COSTS ENDORSEMENT

COURT FILE NO.: CV-11-1165
DATE: 20150928

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: AACURATE GENERAL CONTRACTING LTD., Plaintiff

AND:

JOSEPH TARASCO, VALERIE TARASCO, Defendants

BEFORE: THE HONOURABLE MR. JUSTICE J.R. McCARTHY

COUNSEL:
M.A. Cummings for the Plaintiff

J. Tarasco and V. Tarasco for themselves

HEARD: by written submissions only

[1] On July 6, 2015, I granted judgment to the Plaintiff in the sum of $42,652.20, plus prejudgment interest of $2,006.40, together with certain procedural and substantive remedies under the Construction Lien Act, R.S.O. 1990, c. C.30, under which the Plaintiff’s action was constituted.

[2] I am now in receipt of written submissions on costs from the Plaintiff and the Defendants. Both parties included a bill of costs as part of their respective written submissions.

[3] The Plaintiff seeks costs on a substantial indemnity basis totalling $68,363.83 broken down as follows:

Main action to trial $36,380.36

Main action trial $21,244.00

Bill of Costs $ 994.40

Disbursements $ 6,628.99

Rona action to date of assignment $ 3,116.08

TOTAL $68,363.83

[4] The Defendants seek costs on a substantial indemnity basis in the “Rona Action #11-1132” in the amount of $32,011.10 broken down as follows:

Main action to trial $28,121.52

Main action trial $ 649.69

Disbursements $ 2,124.89

Rona action File No. 11-1132 $ 1,115.00

TOTAL $32,011.10

[5] The Plaintiff submits it is presumptively entitled to costs having successfully prosecuted the lien claim. The claim for substantial indemnity costs is based on the fact that, at trial, the amount awarded exceeded the amount set out in the Plaintiff’s offer to settle dated February 21, 2013. A copy of that offer to settle is attached as Appendix “A” to these reasons. In addition, the conduct of the Defendants in failing to particularize and present their defence and counterclaim added to both the complexity and the duration of the trial. Costs on a substantial indemnity scale would serve to completely, or very nearly, indemnify the successful Plaintiff for fees and disbursements that were reasonably incurred in the course of litigation. To the extent that the Defendants’ counterclaim had any merit, the Plaintiff conceded those points at the outset of the trial. The entire trial should have taken no more than two hours.

[6] The Defendants concede that the Plaintiff’s costs submissions accurately set out the law but fail to address the lien issues in the two actions. The Defendants refer to the supplier’s lien claim of Rona (court file number 11-1132). The Defendants made an offer to settle that action on March 8, 2013, on the basis of a payment by them of $8,761.10 plus partial indemnity costs. The offer was not accepted. The Defendants submit that costs of this aspect of the claim should go to the Defendants on a substantial indemnity basis. As well, the Defendants ask the court to consider the reasonable expectation of the parties and the fact that the amount of costs sought by the Plaintiff is far greater than the amount recovered. Finally, the Defendants suggest that had the Plaintiff done a better of job of detailing the contract and the extras to the contract, and had the Plaintiff invoiced the Defendants more regularly, they would have better understood his claim. Moreover, the trial would have been shorter and less complex.

[7] I find that the Plaintiff was entirely successful in its prosecution of the action; moreover, the Plaintiff obtained a judgment more favourable than its offer to settle. I cannot give any credence to the arguments put forward by the Defendants. I accept the submission of the Plaintiff that the lien action was consolidated in order to reduce costs. The Plaintiff was fully successful in its claim on the Rona action. In a letter dated November 23, 2011, the Defendants acknowledged, through their then solicitor, that the amount of the holdback for Rona, as the materials supplier, was $15,250.00, or 10% on the contract price of $152,500.00. The Defendants’ offer to settle did not amount to this total. In any event, the Rona claim was assigned to the Plaintiff and subsumed in the overall claim.

[8] I am persuaded that the Defendants must have appreciated the cost consequences of proceeding to trial. They were represented by senior counsel during a great deal of the litigation. They undoubtedly came to understand the cost of litigation. That is revealed in the Defendants’ bill of costs; they were billed significant amounts by Mr. Vandergust for the better part of three years. I infer from that evidence that the Defendants understood the potential costs exposure if they were unsuccessful at trial.

[9] Turning to the other factors for consideration under rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, it is clear that the Plaintiff’s claim for lien was not excessive. The Plaintiff conceded the amounts for set off at the outset; the unperformed labour component, while disallowed, was not unreasonably advanced and had some support in the evidence. The Plaintiff recovered slightly less than 89% of the amount set forth in the claim for lien.

[10] The proceeding was moderately complex; it called for the input of an expert because of the Defendants’ allegations that the Plaintiff’s work was substandard and that it was not in compliance with either the contract drawings or the Ontario Building Code, O. Reg. 332/12. The Plaintiff’s case was presented in a straightforward and efficient fashion. There was nothing that the Plaintiff did to lengthen or complicate the matter unnecessarily. In my reasons, I commented on the utter lack of credibility displayed by both Defendants and their failure to lead any evidence on key points of the defence and counterclaim.

[11] I find that the Plaintiff’s offer to settle was in compliance with Rule 49. The offer to settle satisfies the criteria under rule 49(10). By operation of that rule, the Plaintiff is presumptively entitled to partial indemnity costs to the date of the offer, followed by substantial indemnity costs from the date of the offer through to the end of trial and any necessary proceedings beyond.

[12] I find that the time spent by the Plaintiff’s counsel for pretrial proceedings, trial preparation and trial itself to be reasonable and wholly justifiable. Fifteen hours for preparing and attending at examinations for discovery was reasonable, as was the nearly sixteen hours required for pretrial preparation, working with the expert, attending to undertakings and reviewing the Defendants’ documents. There were three pretrial attendances. The court witnessed the excellent presentation of a detailed and moderately complex construction case by the Plaintiff’s counsel. This undoubtedly required careful preparation and marshalling of the evidence. I find the time claimed for trial preparation of nearly seventeen hours entirely justifiable. The work assigned to the law clerks was labour intensive but necessary. The documents presented at trial were organized, relevant and probative of the issues. I find forty-seven hours for attendance at trial and preparation during trial to be quite reasonable. Any experienced litigator knows that a lawyer’s day during a trial does not end when the courthouse doors close for the evening. Counsel for the Plaintiff has over thirty years of experience. I find that a billable hourly rate of $400 is reasonable and deserved; I am prepared to allow it for the purpose of calculating substantial indemnity costs.

[13] This leaves the consideration of the principle of proportionality. In Marcus v. Cochrane, 2014 ONCA 207, 317 O.A.C. 251, the Ontario Court of Appeal stated that a trial costs order against the unsuccessful party must be fair and reasonable. In Boucher v. Public Accountants Council (Ontario) (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), Armstrong J.A. cast the overriding principle of reasonableness as an access to justice issue (at para. 37):

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. However, in my view, the chilling effect of a costs award of the magnitude of the award in this case generally exceeds any fair and reasonable expectation of the parties.

[14] In Culligan Springs Ltd. v. Dunlop Lift Truck (1994) Inc. (2006), 2006 13419 (ON SCDC), 148 A.C.W.S. (3d) 369 (Ont. S.C.), at para. 28 (quoting Glenny v. Del Management Solutions Inc. (2004), 133 A.C.W.S. (3d) 943 (Ont. S.C.), at para. 7), the Divisional Court stated that a costs award should not be so crushing as to create a sense of injustice to the unsuccessful party by being out of proportion to the issues before the court.

[15] I am mindful that the principle of proportionality calls upon the court to consider the amount claimed for costs in relation to the amount recovered in the judgment, as well as the reasonable expectation of the parties. In my view, however, proportionality cannot and should not be routinely invoked to save litigants from the actual costs of proceedings in circumstances where those litigants have put forth a wholly unmeritorious defence to a legitimate claim or have caused the proceeding to become unduly prolonged or complicated. The principle should be applied thoughtfully and in a balanced fashion along with the other factors set out in rule 57.01.

[16] An over-emphasis on proportionality may serve to under-compensate a litigant for costs legitimately incurred. Assuming, as is often the case, that a successful Plaintiff’s lawyer is working on an actual fees basis (as opposed to a contingency agreement), this will inevitably result in the Plaintiff having to fund her successful litigation out of the proceeds of judgment that a court found she was entitled to. This is patently unfair to litigants who have been wronged and who choose to invest their hard-earned resources into pursuing a legitimate claim. One does not say to one’s lawyer, “I have only a modest claim. I am instructing you to do a mediocre job in advancing it.” Few litigation lawyers would be attracted to a litigation landscape where they could not recommend giving a matter the time and effort it requires to be properly advanced because the principle of proportionality predestines a costs award that promises to turn a successful result in court into a net financial loss for their client. A pattern of such outcomes would result in an unintended but nonetheless real denial of access to justice; it will send a message to litigants that it is not worth one’s while to pursue legitimate claims in court because one cannot possibly make it cost effective to do so. This is a denial of justice in the most fundamental sense. It tends to encourage those resisting legitimate but modest claims to take unreasonable positions, the logic being that any exposure to costs will be limited because of the size of the claim, regardless of the time and expense necessary to extract a judgment. At the same time, legitimate claimants will be left without cost effective remedies. This danger may be partly alleviated by the availability of the simplified procedure under Rule 76 and the Small Claims Court for certain types of claims; however, it offers little comfort to lien claimants who are required to bring their actions in Superior Court proper.

[17] I am obliged to apply the principle of proportionality. I have done so in combination with the other costs factors set out in rule 57.01. This litigation, in my view, falls squarely into the category of cases envisaged by Armstrong J.A. in Boucher, where the prospect of an award of costs against the Defendants should have acted as reality check for them. It did not. Exercising my discretion as trial judge, I conclude that the Plaintiff is entitled to costs of the action on a partial indemnity scale to the date of his offer to settle of February 21, 2013. From that date on, the Plaintiff is entitled to costs on a substantial indemnity scale. The disbursements are set out in the bill of costs. The Defendants did not specifically dispute them. In any event, I find that they were reasonable for the prosecution of the action and for the presentation of the case to court.

[18] Globally, I assess fees at $42,000. This is less than 70% of the fees claimed by the Plaintiff. I have arrived at that amount after a careful weighing of all factors and after reducing the fees allowed on the basis of proportionality. It is the only factor that weighs in favour of the Defendants. While this amount approximates the total of the actual judgment, I find that it would be patently unfair to the Plaintiff to saddle it with any greater share of the actual costs incurred. To do so, in the case before me, would result in a great injustice. A considered, balance and fair application of the principle of proportionality can only serve to alleviate the burden that must fall upon the Defendants to a limited extent. HST on the fees allowed amounts to $5,460. The Plaintiff is entitled to recovery of its disbursements in the amount of $6,628.99 inclusive of HST. The Defendants, Joseph Tarasco and Valerie Tarasco, shall therefore pay to the Plaintiff the costs of the action in the amount of $54,088.99. In line with the process set out in my judgment, these costs are payable by the Defendants to the Plaintiff or into court within 60 days. In the event of default of payment, the Plaintiff is entitled to invoke the sale powers as outlined in paragraph 38 of the judgment in order to have the costs award satisfied.

J.R. McCARTHY, J.

Date: September 28, 2015