ONTARIO

SUPERIOR COURT OF JUSTICE

OTTAWA COURT FILE NO.: 11-52947

DATE: 2015/10/16

BETWEEN:

Shirley Mills and Clayton Mills

Plaintiffs

– and –

Minto Developments Inc., Minto Group Inc., Minto Commercial Properties Inc., Minto Communities Inc. and Minto Land Development Corporation

Defendants

Cameron Grant, for the Plaintiffs

Christine A. Powell, for the Defendants

HEARD : BY WRITTEN SUBMISSIONS

DECISION ON COSTS

KERSHMAN J.

[1] Cost submissions have now been received from both parties and reviewed. The reply submissions brief of the defendant included a fresh defendant’s bill of costs, which was not included in its original costs submissions. The plaintiff objected to the fresh bill of costs and requested that the court not consider it.

[2] In the original decision the court requested that the parties submit written costs submissions together with costs outlines. The defendant submitted a costs outline. The plaintiff submitted a bill of costs.

[3] The court finds that it was not appropriate for the plaintiff to submit a bill of costs when a costs outline was requested which then forced the defendant to seek to introduce a bill of costs.

[4] The court is not prepared to consider the bill of costs submitted by the defendant in its reply submissions. A finding is made to that effect.

analysis

[5] In this case the court must decide if the defendant is entitled to substantial indemnity costs. It made a Rule 49 Offer to Settle, on terms whereby it offered to consent to a dismissal of the action without costs if accepted prior to November 30, 2012. On July 30, 2014, the defendant made a second Rule 49 Offer to Settle whereby the defendant would pay the plaintiffs $5,000.00 inclusive of all damages, pre-judgment interest, legal fees and disbursements.

[6] Neither Offer to Settle was accepted.

[7] At trial the plaintiff did not achieve any recovery and achieved a result less favourable than the defendant’s Offer to Settle.

[8] The defendant claims costs on a substantial indemnity basis because, notwithstanding counsel’s call to the bar in 2000, the defendant had a fee arrangement with counsel whereby counsel would work at discounted rates.

[9] The defendant relies on the case of Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041 (Div. Ct.), wherein the court affirmed that an appropriate hourly rate for costs is determined in accordance with the guidelines in Section 131 of the Courts of Justice Act and Rule 57.01, and not in accordance with any mathematical formula tied to actual costs (at para. 14). The amount sought by the defendant is $79,114.87, together with disbursements of $24,813.80, both figures inclusive of HST. The plaintiff argues that the costs as claimed exceeded the amount in issue, which was $65,328.99. It further notes that this was a simplified procedure action and with no examinations for discovery.

[10] The plaintiff argues that the costs outline includes insufficient particularization to permit understanding of how much money was spent and only includes lump sum amounts per timekeeper. Lastly it argues that the Offers to Settle were not offers to settle but were actually offers to capitulate. It argues that the defendant is entitled to its reasonable partial indemnity costs which the plaintiff argues should be $25,000.00 inclusive of disbursements.

FACTORS

[11] The factors to be considered when fixing costs are set out in Rule 57 of the Rules of Civil Procedure and include, in addition to success, the amount claimed and recovered; the complexity and importance of the matter; the conduct of any party that would unduly lengthen the proceedings; whether any step was improper, vexatious or unnecessary, or taken through negligent mistake or excessive caution; a party’s denial or refusal to admit anything; any offer to settle in the scale of costs; the hourly rate and the time spent; as well as the amount the losing party would reasonably expect to pay.

SUCCESS

[12] In this case, the defendant was completely successful. The plaintiff’s claim was rejected in its entirety.

AMOUNT CLAIMED AND RECOVERED

[13] The parties agreed that the amount of the damages was $65,328.99. The action was only litigated on the aspect of liability. Notwithstanding what was argued by counsel for the plaintiff, it appeared to the court that both counsel cooperated and acted reasonably with respect to various matters and agreed on the damages prior to trial. As stated previously, the plaintiff did not recover any damages whatsoever.

Complexity and importance

[14] The issues were of above average complexity given the technical nature of the cause of the flood. The issues were important to both parties involved particularly considering the amount of damages in issue.

SCALE OF COSTS

[15] The defendant made two Offers to Settle, the first one being on October 15, 2012. This Offer to Settle was on the terms that the plaintiff’s claims be dismissed on a without prejudice basis if accepted prior to November 30, 2012. If accepted subsequent to that date, the plaintiff’s claim could be dismissed on the payment to the defendant of fees incurred thereafter on a partial indemnity basis and payment to the defendant of all its disbursements.

[16] A second Offer to Settle was made by the defendant on July 30, 2014, on the terms that the defendant pay to the plaintiffs $5,000.00 inclusive of all damages, pre-judgment interest, legal fees and disbursements.

[17] Neither offer was accepted. As a result, the defendant claims costs on a substantial indemnity scale from the date that it made the first offer until the end of trial. The defendant also seeks costs on a partial indemnity scale from the date of the commencement of the action until it made the first offer to settle based on the decision by the Court of Appeal in S & A Strasser Ltd. v. Town of Richmond Hill (1990), 1990 6856 (ON CA), 1 O.R. (3d) 243 (C.A.). Rule 49.10(2) of the Rules of Civil Procedure sets out the rules which apply when a defendant makes an Offer to Settle and obtains the result after trial as favourable as the terms set out in the offer. The section reads as follows:

Rule 49.10(2) Defendant’s offer – Where an offer to settle,

(a) Is made by a defendant at least seven days before the commencement of the hearing;

(b) Is not withdrawn and does not expire before the commencement of the hearing; and

(c) Is not accepted by the plaintiff,

And the plaintiff obtains a judgement as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs for that date, unless the court orders otherwise.

[18] In the case of Dunstan v. Flying J Travel Plaza (2007), 2007 819 (ON LRB), 54 C.P.C. (6th) 123, RJ Smith J. at paragraph 9 points out that Rule 49.10(1) of the Rules of Civil Procedure deal with a plaintiff’s offer to settle in a contrast to the defendant’s offer to settle. The judgment says as follows:

[9] Rule 49.10(1) of the Rules of Civil Procedure deals with a plaintiff’s offer to settle and in contrast to the defendant’s offer to settle, the plaintiff is entitled to receive costs on a substantial indemnity basis from the date the offer is made, if a result is achieved after trial which is as or more favourable than the terms of the offer. The relevant section of Rule 49.10(1) is as follows:

… and the plaintiff obtains a judgment as favourable as or more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer to settle was served and substantial indemnity costs from that date, unless the court orders otherwise.

[10] In the case of S & A Strasser Ltd. v. Town of Richmond Hill et al. (1990), 1990 6856 (ON CA), 1 O.R. (3d) 243 (C.A.) Justice Carthy dealt with what appears to be an anomaly of awarding a plaintiff substantial indemnity costs if he or she obtained a result as favourable or more favourable than its offer, whereas a defendant is only entitled to partial indemnity costs, if a plaintiff obtains a judgment as favourable or less favourable than the defendant’s offer to settle. Justice Carthy explains what at first glance appears to be an anomaly when he stated as follows:

“The answer is found in appreciating that this rule assumes that the plaintiff has recovered a judgment of some value. Without the rule, that plaintiff would normally recover party-and-party costs. The rule gives the plaintiff a bonus for an offer lower than the recovery by elevating costs to the solicitor-and-client level following the offer. The bonus to a defendant who makes an offer higher than the recovery is that the defendant pays no costs following the offer and, in addition, recovers party-and-party costs for that period of time.”

[11] Justice Carthy further stated that:

“That rationale does not fit a case where the plaintiff is totally unsuccessful because, without the rule, the defendant is normally entitled to party-and-party costs. The words in the rule “and the plaintiff obtains a judgment as favourable” make it clear that the rule has no application where the plaintiff fails to recover any judgment.”

[12] I agree with the reasoning of Justice Carthy in the S & A Strasser Ltd. decision, that the provisions of Rule 49.10(2) apply when a defendant exceeds its offer to settle and where the plaintiff has recovered a judgment of some value. In this case, Dunstan did not recover a judgment of any value.

[13] The general wording of Rule 57.01(1) states as follows:

“… the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing, …”

Again, I agree with the reasoning of Carthy J. in the Strasser decision that the court in exercising in discretion pursuant to Rule 57.01(1) may find it appropriate to award costs on a substantial indemnity basis from the date of the defendant’s offer to settle, if the defendant made an offer to settle and the plaintiff did not recover a judgment of any value after trial. I therefore order that costs be awarded to the defendant on a partial indemnity basis as claimed from September 15, 2005 until its offer to settle on February 26, 2007 and on a substantial indemnity scale from February 26, 2007 until April 27, 2007.

[19] This court agrees with the reasoning of Carthy J.A. in S & A Strasser Ltd. v. Town of Richmond Hill and Smith J. in the Dunstan decision.

[20] On that basis, the court orders that costs be awarded to the defendant on a partial indemnity basis as claimed from the start of the claim until October 15, 2012, being the date of the first offer to settle, which was as favourable or more favourable than the judgment at trial.

[21] Costs are awarded on a substantial indemnity scale from October 12, 2012 to August 13, 2015.

HOURLY RATES

[22] The defendant claims $52,743.25 for fees inclusive of HST on a partial indemnity basis, $79,114.87 inclusive of HST on a substantial indemnity basis together with disbursements of $24,813.80 inclusive of HST.

[23] The defendant used two solicitors, both called to the bar in 2000. The regular hourly rate charged by Ms. Powell is $280.00 per hour. She claims $168.00 per hour on a partial indemnity basis and claims $256.00 per hour on a substantial indemnity basis.

[24] The regular hourly rates charged by Ms. Sweeney is $228.00 per hour. She claims costs of $136.80 per hour on a partial indemnity basis and $205.20 on a substantial indemnity basis.

[25] The plaintiff argues that the defendant’s costs outline includes insufficient particularization to understand how so much money was spent. The plaintiff also claims that the cost outline contains questionable entries: Jody Holland is listed as a time keeper, but she corresponded with counsel as Ms. Powell’s assistant and costs are sought for the attendance of two time keepers at trial

[26] The applicable rate for costs on the substantial indemnity basis is now 1.5 times the partial indemnity rate.

[27] The hourly rates claimed for articling students is $62.40 on a partial indemnity basis and $93.60 on a substantial indemnity basis.

[28] The defendant’s claim for a law clerk is $62.40 on a partial indemnity basis and $93.60 on a substantial indemnity basis.

[29] Based on the calculations of the court, the Court is satisfied that these rates comply with the partial indemnity rates recommended in 2005 by the Costs Subcommittee of the Civil Rules Committee.

[30] The court is not aware that the Civil Rules Committee has issued any follow-up information.

[31] The court considers the rates charged to be reasonable both on a partial indemnity basis and a substantial indemnity basis.

TIME SPENT

[32] The plaintiff argues that if it had been successful it would have sought partial indemnity fees of $41,992.64 inclusive of HST plus disbursements. The plaintiff argues that it had a more complicated case to present at trial based on the number of witnesses that testified for each side.

[33] The court has reviewed the hourly times spent by the various parties whether those times are actually claimed for or are written off. According to the court’s calculations the lawyer’s time spend by the plaintiff was approximately 220 hours while the lawyer’s time spend by the defendant was approximately 238 hours.

[34] The court finds that the time spent by each side is approximately the same with the defendant spending slightly more time.

[35] In relation to articling students and clerks, the plaintiff spent 42.5 hours and the defendant spent 126.8 hours. The court notes that there is a significant difference in the amount of time spent in this section.

THE AMOUNT THAT THE UNSUCCESSFUL PARTY WOULD REASONABLY EXPECT TO PAY

[36] The plaintiff submits that the disbursements are excessive and argues that they include “outgoing fax charges”, “litigation court forms licence fees” and copying charges of almost $700.00 with no explanation.

[37] The court notes that the photocopies claimed by the plaintiff is $898.47.

[38] The court finds no merit in the aforesaid argument put forward by the plaintiff.

[39] The plaintiff argues that the total fees and disbursements of the defendant should be assessed at $25,000.00 inclusive of disbursements and HST. The court has reviewed subsection 57.01(0.b) of the Rules of Civil Procedure which reads as follows:

Rule 57.01(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;

[40] The court does not agree with the plaintiff’s submissions as to the quantum of costs that should be paid.

[41] Both parties knew the quantum of damages in issue prior to the start of the trial – about $65,000.00.

[42] Both parties expected the trial to take approximately five days.

[43] A flood at the courthouse was an unforeseen circumstance which reduced the time to four days. The loss of time was made up for by final argument being by way of written submissions instead of oral arguments.

[44] The court notes that this is a subrogated claim by the plaintiff’s insurance company. The insurance company is a sophisticated litigator as is the defendant. Both have in-depth knowledge of the time it takes for litigation and its risks and associated costs. The amount of costs awarded must bear some relationship to the claim as made by the plaintiff. At the same time, the defendant is required to expend reasonable amounts of time and money to properly defend a claim made against it. As stated by Smith J. in Dunstan at paragraph 30:

The plaintiff cannot argue that nominal costs should be awarded because of the total absence of any recovery by the plaintiff or argue that the amount involved was such that the defendant should not have properly prepared the defence of the case.

In this case, Smith J. found that the defendant was entitled to take reasonable steps to defend a claim and to introduce appropriate expert evidence. Costs awarded must be reasonable based on all of the circumstances one of which is the amount of the claim. This court agrees with the finding of Smith J. in that regard.

[45] The Court is aware that the trial was adjourned in September 2014 because of the plaintiff’s expert’s lack of availability during that week. This decision takes the delay into account.

[46] In this case, the plaintiff knew of the risks of taking this matter to a 5 days trial in relation to a $65,000 claim. It chose to take the risk, it should be obliged to accept consequences including the cost consequences. The plaintiff was sophisticated enough to know that the costs would be high whether they won or lost.

[47] Considering all of the factors set out above including the hourly rates, the offers to settle, the reasonable expectations of the losing party, this court assesses the defendant’s fees at the sum of $45,000 plus HST of $5850.00 for a total of $50,850.00.

DISBURSEMENTS

[48] The amount claimed by the defendant for the disbursements is $22,043.67 plus HST. These disbursements are for the most part reasonable. However, in relation to the expert fees of $17,995.20 plus HST, the court finds this amount to be excessive to a certain extent notwithstanding the number of reports prepared by Mr. Passmore. The court notes that the trial had to be adjourned temporarily so that Mr. Passmore could obtain further files for review. The court reduces this expert’s disbursement to $13,000.00 plus HST.

[49] This was a simplified procedure action and there were no examinations for discovery. The defendant charged $1277.10 for transcripts and copies. There is no breakdown for transcripts versus copies. The court reduces this amount to $800.00 plus HST. Based on the aforesaid the court assesses the disbursements at $16,571.37 plus HST where applicable.

Disposition

[50] The plaintiff is ordered to pay the defendant costs of $50,850 inclusive of HST plus disbursements of $16,571.37 plus HST where applicable.

[51] Order accordingly.

Mr. Justice Stanley Kershman

Released: October 16, 2015

OTTAWA COURT FILE NO.: 11-52947

DATE: 2015/10/16

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Shirley Mills and Clayton Mills

Plaintiffs

– and –

Minto Developments Inc., Minto Group Inc., Minto Commercial Properties Inc., Minto Communities Inc. and Minto Land Development Corporation

Defendants

DECISION ON COSTS

Mr. Justice Stanley Kershman

Released: October 16, 2015