Santos v. Sangwan, 2015 ONSC 5368

CITATION: Santos v. Sangwan, 2015 ONSC 5368

COURT FILE NO.: CV-14-5495

DATE: 2015-08-26

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

JOHN LOUIS SANTOS

Evan Moore, for the Applicant

Applicant

• and -

PARAMJIT SANGWAN and PRINT 911 INC.

Self-represented

Respondents

HEARD: April 29, 2015, at Brampton, Ontario

Price J.

Costs Endorsement

NATURE OF PROCEEDING

1Mr. Santos applied for judgment against Mr. Sangwan and Print 911 Inc. for the balance of $94,600 he claimed was owing to him from a sale purchase agreement that he had entered into with Mr. Sangwan on February 28, 2013, for the sale of a printing business, Print 911 Inc. I dismissed the application upon finding that Mr. Santos made a fraudulent misrepresentation regarding the value of equipment owned by the business, which misrepresentation was material to Mr. Sangwan’s entering into the share purchase agreement.

2The parties have been unable to agree on costs. These reasons address that issue.

ISSUES

3The court must determine whether the respondents are entitled to their costs of the motion for summary judgment and the application and, if so, the amount.

PARTIES’ POSITIONS

4The respondents, Paramjit Sangwan and Print 911 Inc., claim costs in the amount of $14,935.66, consisting of $14,335.66 for fees they were charged by their solicitors and $600 for time that Mr. Sangwan later spent representing himself and Print 911 Inc.

5The applicant, Mr. Santos, acknowledges that costs are normally awarded to the successful party, and that the fact that the respondents were not represented by counsel at the hearing of the application does not mean that they are not entitled to costs. He submits, however, that the costs claimed by the respondents are excessive and argues their lost opportunity cost, which they assess at $600, should be the total costs awarded to them in the proceeding.

EVIDENCE FILED

6Mr. Sangwan attaches the following invoices from lawyers he consulted in connection with the proceeding:

a) An invoice from Jonathan Kleiman, dated November 27, 2014, in the amount of $1,000 for fees and $130 for HST, for a total of $1,130;

b) An invoice from Jonathan Kleiman, dated January 1, 2015, in the amount of $425 for fees and $55.25 for HST, for a total of $480.25;

c) An invoice from RD Law, dated February 13, 2015, in the amount of $3,652.50 for fees, $246.55 for disbursements, and $493.62 for HST, for a total of $4,392.67;

d) An invoice from RD Law, dated March 31, 2015, in the amount of $6,000 for fees, $725.22 for disbursements, and $857.77 for HST, for a total of $7,582.99.

ANALYSIS AND EVIDENCE

General principles

7Boswell J. set out the general principles governing costs assessments in George v Landels, where he stated:

The award of costs is governed by section 131 of the Courts of Justice Act, R.S.O. 1990 c. C.43 and by Rule 57.01 of the Rules of Civil Procedure. Section 131 provides for the general discretion to fix costs. Rule 57.01 provides a measure of guidance in the exercise of that discretion by enumerating certain factors that the court may consider when assessing costs. In addition, the Court must always be mindful of the purposes that costs orders serve. As Perell J. summarized in 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (S.C.J.), at para. 10:

Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements (internal citations omitted).¹

8Ultimately, in determining an amount for costs, the overriding principles are fairness and reasonableness.² In assessing what is fair and reasonable in the circumstances, the Court does not engage in a mechanical exercise, but takes a contextual approach, applying the principles and factors discussed above to settle on a figure that is fair and reasonable in all the circumstances.³

9The Court is guided by the factors set out in Rule 57.01(1) of the Rules of Civil Procedure. The Court may consider, among other factors, the following:

(a) The complexity of the proceeding;

(b) The importance of the issues;

(c) The conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(d) Any offers to settle;

(e) The principle of indemnity;

(f) The concept of proportionality, which includes at least two factors:

(i) The amount claimed and the amount recovered in the proceeding; and,

(ii) 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;

(g) Any other matter relevant to the question of costs.

Importance and complexity of the motion

10The application involved a claim for $94,600. The importance of the action was limited to the litigants; it did not involve issues of importance to the public.

11The application involved issues of moderate factual complexity. The respondents relied on misrepresentations, which required consideration of the evidence of equipment values and of revenues earned. Mr. Santos relied on the “entire agreement” clause of the share purchase agreement, which required consideration of whether fraudulent misrepresentations are protected by such clauses.

Reasonableness and offers to settle

12The general rule is that costs follow the event and will be awarded on a partial indemnity scale.⁴ In special circumstances, costs may be awarded on a higher scale, but those cases are exceptional and generally involve circumstances where one party to the litigation has behaved in an abusive manner, brought proceedings wholly devoid of merit, and/or unnecessarily run up the costs of the litigation.⁵

13In the present case, the application was devoid of merit and arose from a transaction that was tainted by fraudulent misrepresentations. On this basis, the respondents are entitled to their costs on a substantial indemnity scale.

14Neither party has tendered offers to settle that would affect the determination of costs.

Indemnity - The hourly rates charged

15In determining the appropriate hourly rates to be assigned to the lawyers involved in the motion, the court follows the approach taken by Aitkin J. in Geographic Resources.⁶ That is, the starting point is the successor of the Costs Grid, namely, the “Information for the Profession” bulletin from the Costs Sub-Committee of the Rules Committee (the “Costs Bulletin”), which can be found immediately before Rule 57 in the Carthy or Watson & McGowan edition of the Rules, sets out maximum partial indemnity hourly rates for counsel of various levels of experience.

16The Costs Bulletin suggests maximum hourly rates (on a partial indemnity scale) of $80.00 for law clerks, $225.00 for lawyers of less than 10 years’ experience, $300.00 for lawyers of between 10 and 20 years’ experience, and $350.00 for lawyers with 20 years’ experience or more.⁷ The upper limits in the Costs Bulletin are generally intended for the most complex and important of cases.

17The Costs Bulletin, published in 2005, is now dated. Aitkin J. considered adjusting the Costs Subcommittee’s hourly rates for inflation, as Smith J. did in First Capital (Canholdings) Corp. v. North American Property Group,⁸ but the unadjusted rates of the lawyers in her case were only slightly less than the actual fees they charged, so she elected to use their unadjusted rates. Normally, however, it is appropriate to adjust the hourly rates in the Costs Bulletin to account for inflation since 2005.

18Based on the Bank of Canada Inflation Calculator, available online at http://www.bankofcanada.ca/rates/related/inflation-calculator/, the 2014 equivalent of the hourly rates in the Costs Bulletin are $93.52 for law clerks, $263.03 for lawyers of under 10 years’ experience, $350.71 for lawyers of between 10 and 20 years’ experience, and $409.16 for lawyers of over 20 years’ experience.

19The court is guided by the rates in the Costs Bulletin, not the actual hourly rates charged. The actual rates charged are relevant only as a limiting factor, in preventing the costs awarded from exceeding the actual fees charged. The Costs Subcommittee’s rates apply to all lawyers and all cases, so everyone of the same level of experience starts at the same rate.

20The court adjusts the hourly rate, or the resulting fees, to reflect unique features of the case, including the complexity of the proceeding, the importance of the issues, and the other factors set out in Rule 57.01(1). If an excessive amount of time was spent, or too many lawyers worked on the file, the court reduces the resulting amount of fees accordingly. As long as the resulting amount does not exceed the amount actually charged to the client, the actual fee that the client agreed to pay is irrelevant.

21Mr. Sangwan and Print 911 Inc. were initially assisted by Jonathan Kleiman, who was called to the Bar in Ontario in 2010, and who had four years’ experience at the time of the proceeding. According to the Costs Bulletin, he was entitled to claim a maximum hourly rate of $225 in 2005, which translates to $263.03 today. I am adjusting this amount to $250 to take account of Mr. Kleiman’s years of experience.

22Mr. Sangwan and Print 911 Inc. were later assisted by Rinku Deswal, who was called in 2004, and had ten years’ experience at the time of the proceeding. He was assisted by Tina Margellis, who was called to the bar in 2001 and had 13 years’ experience. They were entitled to claim $300 in 2005, which translates to $350.71 today. Because Mr. Deswal is at the low end of this range, I allow, $300 for his time. I allow $325 for Ms. Margellis.

23Mr. Deswal was also assisted by Peter Welsh, who was called to the Bar in New Brunswick in 1973 and in Ontario in 1977, and had over 20 years’ experience. Mr. Welsh was entitled to claim $350 in 2005, which translates to $409.16 today. I allow him a rate of $400. The lawyers at RD Law were assisted by a student, who was entitled to claim $80 in 2005, which translates to $93.52 today. I round the student’s rate to $90.

Indemnity - The time spent on the motions

24As appears from Mr. Kleiman’s invoice dated November 27, 2014, he spent 3.1 hours in correspondence and communication. I allow this time at $250 per hour, for a total of $775. Mr. Kleiman’s invoice dated January 6, 2015, discloses 2 hours spent in “travel to Brampton for meeting”. I allow half this time at his regular hourly rate and half, which I attribute to travel, at half his rate, for a total of $375. Mr. Kleiman’s invoice dated January 1, 2015, discloses 1.7 hours for correspondence, which I allow at $250 per hour, for a total of $425. The cumulative total of these amounts is $1,575. Because Mr. Kleiman charged his time at his partial indemnity rate of $250 to the client, no adjustment is necessary in making an award of these costs on a substantial indemnity scale.

25As appears from RD Law’s invoice dated February 13, 2015, Mr. Deswal, whose adjusted partial indemnity rate was $300, charged his time at $375. Ms. Margellis, whose rate was $325, also charged $375, as did Mr. Welsh, whose adjusted rate was $400. Having regard to the amount of time each of them spent (8.7 hours by Mr. Deswal, .5 by Ms. Margellis, and 3.1 by Mr. Welsh, I would make a minor downward adjustment in the costs associated with their work. However, because Mr. Sangwan and Print 911 Inc. are being awarded their costs on a substantial indemnity scale, they are entitled to recover the total fees of $3,652.50 charged on this invoice.

26As appears from RD Law’s invoice dated March 31, 2015,

a) The 9.2 hours spent by Mr. Deswal, at his rate of $300 per hour ($2,760);

b) The 25.5 hours spent by Ms. Margellis, at her rate of $325 ($8,287.50);

c) The 12.4 hours spent by Peter Welsh, at his rate of $400 per hour ($4,960); and

d) The 2.9 hours spent by the student at $90 per hour ($261);

result in costs, on a partial indemnity scale, of $16,268. However, RD Law did not charge for a substantial amount of its time (3.7 hours of Mr. Deswal’s time, 18.7 hours of Ms. Margellis’ time, and 2.5 hours of Mr. Welsh’s time), and applied a discount of $2,325, with the result that only $6,000 was actually charged to the client. Having regard to the reductions made and the fact that Mr. Sangwan and Print 911 Inc. are being awarded their costs on a substantial indemnity scale, they are entitled to recover this entire amount.

27Mr. Kleiman did not charge for any disbursements. RD Law charged for $246.55 in their invoice dated February 13, 2015, and $725.22 in their invoice dated March 31, 2015, for a total of $971.77. With the exception of the disbursements charged by RD Law for its motion to be removed as the respondents’ solicitors, Mr. Santos does not dispute the disbursements and I find them to be reasonable. In fixing costs, the court need not undertake a line by line analysis of the hours or expenses claimed, nor should it second guess the amounts claimed unless they are clearly excessive or overreaching.⁹

28Based on the invoices of Mr. Kleiman and RD law, the respondents are entitled to the following amounts to reflect the time his lawyers spent, if the time was reasonably spent:

(a) Fees:

(i) Mr. Kleiman: $1,575

(ii) RD Law: $9,652.50 ($3,652.50 + $6,000)

$11,227.50

(b) HST on fees (13%): $ 1,459.57

(c) Disbursements: $ 971.77

TOTAL: $13,658.84

29As noted above, Mr. Sangwan and Print 911 Inc. claim $600 for the time Mr. Sangwan spent representing himself and his corporation after RD Law was removed from the record. As noted above, Mr. Santos does not dispute this amount. In any event, I find that the time was spent doing the work ordinarily done by a lawyer retained to conduct the litigation and, as such, is properly recoverable on the basis articulated by Justice Perell in Mustang Investigations v. Ironside.¹⁰

30A portion of the time charged by Mr. Kleiman was for settlement discussions which preceded the commencement of the proceeding. Mr. Santos argues that these should not form part of the claim for costs. I do not agree. A party whose lawyer assists him to negotiate in an effort to settle the issues in dispute in the litigation is entitled to have the time the lawyer spends doing so included in the costs of the proceeding. Modern costs rules are designed to foster three fundamental purposes:

(a) To indemnify successful litigants for the costs of litigation;

(b) To promote and encourage settlement; and

(c) To control behaviour by discouraging frivolous suits and defences that lack merit.¹¹

31Including time spent in negotiation in the costs of a proceeding is consistent with the purpose of promoting and encouraging settlement. Justice Allen, in Lakha v. Alloo, applied this principle in awarding a wife the costs of negotiations leading to a settlement of litigation involving child custody and spousal support.¹² Although that proceeding was governed by the Family Law Rules, the principle involved here is no different in the context of civil litigation, and Allen J. made reference to both the Rules of Civil Procedure and the Family Law Rules in her reasons.

32In awarding the wife her costs, Allen J. stated:

Costs Incurred During Settlement Negotiations

The father also submits it is inappropriate for policy reasons for the court to consider costs for periods during which the parties were engaged in settlement negotiations, the concern being that this could have the chilling effect of discouraging parties from attempting to settle for fear that costs consequences will follow prolonged negotiations. In the father’s view, costs in this case should only be considered for trial preparation and trial time. I disagree with that position in the circumstances of this case.

Firstly, the Rules permit the court to consider the conduct of parties when deciding costs. Both the Family Law Rules and Rules of Civil Procedure permit the court to consider any unreasonable conduct of a party, the concern here being wasted time and expense resulting from that conduct. Rule 57.01(e) of the RCPs directs the court’s attention to any conduct that tended to shorten or lengthen a proceeding without specifically referring to conduct on a settlement. Rule 24(5) of the FLRs speaks to any unreasonable conduct of a party and specifically includes conduct in relation to settlement offers. That Rule requires the court to examine whether the party made an offer, the reasonableness of any offer the party made or whether the party withdrew or failed to accept an offer.¹³ [Emphasis added]

33In Nby Enterprises Inc. v. Duffin, Tucker J. allowed costs “of this motion, the original motion, their settlement meetings and negotiations.”¹⁴ In Paradis v. McLaren, McCartney J., in granting costs to an Applicant for guardianship under the Substitute Decisions Act, observed: “The Application itself was commenced January 26, 2007, and the final Order was granted on March 14, 2007. The matter did not proceed to trial, so the costs clearly involve a considerable amount of settlement negotiations and preparatory work on the Application.”¹⁵ [Emphasis added]

34Mr. Santos submits that RD Law charged $1,500 plus H.S.T. for the time that firm spent on March 31, 2015, to obtain an order removing them from the record, and disbursements in the amount of $725.22, and that these amounts should not form part of the amount awarded to the respondent for their costs. I agree that these amounts were incurred as a result of the breakdown in the relationship between the respondents and their counsel and should not be included. I am therefore deducting the amount of $2,225.22 from the award of costs. This deduction leaves a net amount of $12,033.62 ($13,658.84 plus $600, less $2,225.22). I am rounding this amount down to $12,000.

Proportionality and the reasonable expectation of the unsuccessful parties

35As noted, the amount at stake in the proceeding was $94,600. I find that costs of $12,000 were proportionate to the amount at stake.

36Mr. Santos acknowledges that his own costs were $12,229.59. The amount of $12,000 for the respondents’ costs is therefore proportionate to the costs that Mr. Santos incurred.

CONCLUSION AND ORDER

37For the foregoing reasons, it is ordered that:

1. The applicant shall pay the respondents’ costs in the amount of $12,000, payable forthwith.

Price J.

Footnotes

1. 1George v Landels, 2012 ONSC 6608
2. 2Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.); and Moon v. Sher (2004), 2004 39005 (ON CA), 246 D.L.R. (4th) 440 (C.A.)
3. 3Gratton-Masuy Environmental Technologies Inc. (c.o.b. Ecoflow Ontario) v. Building Materials Evaluation Commission, 2003 8279 (ON SCDC), 2003 ONSC 8279 (ON SCDC), [2003] O.J. No. 1658, at para. 17
4. 4Bell Canada v. Olympia & York Developments Limited et. al. (1994), 1994 239 (ON CA), 1994 ONCA 239, 17 O.R. (3d) 135 (C.A.)
5. 5Standard Life Assurance Company v. Elliott (2007), 2007 18579 (ON SC), 86 O.R. (3d) 221 (S.C.J.)
6. 6Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041, paras. 7 and 11 to 16
7. 7“Information for the Profession” bulletin (“the Costs Bulletin”) from the Costs Sub-Committee of the Rules Committee (that the Costs Sub-Committee of the Rules Committee issued to replace the Costs Grid, which it repealed in 2005). The Costs Bulletin has advisory status only and not statutory authority, as it was not included in the Regulation that repealed the Costs Grid.
8. 8First Capital (Canholdings) Corp. v. North American Property Group, 2012 ONSC 1359, 2012 ONSC 1359 (S.C.J.)
9. 9see the cases referenced in Fazio v. Cusumano 2005 33782 (ON SC), 2005 CarswellOnt 4518 (S.C.J.), at para. 8.
10. 10Mustang Investigations v. Ironside, [2009] O.J. No. 3848, at para. 10
11. 11Fong v. Chan, 1999 2052 (ON CA), 1999 2052 (ON C.A.), (1999), 46 O.R. (3d) 330, 128 O.A.C. 2, 181 D.L.R. (4th) 614, 1999 2052, [1999] O.J. No. 4600, 1999 Cars­well­Ont 3955 (Ont. C.A.).
12. 12Lakha v. Alloo, 2009 67667 (ON SC), 2009 ONSC 67667.
13. 13Lakha v. Alloo, above, at paras. 15 and 16.
14. 14Nby Enterprises Inc. v. Duffin, 2006 ONSC 26969.
15. 15Paradis v. McLaren, 2007 ONSC 14922.