SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: C-14-15 & C-145-15
DATE: 2015/08/20

RE: CELADON CANADA, INC., Applicant

AND:

HOSS CARTAGE & DISTRIBUTION SYSTEMS INC. and MARY TUROCZI, Respondents

AND RE: HOSS CARTAGE & DISTRIBUTION SYSTEMS INC., Applicant

AND:

MARY TUROCZI, Respondent

BEFORE: The Honourable Justice D.A. Broad

COUNSEL:
John G. Webster for CELADON CANADA, INC.

Howard Wolch for HOSS CARTAGE & DISTRIBUTION SYSTEMS INC.

Wayne R. Bumstead for MARY TUROCZI

costs ENDORSEMENT

[1] The parties have not been able to agree on the costs of the applications and have now delivered their respective submissions on costs. The following is my disposition on the issue of the costs of the two applications which were argued together.

Hoss Cartage & Distribution Systems Inc.’s Claim for Costs

[2] Hoss Cartage & Distribution Systems Inc. (“Hoss”) was a respondent in the application brought by Celadon Canada Inc. (“Celadon”) in file No. C-14-15 and was the applicant in the application against Mary Turoczi (“Turoczi”) in file No. C-145-15. Hoss submits that, as it was the successful party in respect of both applications, it is entitled to costs against each of Celadon and Turoczi on a partial indemnity basis.

[3] Hoss put forward a global claim for costs in the sum of $40,323.42, comprised of fees in the sum of $34,704.00, disbursements in the sum of $1,013.00 and HST on the fees and on the taxable disbursements. Hoss delivered only one set of costs submissions for this global amount notwithstanding the direction at paragraph 77 of my Endorsement that it provide its written submissions as to costs in respect of each file.

[4] The fee portion of Hoss’ claim for costs is comprised of 77.8 hours for Mr. Wolch (32 years at the bar) in the sum of $27,619.00, 29.9 hours for Mr. Thiele (23 years at the bar) in the sum of $6,877.00, and 2.6 hours for a law clerk in the sum of $208.00. Hoss suggests that 80% of its costs be attributed to Celadon and 20% to Turoczi on the basis that it is “difficult to split the bill between the two matters/parties.”

Position of Celadon

[5] Celadon does not deny that costs should follow the event and that Hoss should therefore be entitled to an award of costs against it. However, it submits that the amount claimed by Hoss was not reasonably expected, is not warranted and is well beyond what is reasonable in the circumstances. Celadon points out that Hoss did not deliver a Costs Outline prior to the hearing of the applications as required by sub-rule 57.01(6) of the Rules of Civil Procedure, as Celadon did and that Hoss’ Bill of Costs provides only a general description of work with no dockets and no breakdown as to how much time was devoted to each task. Moreover, Celadon argues that the issues in its application against Hoss did not warrant Hoss’ utilization of two senior counsel and that, since the issues were discreet and based upon established legal principles, the application was of average, not high, complexity. Celadon points out that the affidavit material was relatively short and there were no cross-examinations, no examinations of non-party witnesses and no contested pre-application hearings.

[6] Celadon submits that its reasonable expectations with respect to its responsibility for costs in the event that it was unsuccessful on the application may be gauged by its Costs Outline submitted prior to the hearing in the total sum of $12,939.56 on a partial indemnity basis comprising fees of $11,000.00, disbursements of $477.06 and HST on the fee portion.

Position of Turoczi

[7] Turoczi submits that she has no liability for Hoss’ costs in the dismissed Celadon application. She points out that Hoss did not give notice that it intended to advance a claim for its costs of the Celadon application, if dismissed, against her, and that Hoss’ only claim for costs from her was its claim in paragraph 1(c) of the notice of application in the Hoss application (file No. C-145-15) for “the costs of this proceeding.”.

[8] Turoczi also points out that it only opposed the relief sought in paragraph 1(a) of Celadon’s application which requested a declaration that the respondent Hoss exercise the option to purchase in its lease with her. She took no position on the other substantial relief requested in Celadon’s application.

[9] In respect of the costs of Hoss’ application, Turoczi submits that no award of costs should be made against her or alternatively, that any award of costs against her should be limited to a $1,000 counsel fee for the argument of the issue raised in Hoss’ application with respect to whether it was entitled to exercise the option to purchase contained in the lease. She argues that the costs requested by Hoss include an undetermined but substantial amount for costs incurred for the Celadon application, for which she has no liability.

[10] Turoczi also points to Hoss’ failure to deliver a Costs Outline as required by sub-rule 57.01(6) and confirms that Hoss’ costs submissions and Bill of Costs are not supported by dockets, invoices and other evidence and the fee portion does not set out an itemized breakdown of the time spent by the lawyers and clerk. Turoczi says that the information provided by Hoss is insufficient for her to assess what portion of Hoss’ claim for costs is properly attributable to its application against her. Moreover, she says that Hoss’ global claim for partial indemnity costs of $40,323.42 is disproportionately high, and that, in any event, the steps taken by Hoss in respect of its application, in contrast to its defence of Celadon’s application, were quite limited.

Guiding Principles

[11] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, provides that "subject to the provisions of an Act or rules of court, 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 cost shall be paid."

[12] The factors to be considered by the court, in the exercise of its discretion on costs, are set forth in subrule 57.01(1) including, at subparagraph (0.a), the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer and, at subparagraph (0.b), the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed.

[13] The Court of Appeal has observed that modern costs rules are designed to foster three fundamental purposes: (1) to indemnify successful litigants for the cost of litigation; (2) to encourage settlements; and (3) to discourage and sanction inappropriate behavior by litigants (see Fong v. Chan (1999) O.J. No. 3707 (CA) at para. 24).

[14] It is well known that the overall objective in dealing with costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful party. The expectation of the parties concerning the quantum of costs is a relevant factor to consider. The court is required to consider what is "fair and reasonable" having regard to what the losing party could have expected the costs to be (see Boucher v. Public Accountants Council (Ontario), 2004 14579 (ON CA), [2004] O.J. No. 2634 (Ont. C.A.) at para. 26 and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC, 2005 1042 (ON CA), [2005] O.J. No. 160 (Ont. C.A.)).

[15] The usual rule in civil litigation is that costs follow the event and that rule should not be departed from except for very good reasons (see Gonawati v. Teitsson, 2002 41469 (ON CA), [2002] CarswellOnt 1007 (Ont. C.A.)], 2002 41469 and Macfie v. Cater, 1920 401 (ON SC), [1920] O.J. No. 71 (Ont. H.C.) at para 28).

Analysis

[16] The requirement of sub-rule 57.01(6) that every party who intends to seek costs deliver to every other party a Costs Outline and bring it to the hearing is, in my view, very important given the centrality of a consideration of what is fair and reasonable for the unsuccessful party to pay for costs, as measured by what the losing party could have expected the costs to be. A mutual exchange of Costs Outlines, prior to the disposition of the matter before the court, goes a long way to ensuring that the parties’ reasonable expectations with respect to costs are disclosed to the opposing side and to the court objectively and without being influenced by the court’s determination.

[17] A failure to give a Costs Outline, as required by the sub-rule, may result in the rejection of a successful party’s request to fix costs unless there is no prejudice and the court is still able to do substantial and procedural justice in fixing costs based on a subsequently delivered Bill of Costs and costs submissions (see Beneficial Investment (1990) Inc. v. Hong Kong Bank [2006] O.J. No. 1428 (Master) at para. 5 and V. Gibbons Contracting Limited v. Losani Homes (1998) Ltd. [2008] O.J. No. 4056 (S.C.J.) at para. 3). It was not argued by Celadon that it suffered prejudice resulting from the failure by Hoss to deliver a Costs Outline or that the court is unable to do substantial and procedural justice in fixing costs in its absence. However, it does argue that the failure to deliver a Costs Outline is a relevant factor for the court to consider in assessing Hoss’ claim for costs.

[18] In the present case, simply providing a block amount in respect of fees for all pre-hearing steps, without any breakdown as between the various steps in the proceeding and as between the particular lawyer involved, is most unhelpful. The task of the court in the absence of such a breakdown is made more difficult by the failure to provide supporting time dockets, although I hasten to add that simply providing copies of time dockets without an accompanying breakdown summary of the time expended by each lawyer on each step in the proceeding should not be encouraged.

[19] Although, as between Hoss and its counsel, the choice to employ the services of two senior counsel to prepare for argument of the applications may be perfectly reasonable, that choice should not necessarily be visited upon the opposing party in light of the overarching principle of proportionality to be applied in fixing costs. The need for involvement of two senior lawyers, for the purposes of fixing costs as between the parties, has not, in my view, been demonstrated in the present case.

[20] In my view, Celadon’s Costs Outline, delivered prior to the hearing, represents a fair indication of what each of the parties’ reasonable expectations should have been with respect to their liability for costs if unsuccessful on the application.

Disposition

(a) Costs of Hoss as against Celadon

[21] Applying the principle of proportionality, I fix Hoss’ costs as against Celadon, in responding to Celadon’s application in file C-14-15, at $10,000.00 in respect of fees for pre-hearing attendances, $2,500.00 in respect of counsel’s fee for attendance on the argument as against Celadon, HST on the fee portion of $1,625.00 and $820.00 for disbursements and HST thereon for a total of $14,945.00.

(b) Costs of Hoss as against Turoczi

[22] With respect to Hoss’ claim for costs as against Turoczi, I agree that there should be no amount awarded in respect of the Celadon application (file no. C-14-15) for the reasons advanced by Turoczi. However, Turoczi did oppose the Hoss application (file no. C-145-15) and was unsuccessful in doing so. Costs should therefore follow the event in respect of Hoss’ application.

[23] Although the court is hampered by Hoss’ failure to separately delineate the costs attributable to its application, as distinguished from its response to Celadon’s application, I am still in a position to do substantial and procedural justice by awarding to Hoss a reasonable and proportionate amount of costs for the preparation the notice of application, compiling, issuing and serving the application record and attendance to argue the issue at the hearing, given that the parties agreed that the matter could be argued based upon the affidavit material in the Celadon application file. I would allow Hoss, as against Turoczi, $500.00 in respect of fees for pre-hearing attendances, counsel fee on the hearing of $1,000.00, HST on the fees in the sum of $195.00, and $381.00 for disbursements to issue and serve the application record for a rounded total of $2,075.00.

D.A. Broad

Date: August 20, 2015