of practice, compiling documents, making copies, preparing for examination of witnesses at trial and attending each day at the trial. They suggested charging their time at a substantial indemnity hourly rate of $55 (for a total of $18,315), or alternatively, a partial indemnity rate of $40 (for a total of $13,320). They analogized these charging rates to the amount that would be charged for a law student, and also noted that they would normally bill their professional time in their own security business at $85 to $125 per hour. They also claimed $10,000 for lost revenue, representing an amount due from one of their own security clients who had thus far declined to pay their pay that amount because of dissatisfaction with delays on their project scheduled during the trial period. They also listed out-of-pocket disbursements of $7,193.67, which included $1.00 per copy or fax. These amounts total over $35,000 on a substantial indemnity basis, and over $30,000 on a partial indemnity basis.
[16] In Fong v. Chan,[^15] Ontario Court of Appeal recognized that the court has the discretion to award costs to self-represented litigants. In doing so, the Court of Appeal provided the following additional guidance:
I would also add that self-represented litigants, be they legally trained or not, are not entitled to costs calculated on the same basis as those of the litigant who retains counsel.… [A]ll litigants suffer a loss of time through their involvement in the legal process. The self-represented litigant should not recover costs for the time and effort that any litigant would have to devote to the case. Costs should only be awarded to those lay litigants who can demonstrate that they devoted time and effort to do the work ordinarily done by a lawyer retained to conduct the litigation, and that as a result, they incurred an opportunity cost by foregoing remunerative activity.… [A] self-represented lay litigant should receive only a "moderate" or "reasonable" allowance for the loss of time devoted to preparing and presenting the case. This excludes routine awards on a per diem basis to litigants who would ordinarily be in attendance at court in any event.[^16]
[17] I am satisfied that Holly Pitters and Kirk Pitters should be awarded costs in this case. In particular, I am satisfied that they devoted time and effort to work that would ordinarily be done by a lawyer conducting litigation, and that they incurred an opportunity cost by foregoing remunerative activity in their securities business.
[18] As previously indicated, the Pitters seek costs on a full indemnity or substantial indemnity basis, citing in particular objectionable conduct by Lannie Henderson, a former plaintiff. As explained in the previous section, I see nothing in the conduct of the plaintiffs to justify ordering an enhanced scale of costs. There was no egregious or reprehensible conduct that warrants sanction. I have also reached the same conclusion with respect to the conduct of Lannie Henderson. Therefore, the costs of the Pitters will be payable on a partial indemnity basis.
[19] In any case, Lannie Henderson is no longer a party to this action. I have no jurisdiction to order costs against him. He ceased to be a party following his bankruptcy. His trustee subsequently sold its interest in the litigation to Nicola Robinson, and I removed that the trustee as a party at the commencement of the trial on an unopposed basis.
[20] Under subsection 131(1) of the Courts of Justice Act,[^17] the costs of and incidental to a proceedings are in the court’s discretion, and the court may determine by whom and to what extent costs should be paid. However, as indicated by the Ontario Court of Appeal in Rockwell Developments Ltd. v. Newtonbrook Plaza Ltd.,[^18] the court is restricted to making an award of costs only against a party to the proceedings except in narrow circumstances that do not apply in this case. Accordingly, the costs in this case will be payable only by the plaintiffs, and not Mr. Henderson.
[21] When reviewing the bill of costs submitted by the Pitters, it is evident that any litigant would have devoted a significant portion of the time recorded to the case. As the Court of Appeal indicated in Fong v. Chan, charges for that time by a self-represented litigant are not compensable in costs. In addition, while I accept that the Pitters incurred an opportunity cost as a result of the litigation, they have not established that the amount of remunerative activity foregone amounted to as much as $10,000. As well, their disbursement claim is a multiple of the disbursements incurred by counsel for Darling Court and related parties.
[22] I am also mindful of the direction in Fong v. Chan that the amount awarded to self-represented parties be moderate or reasonable. In this regard, I note that the total partial indemnity claim of over $30,000 by the Pitters is not much less than the costs I have awarded to counsel of Darling Court and related parties. As well, in order to arrive at a result that is fair and reasonable to all parties, I am entitled to take into account other factors set out in subrule 57.01(1) of the Rules of Civil Procedure, including the reasonable costs expectations of the unsuccessful party.
[23] Taking the matters outlined above into account, I fix the Pitters’ costs of on a partial indemnity basis at $6,000 including disbursements and tax, payable by the plaintiffs within 30 days of taking out the judgment incorporating this costs award.
IV. Conclusion
[24] Accordingly, on the question of costs, an order will issue as follows:
The Defendants Darling Court Developments Inc., Gabriel Kirchberger, Cathy Oden and GK York Management Services Inc. are entitled to their costs of the action, fixed at $35,000 including disbursements and tax, payable by the plaintiffs within 30 days of taking out the judgment incorporating this costs award; and
The Defendants Holly Pitter and Kirk Pitters are entitled to their costs of the action, fixed at $6,000 including disbursements and tax, payable by the plaintiffs within 30 days of taking out the judgment incorporating this costs award.
The Honourable Mr. Justice R.A. Lococo
Released: January 5, 2015
CITATION: Henderson (Trustee of) v. Pitters, 2015 ONSC 2
COURT FILE NO.: 09-13221 (Hamilton)
DATE: 2015/01/05
SUPERIOR COURT OF JUSTICE - ONTARIO
BETWEEN:
Lannie Henderson (by his trustee in bankruptcy, MSI Spergel Inc.), Jerry LaPorte, Nicola Jane Robinson and Nemesis Entertainment Complex Inc.
Plaintiffs
- and -
Holly Pitters, Kirk Pitters, Gabriel Kirchberger, Darling Court Developments Inc., Cathy Oden, GK York Management Services Inc., Club Nemesis and New Vision Entertainment Complex
Defendants
BEFORE: The Honourable Mr. Justice R.A. Lococo
ENDORSEMENT – COSTS
Lococo J.
Released: January 5, 2015
[^1]: Henderson (Trustee of) v. Pitters, 2014 ONSC 6227, [2014] O.J. No. 5084 (S.C.).
[^2]: See Bell Canada v. Olympia & York Developments Ltd. (1994), 1994 CanLII 239 (ON CA), 17 O.R. (3d) 135 (C.A.) at para. 21.
[^3]: (1978), 1978 CanLII 1307 (ON CA), 21 O.R. (2d) 769 (C.A.).
[^4]: R.R.O. 1990, Reg. 194.
[^5]: 1990 CanLII 6856 (ON CA), [1990] O.J. No. 2321, 1 O.R. (3d) 242 (C.A.), at para. 4.
[^6]: Ibid. at para. 4.
[^7]: Ibid. at para. 11.
[^8]: Ibid. at para. 9.
[^9]: 2002 CanLII 41899 (ON CA), [2002] O.J. No. 1536, 59 O.R. (3d) 97 (C.A.).
[^10]: 1998 CanLII 14847 (ON SC), [1998] O.J. No. 2204, 40 O.R. (3d) 180 (Gen. Div.).
[^11]: Footnote 9 supra at para. 37.
[^12]: Ibid. at para. 39.
[^13]: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) at para 26.
[^14]: See in particular paragraph 57.01(1)(0.b) of the Rules of Civil Procedure.
[^15]: 1999 CanLII 2052 (ON CA), [1999] O.J. No. 4600, 46 O.R. (3d) 330 (C.A.).
[^16]: Ibid. at para. 28.
[^17]: R.S.O. 1990, c. C.43.
[^18]: 1972 CanLII 531 (ON CA), [1972] O.J. No. 1837, [1972] 3 O.R. 199 (C.A.).