SUPERIOR COURT OF JUSTICE - ONTARIO

Court File No.: CV-13-483479

RE: 1519024 ONTARIO INC. et al v. AGC FLAT GLASS NORTH AMERICA LTD.

Before: Master R. Dash

Counsel:
Harry Poch, for the plaintiffs

Richard Butler, for the defendant

COSTS ENDORSEMENT

[1] On September 28, 2015 I heard a motion by the defendant under rule 23.05 for costs of this action following a notice of discontinuance served on March 24, 2015. On September 30 I released my decision awarding costs of the action to the defendant in the sum of $20,000. This endorsement deals with costs of that motion. Both parties seek costs of the motion and have made submissions in writing.

[2] The statement of claim served on September 5, 2013 claimed $20 million damages resulting from contaminated groundwater under the plaintiffs’ property said to have originated at a property formerly owned by the defendant. Other actions had been started against owners of other properties that may have been the source of contamination. All actions had been held in abeyance pending further environmental investigations by the plaintiffs. In particular in this action, the plaintiffs had granted a waiver of defence to the defendant on September 18, 2013 and on several occasions advised the defendant to limit its defence expenses until further notice. The plaintiffs indicated on May 29, 2014 that the action would be discontinued but the notice of discontinuance was not served until March 24, 2015.

[3] Despite the waiver, the defendant did extensive investigations and retained coverage counsel. (There was no evidence that any of the potential insurers had raised coverage issues.) The defendant claimed partial indemnity costs of $66,465, based on actual costs of $128,577 including the costs of coverage counsel. The plaintiff suggested that a costs award of $5,000 would be reasonable. I awarded $20,000. In my reasons I made the following observation:

The time spent in gathering and reviewing information in order to assess liability, while clearly important if the action proceeded, was overly ambitious, unnecessary and excessive during the period of indulgence when it was unknown if a defence would be required – this was the most significant part of incurred costs. Also, as noted I would allow nothing for the costs of coverage counsel or in retaining them. Even costs subsequent to May 29/14 were largely unnecessary other than advising the bonding company of the discontinuance.

[4] The defendant submits that it was successful on the motion and seeks costs of the motion on a partial indemnity scale of $17,071 plus $1,000 for costs submissions. The plaintiffs submit that they were successful on the motion and seek costs on a partial indemnity scale of $13,353.

[5] Although I have not been made privy to all of the communications between counsel leading up to service of the motion record on July 22, 2015, I accept the defendant’s submission that as of that date, the plaintiffs had not yet admitted that they would be liable for any costs of the discontinuance pursuant to rule 23.05. I have concluded that the first time that the plaintiffs admitted that the defendant was entitled to some costs and that the motion would be restricted to issues of quantum was on September 1, 2015 during the cross-examination of Benjamin Hung, one of the plaintiffs’ affiants, even though they may have earlier admitted that some steps taken by the defendant during the indulgence were reasonable.

[6] In support of that conclusion I have reviewed pages 44 to 49 of the transcript of that cross-examination. At page 44 Mr. Poch initially stated, “We’re not denying that you are entitled to costs, as you’re well aware. It’s the quantum.” Mr. Butler responded, “I think that’s actually the first time that we’ve heard that the plaintiffs are providing admission that the defendants are entitled to costs.” Mr. Poch then appears to resile from that admission when he states, “Hold it, I just want to be clear…You have the right to bring a motion for costs.” When Mr. Butler says, “Okay well that’s very different to what you just said”, Mr. Poch agrees, “Okay. And I’m just clarifying that now…The ultimate decision is left with the Master as to whether or not there should be costs and the quantum.” Mr. Butler confirms, “We have brought a motion for costs. It is currently opposed. The way I take that is you oppose our request for any and all costs.” He goes on to advise Mr. Poch that if entitlement is in issue he is entitled to cross-examine on the bona fides of the action against the defendant, but if the issue is only quantum that would be different. Mr. Poch then goes off the record to speak to his client. When he returns he puts on the record, “The plaintiffs agree that your client is entitled to some costs and the dispute is the quantum. Our position is that it should be around $5,000…And that’s what the dispute is. It’s not whether there should be no costs or some costs.”

[7] Clearly it was reasonable and necessary for the defendant to bring the motion (and to cross-examine Mr. Hung) in order to obtain any award of costs. This is some measure of success in favour of the defendant and in my view it should be awarded costs incurred relating to the issue of entitlement to (as opposed to quantum of) costs. That said, notwithstanding that entitlement and quantum were both live issues until September 1, 2015, my conclusion from a review of the dockets and the motion materials is that very little of the preparation time and very little of the motion record were devoted to that issue. By far, the lion’s share of the work up the admission made mid-way through the September 1 cross-examination was devoted to quantum. All of the work after that date, including the preparation of the factum, dealt exclusively with the issue of quantum. Indeed paragraph 2 of the defendant’s factum reads: “The plaintiffs agree and admit that AGC is entitled to costs, but challenge the quantum.”

[8] I cannot say that the defendant was successful on the issue of quantum. It incurred actual costs of $128,577 in defending the action and sought $66,465 in partial indemnity costs in its bill of costs, in its factum and in argument before me. It was awarded $20,000 or only 30% of what it sought (and only 15.5% of its actual costs). I was critical of the quantum of costs incurred during the waiver of defence.

[9] On July 10, 2015, the defendant served a formal offer to settle the motion. The terms of the offer would have required the plaintiffs to pay $29,000 for the costs of the discontinued action plus an unspecified additional amount (to be agreed or assessed) for costs of the motion plus a full and final mutual release. While I accept that this was a genuine offer of compromise, the defendant did not exceed its offer. The actual amount of the offer was not determinable given the inclusion of unascertained costs of the motion. In any event, the quantum of costs awarded for the discontinued action was $9,000 (or 31%) less than the amount offered for the costs of the action (even without consideration of costs of the motion). Further, there was no obligation for the plaintiffs to provide a release as required by the terms of the offer.

[10] I likewise cannot say that the plaintiffs were successful on the motion. The award was $15,000 more (four times greater) than the $5,000 suggested by the plaintiffs in their submissions. There were no other offers made by the plaintiffs to settle the costs of the action.

[11] It is unnecessary to finely parse whether the $20,000 award was closer to the defendant’s position (or even its offer) or to the plaintiffs’ position. Arguments could reasonably be made both ways, depending on whether one examines dollar differentials or percentage differences. In my view the division of success on the issue of quantum, being the main issue on the motion and the sole issue at the hearing, was such that neither party should be awarded the costs of the motion on the issue of quantum, being the lion’s share of the costs of the entire motion.

[12] I cannot say that either party unnecessarily caused costs to be incurred by the respective cross-examinations, which in my view were reasonable. The defendant obtained a valuable admission on its cross-examination. The plaintiffs were entitled to test whether work was done as set out in the defendant’s dockets by way of cross-examination and productions. The plaintiffs’ failure to admit entitlement to costs until September 1, 2015 did cause the defendant to incur unnecessary costs preparing materials and researching the law on that issue. The defendant should have those costs, although in my view it was a very small portion of the costs incurred.

[13] In my view $3,500 costs, inclusive of HST and disbursements, would be fair and reasonable and attributable to the issue of entitlement. It is also proportionate to the issue on the motion, namely costs of the action, and to the $20,000 awarded as costs of the action. It is an amount that should have been within the reasonable contemplation of the plaintiffs.

[14] The plaintiffs shall pay to the defendant its costs of the motion within 30 days fixed in the sum of $3,500.

Master R. Dash

DATE RELEASED: October 26, 2015