SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-08-364088

DATE: 20151223

RE: ROY WISE PROFESSIONAL CORPORATION AND ROY WISE, Plaintiffs (Defendants by Counterclaim)

AND

NOEL MARK COLACO, Defendant (Plaintiff by Counterclaim)

BEFORE: Mr. Justice Stephen Firestone

COUNSEL:
Benjamin Salsberg (for the Plaintiffs at trial), Roy Wise, for the Plaintiffs regarding cost submissions

Tim Gleason and Sean Dewart, for the Defendants by Counterclaim.

Noel Mark Colaco, In Person

HEARD: In Writing

COSTS ENDORSEMENT

[1] The trial of the main action for payment of outstanding legal services along with the defendant’s counterclaim grounded in solicitor’s negligence proceeded before me without a jury for six days.

[2] In my reasons for judgment dated August 27, 2008, I ordered that the defendant (plaintiff by counterclaim) pay to the plaintiffs the sum of $90,454.81 plus any applicable pre and post- judgment interest. The defendant’s counterclaim was dismissed.

[3] In those reasons, I encouraged the parties to agree on the issue of costs. If they could not, a timetable was ordered for the delivery of cost submissions. Those cost submissions have been received and considered.

Position of the plaintiffs (defendants by counterclaim)

[4] Regarding the main action, the plaintiffs Roy Wise Professional Corporation and Roy Wise (“Wise”) submit that prior to the commencement of this action, Colaco acknowledged the validity of the time dockets. Had Colaco acknowledged this earlier, it would have reduced preparation time.

[5] This case involved allegations by Colaco that Wise acted contrary to Colaco’s instructions. Colaco also alleged that Wise failed to properly report and failed to advise Colaco of the need to be truthful and to make complete and honest disclosure in an affidavit Wise used to obtain an ex-parte injunction. Colaco further alleged that Wise was negligent in failing to take certain steps, had no involvement in the resolution of a certain matter and failed to properly obtain and account for the distribution of sale proceeds received in trust from the sale of a property. Colaco’s allegations called into question Wise’s competence and integrity as a barrister and solicitor.

[6] Wise submits that the allegations Colaco made in both his defence and counterclaim were a sham and that Colaco deliberately attempted to withhold critical evidence from the plaintiffs and the court during the course of this action.

[7] Wise submits that Colaco refused to produce his former solicitor’s file notwithstanding that requests were made for same. In addition, Wise brought a motion for further and better affidavit documents. This resulted in Colaco delivering three separate affidavit documents which did not contain the requested disclosure.

[8] In addition, Wise submits that Colaco failed to comply with a direction of the pretrial judge of September 1, 2014, ordering that certain files be produced.

[9] Wise highlights the fact that Colaco withheld critical documents from his own expert and the court. In addition, the evidence introduced at trial ultimately undermined the allegations against Wise.

[10] Wise, by way of compromise, served an offer to settle in both the main action and counterclaim for the sum of $60,000 on September 14, 2009, in order to avoid the cost of discovery, mediation, pretrial and trial. Given Colaco’s conduct during course of this litigation as well as the result achieved, Wise seeks costs in the main action on a substantial indemnity basis in the sum of $134,491.38.

[11] Regarding Colaco’s counterclaim, Wise submits that they were completely successful in defending the solicitor’s negligence claim against them. They submit that they served their offer to settle in both the main action and counterclaim, on September 14, 2009, before work on the counterclaim commenced. At trial, Wise did obtain a result more favorable than the offer to settle. As a result, they are entitled to substantial indemnity costs of the counterclaim in the sum of $105,181.33.

[12] The issues raised in the counterclaim were of fundamental importance to Wise. In addition to the $428,011.35 Colaco sought, he alleged that Wise failed to meet the standard of care of a reasonably competent solicitor. These allegations called into question Wise’s integrity. An adverse finding would have tarnished his professional reputation.

[13] Given the allegations Colaco made in the counterclaim, Wise’s professional liability insurance was engaged. LawPro was required to retain counsel to defend the counterclaim. This “ill-considered” litigation strategy on Colaco’s part required the new counsel appointed to learn both this file and the numerous underlying files related to Colaco’s allegations of negligence. This required review of a voluminous documentary record spanning decades.

[14] The fees Wise billed with respect to the counterclaim in the sum of $87,743.37 are reasonable and fall within the amount that an unsuccessful party could reasonably expect to pay in relation to a counterclaim for $428,011.35 in damages which proceeded to a six day trial.

[15] Wise highlights that the Rule 49 offer to settle in the sum of $60,000 plus interest and costs was never withdrawn. Under the terms of that offer, from September 24, 2009, Wise offered to settle both the claim and counterclaim in exchange for a payment from Colaco in the sum of $60,000 plus interest and costs.

[16] Wise submits that pursuant to Rule 49.10(1), since their offer was never withdrawn and they obtained a judgment more favorable than the terms of that offer, they are entitled to substantial indemnity costs after the date of an offer. Wise highlights that all of the costs regarding the counterclaim were incurred after September 24, 2009.

Position of the defendant (plaintiff by counterclaim)

[17] Regarding the main action, Colaco raises substantive issues which are in part unrelated to the issue of costs. He submits, in part, that in the Hanna case, Wise only obtained a Mareva injunction which was defective. Colaco alleges that Wise “kept it alive through the adjournment mechanism”. Further, Wise made no efforts to collect on the payment agreement. Notwithstanding that a statement of claim was issued, it was never served.

[18] Regarding the Malik file, Wise did not do anything substantial, as he was asked by Colaco to suspend work on it. He did not act on the Baranyai matter until after the sale of the building.

[19] Colaco submits that Malik’s misstatement regarding the interest question was immaterial, given that Wise never sued on the payment agreement and Malik was never examined. Further, if it is accepted that Colaco made a side agreement to exempt simple interest instead of compound interest, the premise for Colaco’s case against Hanna would not exist. As a result, Wise’s services would not be required.

[20] Colaco submits that he never misled the court. He argues that he was never shown the motion record and his signature was only on the affidavit listing Hanna’s payments. Further, the documents that his expert denied seeing consist of only the statement of claim issued by Wise, (which was never served) and the motion to marry the judgment and payment agreement filed in March, 2007.

[21] Colaco submits that Wise’s offer to settle was not sincere or reasonable, given mathematical errors in billing and the fact that Colaco was overcharged. He submits the costs billed by Wise are exorbitant, given that most of the documents were photocopies of existing documents. Further, Wise was never prepared to revise his billing based on the cost-benefit analysis provided by Colaco.

[22] Colaco submits that Wise went on a tangent into various unproductive areas which led to an adjournment of the original trial date.

[23] Colaco submits that the $60,000 offer to settle was not a sincere or reasonable one given the overcharge for the fee to his assistant, the mathematical errors in billing and an amount never collected by Wise.

[24] Colaco submits that the motion to obtain files from his lawyer and expert was unnecessary and could have been obtained by way of subpoena. Further, it was the actions of Wise which led to the original adjournment of the trial and the requirement that Colaco obtain an expert report.

[25] No new documentary evidence was introduced at trial. All documents were already available in Wise’s files. Colaco submits that Wise excessively staffed the defence for the counterclaim.

[26] Colaco submits that he did not dispute Wise’s billing, but rather disputed the results achieved and whether that work was beneficial to him. As a result, Colaco submits that in exercising my discretion to award costs I should consider that Colaco has paid Wise, as well as other lawyers, significant sums of money. Colaco submits that any costs I order should be calculated on a partial indemnity basis.

Analysis

[27] Section 131(1) of the Courts of Justice Act provides as follows:

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 costs shall be paid.

[28] Rule 57.01 of the Rules identifies the factors a court may consider when exercising its discretion to award costs:

(1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(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;

(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;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

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

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs.

[29] Rule 49.10 limits the court’s discretion on costs in certain circumstances when there has been a qualifying offer to settle:

(1) Where an offer to settle,

(a) is made by a plaintiff 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 defendant,

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.

(2) 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 judgment 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 from that date, unless the court orders otherwise.

[30] Rule 49.13 provides as follows:

Despite rules 49.03, 49.10 and 49.11, the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer.

[31] In Agius v. Home Depot Holdings Inc., 2011 ONSC 5272, the court set forth the general principles to be applied in fixing costs, at paras. 10-12:

Cumming J. in DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601 at para. 5, described the “normative approach” to an application for costs:

Costs are in the discretion of the Court: s. 131, Courts of Justice Act, R.S.O. 1990, c. C.43 and Rule 57.01 of the Rules of Civil Procedure. In Ontario, the normative approach is first, that costs follow the event, premised upon a two-way, or loser pay, costs approach; second, that costs are awarded on a partial indemnity basis; and third, that costs are payable forthwith, i.e. within 30 days. Discretion can, of course, be exercised in exceptional circumstances to depart from any one or more of these norms.

Fixing of costs is not merely a mechanical exercise in reviewing the receiving party’s Cost Outline. In Andersen v. St. Jude Medical Inc. (2006), 2006 85158 (ON SCDC), 264 D.L.R. (4th) 557, the Divisional Court set out several principles to be considered in making an award of costs:

1. The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in rule 57.01(1): Boucher [Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291], Moon [Moon v. Sher (2004), 2004 39005 (ON CA), 246 D.L.R. (4th) 440], and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 2005 1042 (ON CA), 75 O.R. (3d) 638 (C.A.).

2. A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case: Boucher. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 119 A.C.W.S. (3d) 341 (Ont. C.A.), at para. 4.

3. The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: rule 57.01(1)(0.b).

4. The court should seek to avoid inconsistency with comparable awards in other cases. “Like cases, [if they can be found], should conclude with like substantive results”: Murano v. Bank of Montreal (1998), 1998 5633 (ON CA), 41 O.R. (3d) 222 (C.A.), at p. 249.

5. The court should seek to balance the indemnity principle with the fundamental objective of access to justice: Boucher.

The Court of Appeal has identified the overriding principle to be that the amount of costs awarded be reasonable in the circumstances. In Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 Epstein J.A. stated at paras. 51-52:

As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding at para. 37, where Armstrong J.A. said “[t]he 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 application of Rule 49.10

[32] Rule 49.10(1) (“Plaintiff’s Offer”) and Rule 49.10(2) (“Defendant’s Offer”) take effect when “the plaintiff obtains a judgment.” Therefore, the specific cost consequences under Rule 49.10 have no application when the plaintiff’s claim is dismissed in its entirety with no award of damages: Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, at para. 38 (“as the plaintiff’s claim had failed, rule 49.10 had no application”). The Court of Appeal explained the rationale for Rule 49.10’s limited scope in S & A Strasser Ltd. v. Richmond Hill (Town) (1990), 1990 6856 (ON CA), 1 O.R. (3d) 243 (C.A.), at p. 245:

At first glance it seems an anomaly that the plaintiff should be awarded solicitor-and-client costs following the date of an offer, while the defendant only receives party-and-party costs. 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 that 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. 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.

[33] In this case, the plaintiffs did obtain a judgment and were clearly the successful parties in both the main action and counterclaim. I also note that irrespective of the automatic cost consequences that flow from the application of Rule 49.10, in exercising my discretion with respect to costs, under Rule 49.13, I may take into account “any offer to settle made in writing, the date the offer was made in the terms of the offer”. The offer to settle made by the plaintiffs (defendants by counterclaim) certainly falls under this category.

[34] In this case, the plaintiffs made an offer to settle both the main action and counterclaim through the payment of “$60,000 in full and final discharge of all liabilities.” The offer stated as follows:

[This offer] shall remain open for 10 days following which it shall be deemed to be amended to provide for the payment of the plaintiffs in addition to the sum of $60,000 pre-judgment interest at the Courts of Justice Act rate on the above amount from October 10, 2008 together with costs from the date of this offer on a partial indemnity basis to the date of this offer and thereafter on a substantial indemnity basis.

[35] The terms of the offer to settle were equally applicable to both the results achieved in the main action and counterclaim. In the main action, the plaintiffs were successful and obtained judgment in the sum of $90,454.81. In the counterclaim, the plaintiffs were successful in having it dismissed in its entirety.

[36] At no time did Colaco accept the plaintiffs’ offer to settle dated September 14, 2009 or withdraw his counterclaim.

The application of Rule 57.01

[37] In addition to the result achieved and offers to settle, I may consider the factors enumerated in Rule 57.01(1) when exercising my discretion under s. 131 of the Courts of Justice Act.

[38] Costs are in the absolute discretion of the court. A successful litigant has no right to costs, but only to a reasonable expectation of costs. In Yelda v. Vu, 2013 ONSC 5903 (leave to appeal denied), 2014 ONCA 353 at para. 11, Arrell J.A. confirmed the long-standing principle that a successful party is entitled to costs except for good reason. He states as follows:

The principle that costs follow the event should only be departed from for very good reasons such as misconduct of the party, miscarriage in procedure, or oppressive or vexatious conduct of proceedings.

[39] Absent special circumstances, a successful party is entitled to the costs: Bell Canada v. Olympia & York Developments Ltd. (1994), 1994 239 (ON CA), 17 O.R. (3d) 135 (C.A.). In the present case, the plaintiffs (defendants by counterclaim) were successful and are entitled to their costs.

[40] Based on the factual matrix and procedural history of this action as well as the application of Rules 49 and 57.01(1), in my view the plaintiffs (defendants by counterclaim) are entitled to their costs on a partial indemnity basis to the date of their offer to settle. They are entitled to substantial indemnity costs thereafter.

[41] This matter began as an action by the plaintiffs to recover monies owing for outstanding legal services provided. Following service of the claim, the defendant delivered his defence which included a counterclaim grounded in solicitor’s negligence. As a direct result of the counterclaim, both the complexity and trial time were increased.

[42] The plaintiffs were successful in the main action and recovered $90,454.81, slightly less than the amount requested. The defendant’s counterclaim was dismissed in its entirety. In my reasons for judgment, I found that Wise exercised his judgment appropriately and that he acted in accordance with his retainer and in his client’s best interests.

[43] In the counterclaim, the defendant called into question Wise’s integrity and competence as a solicitor. Colaco certainly could reasonably have expected that those allegations would be vigorously defended given both the amount sought and the nature of the allegations made against Wise.

Quantum of Costs

[44] Section 131 of the Courts of Justice Act affords the court discretion to determine the amount of costs to be paid.

[45] The overall objective of fixing costs is to arrive at an amount that is fair and reasonable, rather than to reflect the amount of actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), at para. 16.

[46] In Haufler v. Hotel Riu Palace Cabo San Lucas, 2014 ONSC 2686 at para. 11, Quigley J. confirmed the principle, increasingly recognized by the courts, that an hourly approach to determining costs awards is a problematic element of litigation. (See also Brady v. Lamb, 14 C.C.L.I. (4th) 285, 2004 27491 (Ont. S.C.) at para. 29).

[47] I do not intend to engage in the purely mathematical exercise of reviewing the time dockets provided. This approach is in accordance with the principles I have outlined. The court’s role is to fix a reasonable amount to be paid by the unsuccessful party in this case, Colaco. It is not the court’s role to conduct an exact mathematical calculation of the successful litigants’ actual costs.

[48] The rate charged per hour is an appropriate consideration. However, it is subject to the overriding principle of reasonableness as applied to the factual matrix of a particular case.

[49] I have reviewed the plaintiffs’ cost outlines. A review of those outlines indicates that there is some minimal duplication of effort. Based on the factual matrix of this case the time spent and steps taken in both the main action and counterclaim were all reasonable and necessary.

[50] I have considered the appropriate legal principles as they apply to the facts of this case as well as the written submissions of the parties.

[51] Colaco is to pay Wise costs of the main action in the all-inclusive sum of $86,000 and costs of the counterclaim in the all-inclusive sum of $80,000.

Firestone J.

Date: December 23, 2015