Boudreau v. Loba, 2015 ONSC 3267

COURT FILE NO.: 13-59218

DATE: May 21st, 2015

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: JOSEPH ANDRE BOUDREAU et. al. , Plaintiffs

AND:

LOBA LIMITED, et. al. , Defendants

BEFORE: MASTER MACLEOD

COUNSEL: Paul K. Lepsoe, for the Plaintiffs, Moving Parties

Heather J. Williams, for the Defendants, Responding Parties

HEARD: In writing

COSTS ENDORSEMENT

[1] Following a motion argued in December of last year, I ruled that Michael Rankin and McMillan LLP were not in a disqualifying conflict of interest and I dismissed the motion to remove them as lawyers of record for the defendant Loba companies. Costs submissions were made in writing. The ruling on costs is as follows.

[2] The defendant was successful on the motion and is therefore presumptively entitled to costs. In the absence of extraordinary circumstances such costs will ordinarily be on a partial indemnity scale.

[3] The defendants request costs on a substantial indemnity scale because on August 12th, 2014 they offered to permit the plaintiff to withdraw the motion without costs provided the offer was accepted by August 19th, 2014. This is not a Rule 49 offer and I agree with the plaintiff that it does not contain any real offer of compromise. The fact that the motion was not withdrawn and the defendant then had to prepare responding materials is the basis for awarding costs. It is not justification for substantial indemnity costs. Costs will be awarded on a partial indemnity scale.

[4] There is an emerging consensus in the caselaw that a reasonable starting point in fixing partial indemnity costs is a number around 60% of the actual costs billed to the client.[^1] This is a starting point but not an end point since the court must also have regard to factors such as special fee arrangements and in any event must measure the time spent and effort incurred against the other factors set out in Rule 57.01. Ultimately the objective of the exercise is to determine the amount it is reasonable to award against the unsuccessful party.[^2]

[5] Fixing costs is of course a summary process and is not akin to an assessment. On an assessment under Rule 58, the court hears evidence about the work that has been done and conducts what is in essence a trial. This is now the exception. Subrules 57.01 (3) & (3.1) establish the general rule that costs shall be fixed and not assessed. The tradeoff is supposed to be that the judicial officer who heard the matter can fix the costs efficiently without the time, delay and cost of a separate proceeding to establish the costs.

[6] The award of costs is ultimately an exercise of the discretion described in s. 131 (1) of the Courts of Justice Act. I must have regard for the applicable factors set out in Rule 57.01 but it is not necessary to regard the rule as a checklist and to address each factor mechanically. In this case I must balance the principle of indemnity with the principle of reasonable expectations. The most important factors are those addressed in argument. That is the complexity and importance of the motion and the fact that two sets of counsel fees were incurred in responding to the motion.

[7] A motion to remove counsel is a significant motion pitting two important values against each other. On the one hand is the right of a litigant to be represented by the chosen counsel in whom he or she has confidence. On the other is the important value of ensuring all counsel are free of conflicts that may bring the justice system into disrepute. Privilege is also a core value of the justice system since it is critical to promoting candid disclosure of information between lawyer and client and the giving and receiving of legal advice. Such motions are not brought lightly and require a robust response. They are important motions of some complexity.

[8] The motion within the motion to exclude certain evidence added additional complexity. Thus it was necessary to hear argument concerning the allegedly privileged evidence before dealing with the merits of the conflict motion. In addition, there were additional allegations of conflict about work previously done for the federal government which encumbered the motion and required some response. The motion was therefore reasonably complicated but I agree with the plaintiff that on a spectrum of complexity it would not be extreme.

[9] The plaintiff takes issue with the amount of time used to calculate the bill of costs. Mr. Rankin, Ms. Williams and an articling student all spent similar amounts of time on reviewing the motion material and preparing the responding material and factum. This requires consideration. The actual total of the fees calculated at the applicable hourly rates was $43,471.00. By contrast Mr. Lepsoe’s costs outline contains only his own time and though he has not provided a calculation for anything other than partial indemnity, multiplying the hours spent by his full actual hourly rate would generate a bill of less than half that amount.

[10] Mr. Rankin is the lawyer of record. A motion such as this would obviously require him to spend time considering his position, investigating the facts, taking instructions and advising the client. It is also both proper and appropriate to retain outside counsel to prepare the response and to argue this type of motion. That is because the conduct of the lawyer and his law firm is under scrutiny and because his evidence is required for the motion. Inevitably therefore the responding party will incur fees for both the lawyer of record and the outside law firm.

[11] Some duplication of effort is therefore inherent in the nature of the motion and should be no surprise to the moving party. But I agree that it is not reasonable to visit on the moving party a complete duplication of legal fees. Mr. Rankin may well have spent as much time on the responding material as Ms. Williams but I would not allow all of that time in a party and party costs award. Mr. Rankin has also charged 13 hours for his original review of the matter and assessment of the client’s position before retaining outside counsel. That is reasonable.

[12] Similarly I would only allow the articling student time and the law clerk time if there is no duplication of time and they were carrying out tasks that would otherwise have been more expensively charged out by counsel. Legal research and drafting materials no doubt can be important delegated work but the court must be cautious not to charge the opposing party with the cost of educating students. For the most part, law clerk’s time is part of the law firm overhead and it is only appropriate to claim it as costs in lieu of time that would otherwise have been spent by counsel.[^3] I agree with the submissions of the plaintiff that it would be unfair to make a costs award that permits almost equal time to be charged by two senior lawyers and an articling student. It must be borne in mind that the higher hourly rates allowed for more experienced counsel at least in part reflect the expectation that senior counsel can be far more efficient. It does not follow that duplicate time should be entirely eliminated.

[13] For the purpose of party and party costs I have reduced Mr. Rankin’s account by $12,000 and the student’s time by $2,000.00. This produces a figure of $29,471.00 as an actual fee and if I take 60% of that amount as a starting point it generates $17,682.60 for fees. This is not a scientific formula but simply one way to arrive at a reasonable amount. It is not a calculation by which the court is bound.

[14] Ms. Williams has calculated her partial indemnity rate as the same as her substantial indemnity rate on the rationale allowed by Justice Aitken in GRIDS v. Peterson.[^4] I do not quarrel with that principle and I have applied it in other cases. There is no reason that the opposing party should benefit from a discounted rate or special fee arrangement given to preferred clients. On that basis it is arguable that a reduction of less than 40% from the actual amount would be justified in relation to her portion of the account. There is almost 60 hours of her time recorded in the costs outline including 6.6 hours for the hearing. I do not doubt the time was spent but I do not think full cost recovery is justified in this case. To arrive at a fair award I would either reduce the hours or use a lower discount. If I use a figure of 80% rather than 60% for her portion of the costs then the $17,682.50 arrived at by calculating 60% of the actual fee would have to be adjusted. A calculation of 80% of the $20,650 billed by Ms. Williams and 60% of the balance of the amount I have used as my starting number generates a partial indemnity fee of $21,813.00.

[15] As I said earlier in these reasons, the court is not bound by slavish adherence to hourly rates nor to a particular formula. Having regard to the difficulty and complexity of the motion, the importance of the issues and considering the balancing exercise required under the rule, partial indemnity costs of $21,813.00 seems appropriate. To this must be added HST of $2,835.69 and the disbursements of $377.76. This totals $25,026.45.

[16] In conclusion the defendant is awarded costs on a partial indemnity scale fixed at $25,026.45 inclusive of HST and disbursements as set out above.

May 21st, 2015

Master C. MacLeod

[^1]: See Spiteri Estate v. Canada 2014 ONSC 6167 (Master) @ para. 53.

[^2]: Boucher v. Public Accountants Council for the Province of Ontario (2004) O.R. (3d) 291 (C.A.)

[^3]: See 1188710 Ontario Ltd. v. Gartner 2013 ONSC 2008 (S.C.J.)

[^4]: 2013 ONSC 1041 (S.C.J.)