SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 09-CV-376505
DATE: 20150818

RE: Empire Communities Ltd. and Empire Pleasantview Communities Ltd., Plaintiffs

AND:

Her Majesty the Queen, in Right of Ontario and Ontario Realty Corporation, Defendants

BEFORE: F.L. Myers J.

READ: August 17, 2015

COUNSEL: Ronald E. Carr and Richard Ogden for the defendants.

Paul DeMelo and Rahul Shastri for the plaintiffs

COSTS endorsement

[1] The defendants seek costs on a partial indemnity basis for the entire action. I dismissed the action on a motion for summary judgment by endorsement dated July 7, 2015 reported at 2015 ONSC 4355.

[2] In my endorsement I found that under the terms of an agreement of purchase and sale of land, the Crown, as vendor, did not have to disclose certain facts to the plaintiff purchaser. The facts that the plaintiffs claimed ought to have been disclosed were that an Indian Band (as those terms are used in the Indian Act, R.S.C. 1985, c. I-5) had brought a lawsuit seeking damages against the governments of Canada and Ontario concerning, among other things the land that was being sold. The Band had also made claims for compensation against the federal government under a programme related to the stewardship of Indian lands including the lands that were the subject of the sale.

[3] The plaintiffs alleged in this action that the government had a duty to disclose those claims and that the government’s breaches of that duty caused them to suffer damages. The damages were claimed originally at $500 million. By the date of the hearing of the motion for summary judgment, the plaintiffs’ claims had been reduced to somewhere between $18 million and $25 million.

[4] The defendants claim costs on a partial indemnity basis despite the fact that the plaintiffs’ principal argument was that the defendants breached their duty of good faith by, in effect, dishonestly failing to tell the plaintiffs about the claims made by the Band. The plaintiffs’ arguments focused on the Supreme Court of Canada’s decision in Bhasin v. Hrynew 2014 SCC 71, 3 S.C.R. 495 and, in particular, the duties of good faith and honesty as set out in that case. It would not have been beyond argument that the plaintiffs ought to be responsible for substantial indemnity costs in light of their unsuccessful accusations that the defendants acted in bad faith and made knowing misrepresentations.

[5] The defendants seek costs on a partial indemnity basis made up of fees of $164,238.05 and disbursements of $219,507.76 for a total of $383,745.81. The plaintiffs’ Costs Outline calculated their own costs on a partial indemnity basis at $96,031.50 for fees and $124,889.54 for disbursements for a total of $220,921.04. The plaintiffs complain that the defendants’ costs are nearly double the plaintiffs’ costs and are unreasonable. Moreover, they express concern that the defendants are government so that the rates claimed may not reflect actual costs to the defendants. Partial indemnity costs are not meant to provide a windfall to a party who has lower than average legal costs. 790668 Ontario Inc. v. D'Andrea Management Inc., 2015 ONCA 557.

[6] The plaintiffs acknowledge that “section 131(2) of the Courts of Justice Act and s. 36 of the SolicitorsAct provides [sic] that costs awarded to the Crown shall not be reduced or disallowed because counsel is a salaried officer of the Crown.” Absent a detailed analysis of the salaries and overheads of the Crown in hiring and housing all of its legal staff, there is no way to tell whether an award of costs on a partial indemnity basis may over or under-indemnify the government in any individual case. In my view, the statutes referred to above preclude such an analysis. Moreover, having to dig into the facts and read or hear evidence concerning Crown costs and resources in every single costs argument would be a seriously disproportionate process. It would not be the “simplest, least expensive and most expeditious process for fixing costs” required by Rule 57.01(7). Instead, where the Crown is a party, costs should be assessed on the regular basis bearing in mind the fundamental goal to achieve a reasonable costs outcome in the circumstances of each case. The fact that the Crown is a party is a circumstance that may have more or less relevancy in any particular case.

[7] In Lakew v. Munro, 2014 ONSC 7316 Firestone J. wrote:

[57] Costs are in the absolute discretion of the court. A successful litigant has no right to costs, but only a reasonable expectation of costs. The plaintiff’s position is that the defendant should be denied his costs and should pay the plaintiff’s costs because of the way in which he conducted the litigation.

[58] In Yelda v. Vu, 2013 ONSC 5903 (leave to appeal denied, 2014 ONCA 353) at para. 11, Arrell J. confirmed the long-standing principle that a successful party is entitled to costs except for good reason. He states as follows:

The principle that costs follow the event should only be departed from for very good reasons such as misconduct of the party, miscarriage in procedure, or oppressive or vexatious conduct of proceedings.

[8] The Divisional Court summarized the key costs principles in Andersen v. St. Jude Medical Inc. (2006), 2006 85158 (ON SCDC), 264 D.L.R. (4th) 557:

1. The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in rule 57.01(1): Boucher [Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291], Moon [Moon v. Sher (2004), 2004 39005 (ON CA), 246 D.L.R. (4th) 440], and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 2005 1042 (ON CA), 75 O.R. (3d) 638 (C.A.).

2. A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case: Boucher. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 119 A.C.W.S. (3d) 341 (Ont. C.A.), at para.

3. The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: rule 57.01(1)(0.b).

4. The court should seek to avoid inconsistency with comparable awards in other cases. “Like cases, [if they can be found], should conclude with like substantive results”: Murano v. Bank of Montreal (1998), 1998 5633 (ON CA), 41 O.R. (3d) 222 (C.A.), at p. 249.

5. The court should seek to balance the indemnity principle with the fundamental objective of access to justice: Boucher.

[9] In this case, the plaintiffs sued the government. They raised issues involving internal government dealings among several departments and ministries. From a legal costs and time commitment perspective, it was easy for the plaintiffs to just allege that a fact was not disclosed and to allege ill motive. It was much more difficult for the defendants to figure out if the facts are true and, if so, why they were or were not disclosed. It is not at all surprising that counsel who received the statement of claim spent many hours trying to figure out the facts and respond to them. This involved communications with multiple ministries and efforts to recall very old files and facts. The defendants have eliminated duplication of over 200 hours in the preparation of their Costs Outline. They prepared heavily for discovery and mediation. They obtained experts’ reports on damages to respond to the plaintiffs’ expert. The defendants retained two experts to respond to the plaintiffs’ expert. One responded to the plaintiffs’ financial analysis. The other dealt with the marketplace at the relevant time. The defendants’ experts opined that the plaintiffs suffered between zero and $1.9 million in damages due to the Aboriginal protest at their subdivision construction site. I cannot say that obtaining two experts is unreasonable in a case in which $20 million is claimed.

[10] The plaintiffs raise an issue that is becoming more common since the Supreme Court of Canada decided Hryniak v Mauldin, 2014 SCC 7, 1 S.C.R. 87. This case was decided solely on liability. Was it necessary or necessarily reasonable for the defendants to dig so deeply into damages if the case did not even raise a serious issue for trial on liability? The plaintiffs note as well that the defendants waited until quite late in the day before bringing their summary judgment motion. They say that they should not be liable for the preparation done by the defendants over all those many years, when the case was decided on summary judgment on liability alone.

[11] The plaintiffs commenced this action in 2009. The defendants pleaded in May, 2009. Voluminous productions were exchanged, discoveries held, and experts’ reports delivered all before Hryniak was decided. The parties held a mandatory mediation session in April 2014 shortly after the Supreme Court of Canada released Hryniak.

[12] It is a common refrain over the past two decades that civil litigation has expanded exponentially. Documentary discovery often becomes unwieldy. E-discovery can be prohibitively expensive. The use of expert witnesses has proliferated. The billable hour may incentivize an approach that maximizes work and leaves no stone unturned. Anecdotally at least, the liberalization of professional liability has led lawyers to conduct defensive practices. This also incentivizes an approach that leaves no stone unturned so as to avoid lawyers’ negligence claims. The days of senior counsel exercising paternalistic judgment to decide that a case turns on one or two documents or even one or two issues are long gone. And yet, perhaps, Hryniak represents a possibility for retrenchment and correction of an errant course. Hryniak now allows a party to focus on a single issue and to seek judgment on that issue alone. Baghbanbashi et al. v. Hassle Free Clinic et al., 2014 ONSC 5934, at para. 3.

[13] It may be that an argument should lie that costs should not be available where a party had a single issue available to resolve the entire case (or a significant portion of a case) and yet deferred or incurred other costs rather than bringing the one issue forward with dispatch. However, this approach is not without its own issues. The most common response to a motion for summary judgment is that the responding party wants discovery. Motions for direction are available. But absent directions, discovery is a once and for all affair. All issues must be covered. Moreover, part of the Hryniak prescription is a focus on expediency. Justice delayed is justice denied. But can a party at the same time be required to move the case forward faster and then be denied costs for moving too quickly on one issue or another?

[14] I do not have to resolve these issues in this case. In light of the fact that the bulk of the costs were incurred prior to Hryniak being decided, the defendants cannot be faulted for proceeding on all issues in parallel. However, it strikes me that this is a very live issue going forward. The goal of expediency includes quickly identifying and moving forward on a gating issue that may resolve the claim or a substantial portion of it. A party may well find itself being criticized and penalized in costs for bringing unnecessary proceedings if it meanders down subsidiary paths before bringing on the single issue that allows the case to be resolved summarily. So, while the days of overbearing, paternalistic professionals may be gone, the need for the exercise of client-centric professional judgment to focus cases on key issues is very much at the forefront of current practice. Identifying, focusing on, and bringing forward quickly and affordably an issue or two that can allow for the fair summary resolution of a case is at the heart of Hryniak’s culture shift.

[15] In my view, the costs sought by the defendants are reasonable in time spent and rates claimed. The plaintiffs ought to have expected the government to respond fully and aggressively to allegations of bad faith and dishonesty. Moreover, the plaintiffs ought to have expected that it would be difficult and time-intensive for government lawyers to find the people and paper responsive to their claim. This is not a case of the government being over-bearing or abusive. It responded seriously to serious accusations that the plaintiff made against it. I see no principled basis to simply lop of a portion of the costs claimed based on hours reasonably spent working n the litigation. In my view, the plaintiffs therefore should be liable jointly and severally to pay costs to the defendants jointly and severally on a partial indemnity basis of $383,745.81 forthwith.

F.L. Myers J.

Date: August 18, 2015