SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-12-182

DATE: 2015/07/17

RE: JIMMIE RAYMOND JAMES and BRENDA LEE JAMES, Plaintiffs

AND:

MILLER GROUP INC., SMITH CONSTRUCTION (division of The Miller Group), Defendants

SERNOSKIE BROS. LIMITED and ALAN JOSEPH SERNOSKIE, Defendants by Counterclaim

BEFORE: Madam Justice Laurie Lacelle

COUNSEL:
Robert E. Houston, Counsel for the Plaintiff

Ryan D. Garrett, Counsel for the Defendants

Colin R. Dubeau, Defendants by Counterclaim

HEARD: May 11, 2015

ENDORSEMENT AS TO COSTS

Overview

[1] This is a decision on the costs to be awarded following a summary judgment motion and “mini-trial” heard on May 11, 2015 pursuant to rule 20.04(2.2) of the Rules of Civil Procedure. The issue at the mini-trial was whether the defendant Miller Group Inc., and Smith Construction [hereinafter “the Miller Group”] had a contractual right of indemnity as against the defendants Sernoskie Bros. Ltd. and Alan Joseph Sernoskie [hereinafter “the Sernoskie Bros.”], in relation to work performed by the Sernoskie Bros. on August 22, 2007 on the property of the Miller Group. Jimmie Raymond James and Brenda Lee James [hereinafter “the James’”] are the plaintiffs in this matter.

[2] In Reasons released on May 15, 2015, I held that the Miller Group had not established that it had a contractual right of indemnity as against the Sernoskie Bros. Accordingly, its application for summary judgment on this basis was dismissed.

[3] The Court requested and has received submissions from the parties as to the issue of costs. For the reasons that follow, the Miller Group is ordered to pay costs to the James’ in the amount of $23, 704.55 inclusive of disbursements and HST. The Miller Group is further ordered to pay costs to the Sernoskie Bros. in the amount of $27, 504.47 inclusive of disbursements and the HST.

The Governing Principles

[4] Section 131(1) of the Courts of Justice Act provides that “the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.”

[5] Guidance in how to apply section 131(1) of the Courts of Justice Act is given in Rule 57.01 of the Rules of Civil Procedure, and in particular in Rule 57.01(1) which sets out the factors which may be considered in exercising its discretion to award costs.

[6] Further guidance in the factors applicable to the exercise of this discretion is found in the jurisprudence. In Serra v. Serra, 2009 ONCA 395, [2009] O.J. No. 1905 (C.A.), the Court of Appeal for Ontario confirmed at para. 8 that “modern costs rules are designed to foster three fundamental purposes: (1) to partially indemnify successful litigants for the cost of litigation; (2) to encourage settlement; and (3) to discourage and sanction inappropriate behaviour by litigants”. The Court of Appeal for Ontario has also provided guidance as to the global approach to determining costs. In Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA), [2004] O.J. No. 2634, it directed that the overriding principles to be applied are those of fairness and reasonableness. The court held at paras 37-38:

The failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice. The costs system is incorporated into the Rules of Civil Procedure, which exist to facilitate access to justice. There are obviously cases where the prospect of an award of costs against the losing party will operate as a reality check for the litigant and assist in discouraging frivolous or unnecessary litigation. …

In deciding what is fair and reasonable, as suggested above, the expectation of the parties concerning the quantum of a costs award is a relevant factor … I refrain from attempting to articulate a more detailed or formulaic approach. The notions of fairness and reasonableness are embedded in the common law. Judges have been applying these notions for centuries to the factual matrix of particular cases.

The Positions of the parties

The James’

[7] The Plaintiff James’ have submitted a Bill of Costs totaling $23, 704.55, inclusive of disbursements and HST. The Bill of Costs includes costs dating from June 9, 2014, which date was subsequent to the decision of the Court of Appeal remitting the matter for a “mini-trial”. The Plaintiffs submit that having regard to the relevant principles, costs should be awarded on a substantial indemnity basis. They highlight the history of the matter since the decision released by the Court of Appeal on April 29, 2014, and urge the conclusion that while the Plaintiffs have made efforts to settle and move the matter forward, the Miller Group has not meaningfully responded.

[8] The James’ identify various factors in Rule 57.01 as germane to their position. They argue that the conduct of the Miller Group unnecessarily lengthened the duration of the proceeding: Rule 57.01 (e). They argue that the stance of the Miller Group regarding limited liability was unnecessary and arguably vexatious, and that they ought to have recognized that there was no basis to argue limited liability: Rule 57.01(f)(i), and (g). With respect to Rule 57.01(i) or any other matter relevant to the question of costs, they argue that with a costs order of at least substantial indemnification, the Plaintiffs will be shielded from any argument advanced by the Sernoskie Bros. pursuant to their agreement for the “shortfall” of costs short of complete indemnification.

The Sernoskie Bros.

[9] The Sernoskie Bros., the defendants by counter-claim, have submitted a Bill of Costs totaling $27, 504.41, inclusive of disbursements and HST. They ask for their costs since and including the Case Conference before Regional Senior Justice McNamara to and including the mini-trial, on a substantial indemnity basis.

[10] They submit that the application of the factors listed in Rule 57.01(1) favours the court ordering the Miller Defendants to pay the Sernoskie Bros.’s costs on a substantial indemnity basis. With respect to Rule 57.01(1)(o.a), which references the principle of indemnity, the Sernoskie Bros. note that they have incurred legal costs of close to $34, 000 since January of 2015 in responding to the Miller Defendant’s claim that an oral indemnity agreement existed. With respect to Rule 57.01(1)(c), they argue that notwithstanding that the Miller Group’s rights were unaffected by the Pierringer agreement between the plaintiffs and the Sernoskie Bros., the Miller Defendants “forced three unnecessary motions, an appeal, a Case Conference, further examination for discovery and this “mini-trial” based on their failure or refusal to understand the consequences of the Pierringer agreement, adding significant complexity to what would otherwise have been a straightforward proceeding”. Similarly, it argues the Miller Group’s conduct has lengthened the proceedings, that it took steps in the proceedings that were a mistake, and refused to admit what it ought to have admitted: Rule 57.01(1)(e), (f) & (g).

[11] The Sernoskie Bros. also make the submission that its offer to consent to a dismissal of the Miller Group’s crossclaim without costs was an offer that should have been accepted by the Miller Group. It notes that the Pierringer agreement contemplated that in that event, the Sernoskies would have co-operated and availed themselves to the remaining parties to give evidence at trial. It also notes that the Pierringer agreement between the Plaintiffs and the Sernoskie Bros. provided a basis upon which the Sernoskies can claim their costs against the Plaintiffs. While they are not advancing that claim at this time, as a factor Relevant to Rule 57.01(1)(i), they submit that “the most appropriate way to avoid the likelihood of the Plaintiffs being contractually liable for any of the Sernoskies’ costs incurred is to award the Sernoskies substantial indemnity costs as against the true driving force behind the mini-trial: the Miller Defendants”.

The Miller Group

[12] The Miller Group submits that the only costs that are at issue are those specifically related to the mini-trial itself, and that the balance of the costs incurred prior to and subsequent to the decision by the Court of Appeal are costs in the cause, and play no part in the mini-trial.

[13] The Miller Group resists a costs award on a substantial indemnity basis. They say any costs awarded should be on a partial indemnity basis. They argue that no offer to settle was made by either the Plaintiffs or Sernoskie Defendants which has been beaten. They also characterize their difference with the Sernoskie Bros. on the motion as a difference in their positions about the “legal effect” of the understanding held by both the Miller Group and the Sernoskie Bros. that the Sernoskie Bros. were wholly responsible for safe blasting and for the damage caused by fly rock, and therefore, they would not ask the Miller Group to pay for such damages.

[14] As regards the costs claimed by the Plaintiffs, they submit that the issue at the mini-trial was as between the Miller Group and the Sernoskie Bros. The only reason for the Plaintiffs’ involvement was the Pierringer Agreement, which did not involve the Miller Group, and was freely entered into by the Plaintiffs. Alternatively, they argue that any costs incurred by the Plaintiffs are nominal given that they presented no evidence at the mini-trial, but merely cross-examined witnesses and gave oral submissions. They submit these costs, on a partial indemnity basis, should not exceed $5, 000.00.

[15] As regards the Sernoskie Bros., they similarly argue that their role in the mini-trial was limited, and in the end, involved only oral submissions. They submit that the costs for the Sernoskie Bros. on a partial indemnity basis should not exceed $5, 000.00.

Analysis

[16] I find there is considerable merit to the submissions of the Plaintiffs and the Sernoskie Bros.

[17] The evidence, and particularly the lack of evidence, proferred at the “mini-trial” was not a surprise to the Miller Group. The deficiencies in the evidentiary record required to establish its claim ought to have been clear long before it scheduled the “mini-trial”. While alleging that the Sernoskie Bros. had by oral contract agreed to indemnify the Miller Group, they produced no direct evidence of a conversation between anyone from the Miller Group with Alan Sernoskie, or anyone else representing the Sernoskie Bros. The likelihood that they would be unsuccessful in the summary judgment motion, and hence liable for the costs of the other parties, was an outcome that ought to have been reasonably anticipated by the Miller Group.

[18] I agree with the Plaintiffs and the Sernoskie Bros. that the Miller Group’s conduct has lengthened the proceedings, that it took steps in the proceedings that were unnecessary, and that it refused to admit what it ought to have admitted (Rule 57.01(1)(e),(f), and (g)). This has resulted in considerable additional costs to each of the James’ and the Sernoskie Bros.

[19] I also find that the Miller Group did not meaningfully respond to efforts by the Plaintiffs and the Sernoskie Bros. to resolve issues, and move the case forward. Among other things, the record produced in the submissions on costs indicates that it was left to the Plaintiffs to move the matter forward following the decision of the Court of Appeal on April 29, 2014. But for the letter from the Plaintiffs’ counsel to the court on October 9, 2014, it is not clear when the Miller Group would have sought to have the issue of their alleged indemnification agreement determined. I also consider the refusal of the Miller Group to produce Mr. Jones for examination particularly troublesome conduct. The record also discloses a general lack of responsiveness on the part of the Miller Group to genuine proposals to settle the matter. I find the overall conduct of the Miller Group since receiving the decision of the Court of Appeal on April 29, 2014 has protracted the litigation unnecessarily, and in these circumstances, costs in addition to those necessitated by the “mini-trial” itself are reasonably claimed.

[20] Further, I do not accept the submission by the Miller Group that the costs involved in preparing for and conducting the mini-trial were nominal. The “mini-trial” took the better part of a full court day. It involved travel to another jurisdiction. Counsel for the Plaintiffs and the Sernoskie Bros. were well prepared for trial, and produced comprehensive materials to assist the court with the issues being litigated. Their participation in the mini-trial cannot be fairly assessed with reference to how many witnesses they called, as is suggested by the Miller Group. They were fully prepared to address an issue the Miller Group insisted on litigating. The costs they have claimed in that regard are reasonable. Given the conduct of the Miller Group to date, both parties remain implicated in the litigation and cannot be faulted for ensuring that their interests remain protected at every step of the litigation necessitated by the Miller Group.

[21] Nor do I accept that this is a case where costs on a partial indemnity basis are appropriate. In view of the findings above regarding the Miller Group’s conduct, costs on a substantial indemnity basis will be awarded.

[22] Having regard to the relevant principles, the submissions of the parties, and the Bill of Costs submitted, I find that it is fair and reasonable that the Miller Group pay the Sernoskie Bros.’ costs in the amount of $27, 504.47 inclusive of disbursements and HST. I further find that it is fair and reasonable that the Miller Group pay the James’ costs in the amount of $23,704.55 inclusive of disbursements and HST. These amounts shall be paid on or before August 30, 2015.

Madam Justice Laurie Lacelle

Date: July 17, 2015