Rosenberg v. 206 Bloor Street West Limited, 2016 ONSC 1111
CITATION: Rosenberg v. 206 Bloor Street West Limited, 2016 ONSC 1111
COURT FILE NO.: CV-12-469391
DATE: 2016-02-12
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Linda Paris Faith Rosenberg, Plaintiff
AND:
206 Bloor St. West Limited carrying on business as Museum House, Crayon Design Company Inc., also known as Crayon Design Co. Inc. and Cheryl Krismer, also known as Cheryl Ann Krismer, Defendants
BEFORE: F. L. Myers, J.
COUNSEL: Shawn Pulver and Lauren Sigal, for the Plaintiff
David Preger and Thomas Arndt, for the Defendants
READ: February 10, 2016
COSTS ENDORSEMENT
[1] For reasons released January 4, 2016, reported at 2016 ONSC 6, the court granted summary judgment and ordered the defendant 206 Bloor St West Limited to refund to the plaintiff her deposit of $514,750 on a failed condominium purchase. The parties agree that the plaintiff is also entitled to a refund of a further $9,000 that she paid under the Partial Upgrade Agreement as a result of my having found that the agreement was terminated due to the vendor’s default. Accordingly, my order is amended to correct that amount.
[2] Counsel are working on settling the determination of prejudgment interest. If they are unable to do so they may each deliver up to five pages of written submissions on the issue – plaintiff first followed by the defendant one week later. Submissions should canvass the questions of whether in circumstances where the interest formula prescribed under the Condominium Act, 1998 produces a prejudgment interest rate of zero or less than zero, prejudgment interest is available under the Court of Justice Act, the Interest Act, or in equity. Under the CJA, the issue is whether under s.128(4)(g) interest “is payable by right other than under this section” when interest is payable under Condominium Act, 1998 but the prescribed rate is zero or below.
[3] The applicant seeks costs all-in of $483,236 on a substantial indemnity basis or $330,874 on a partial indemnity basis. The defendant submits that the plaintiff should be entitled to costs on a partial indemnity basis fixed at $100,000.
[4] The plaintiff says that her actual costs are $523,645. The defendant’s actual costs are $309,461.22. It can be seen at once that the plaintiff spent about the same amount in costs as was in issue.
[5] In DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601 at para. 5, Cumming J. described the basic approach to awarding costs as follows:
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.
[6] In Yelda v. Vu, 2013 ONSC 5903 (leave to appeal denied, 2014 ONCA 353) at para. 11, Arrell J. 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.
[7] The Divisional Court listed several principles to be considered in considering costs in Andersen v. St. Jude Medical Inc. (2006), 2006 85158 (ON SCDC), 264 D.L.R. (4th) 557:
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.).
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.
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).
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.
The court should seek to balance the indemnity principle with the fundamental objective of access to justice: Boucher.
[8] In my view, the plaintiff was successful and is entitled to her costs. To fix the costs under Rule 57.03(1)(a), I need to consider first, what scale of costs is appropriate; and second, what amount is appropriate in that scale.
The Scale of Costs
[9] The plaintiff seeks costs on a substantial indemnity basis because, she says, she tried to engage the defendant in settlement discussions throughout and it was unwilling to make a counter-offer. I do not understand there to be an obligation on the defendant to make offers. Nor is the failure to make an offer itself sufficiently reprehensible conduct to justify an award of substantial indemnity costs. Mortimer v. Cameron (1994), 1994 10998 (ON CA), 17 O.R. (3d) 1(C.A.) leave to appeal refused 19 O.R. (3d) xvi (note). The plaintiff had an option to try to increase the scale of costs that she might recover. She could make an offer to settle under Rule 49 with a sufficient compromise so that she could beat her at trial.
[10] The plaintiff actually made four written offers. The first two did not meet the requirements of a Rule 49 offer. The plaintiff’s next two offers both sought 100% of her deposit back and used other currency to suggest a compromise. In the first of the two, dated April 3, 2014, she sought a refund of the deposit, plus $30,000 in legal fees, reimbursement of another $50,000 or so in interest expenses that she incurred on borrowing the funds used for her deposit, repayment of $9,000 that she paid under the Partial Upgrade Agreement (that she won as discussed above) and another $17,000 or so for engineering fees and expenses. In her offer dated March 10 2015, the plaintiff offered to take the deposit (including the Partial Upgrade Agreement amount), plus $80,000 for legal fees, and over $9,900 for engineering fees. The engineering fees were not in issue at the motion and were not awarded to the plaintiff. Regardless, the plaintiff says that she beat this offer because she will likely receive more in costs in this endorsement than the total that she was willing to take in legal and engineering costs at least in the fourth offer if not the third.
[11] I only need deal with the fourth offer. It was delivered on express term that it replaced the prior offer. Hagyard v. Keele Plumbing & Heating Ltd. (1989), 15 W.D.P.C. 375 (Ont. Div. Ct.)
[12] While the inclusion in an offer to settle of a fixed amount for costs is not a bar to success under Rule 49, Brown v. Township of Ignace, 2010 ONSC 348, in cases where the numbers are close, it creates a problem. Noyes v. Attfield, 1994 7286 (ON SC). The plaintiff chose not to compromise one penny on the principal amount of her claim. For me to tell then whether the plaintiff’s offer represented a compromise, I would have to assess the amount of costs to which the plaintiff would have been entitled as at March 10, 2015. Even if I were to do that now, how was the defendant to know what the plaintiff’s assessable costs were on a partial indemnity basis at that date? It did not have counsels’ dockets. It had no way to know that the plaintiff’s firm was incurring costs at a far higher pace that its own law firm was. The defendant had no way to know if the offer of $80,000 in costs plus $9,900 in engineering fees was a compromise over the partial indemnity costs to which the plaintiff might have been entitled at that time.
[13] Making an offer with no compromise in principal is entirely proper and is also not a bar to being awarded substantial indemnity costs. But where, as here, there is serious uncertainty as to the costs entitlement at the date of the offer and other, non-assessable fees are included in the offer which then have to be accounted for to gauge success, it seems to me that the offer loses the predictability that is central to the success of the Rule 49 regime. Parties should be encouraged to make offers to settle that include a clear, genuine, understandable compromise. The Rule should apply almost automatically when one beats one’s offer. But where there is no clear compromise and the other side cannot readily determine where it stands under the offer, then applying the Rule will incentivize a strategic game whereby counsel try to put enough certainty and compromise in an offer to fool the judge but leave enough uncertainty to fool the defendant. It seems to me that the incentives should be otherwise. The Rules should be interpreted so that clear, understandable, genuine compromise is rewarded and clever tactics to try to gain the benefits of the Rule without meaningful, clear, and understandable compromise is not.
[14] I find that the plaintiff has failed to meet her burden to establish that the judgment is as favourable or more favourable than the terms of her offer to settle under Rule 49.10(1). The plaintiff then is not entitled to costs on a substantial indemnity basis from the date of the offer. Rather, she is entitled to costs on a partial indemnity basis throughout.
The Quantum of Costs
[15] I do not view it as my role to assess the plaintiff’s costs on anything like a docket-by-docket or even a particularly mathematical basis.
[16] The fixing of costs is a discretionary decision under section 131 of the Courts of Justice Act. That discretion is generally to be exercised in accordance with the factors listed in Rule 57.01 of the Rules of Civil Procedure. These include the principle of indemnity for the successful party (57.01(1)(0.a)), the expectations of the unsuccessful party (57.01(1)(0.b)), the amount claimed and recovered (57.01(1)(a)), and the complexity of the issues (57.01(1)(c)). Overall, the court is required to consider what is “fair and reasonable” in fixing costs, and is to do so with a view to balancing compensation of the successful party with the goal of fostering access to justice: Boucher v Public Accountants Council (Ontario), 2004 14579 (ON CA), (2004), 71 O.R. (3d) 291, at paras 26, 37.
[17] I accept, as does counsel for the defendant, that the rates charged by the plaintiff’s lawyer were discounted and were very reasonable.
[18] The plaintiff says that the matter was complex. It was complex factually in that there were literally over 200 individualized disputes between the parties. Unfortunately it took many days of evidence to provide clarity on the facts after legal submissions did not provide the clarity required to determine the issues.
[19] But the case was not complex legally. It turned on one clause in a contract. The plaintiff approached the case with a scattergun of causes of action against multiple parties that made the case much more complex to resolve. While lawyers frequently sue everyone in sight especially in the insurance field, the risks of doing so in a commercial case are obvious. Here the plaintiff has incurred costs equal to her judgment if not more. Much of that occurred due to her own management of the case. I have little doubt from seeing the detailed dealings that she had with the defendant and others and the excessively detailed documents that she prepared for the purposes of case, that the plaintiff very active in her own claim. Her approach made the case too disproportionately expensive. Not every possible claim should be made. For example, the Statement of Claim sought both rescission of the agreement of purchase and sale and specific performance of the same agreement. The two are mutually exclusive.
[20] The decision to seek a CPL also was unnecessary and, in my view, an unreasonable step. The plaintiff would only have closed if the defendant assured her that she was getting the unit built as she wanted it. I said in a prior endorsement that no court would order specific performance of a residential condominium. Not only is it not unique in law but here the parties could not agree on how it was to be built. No court could or would superintend the design and building process with 200+ decisions on which the parties could not agree. The plaintiff realistically wanted her deposit back. Subsection 103(6)(a)(i) of the Courts of Justice Act, RSO 1990, c.C.43, specifically provides for the discharge of a CPL where money is sought in the alternative to the interest in land. You cannot get your deposit back and claim to own the land at the same time.
[21] Similarly, the decision to sue Crayon and Ms. Krismer for a myriad of torts, while legally permissible, caused significant wasted costs. It drove a wedge between the vendor and its agent and thereby caused the vendor to use Mr. Hart as its witness while Ms. Krismer was represented by her insurer. This doubled the initial affidavits and cross-exanimations. Ultimately, after the vendor admitted that it was bound by its agent Crayon and Ms. Krismer, and case management was implemented, the plaintiff agreed to let Crayon and Ms. Krismer out of the action. However, the plaintiff included in her Bill of Costs all the time she spent suing Crayon and Krismer. Those costs do not lie at the feet of the vendor.
[22] I am not ignoring that the defendant did not make it easy for the plaintiff. It was slow to respond at times and it was strategic in its decision-making to be sure. Even once deals were made to remove the CPL or to let Crayon and Krismer out of the action, for example, it took months to implement the deals because of positional play on all sides.
[23] Moreover, I am mindful that while the defendant won on all but one issue at the summary judgment motion, there was no divided success. The plaintiff won her deposit back which was 100% of the money that was realistically at issue. It is true that she lost on her claim for punitive damages but that claim never had an air of reality in a contract case and it had little or no effect on costs.
[24] The plaintiff’s failure to focus matters down to their essence resulted in unnecessary proceedings. The CPL, the shotgun of causes of action, the naming of Crayon and Krismer, and the plaintiff’s initial allegation about the square footage of the unit that was made but never pursued, were all unnecessary issues that caused significant costs that did not contribute to the outcome. The plaintiff’s gross over-statement of her case was referenced in para 36 of my Reasons. It resulted in at least two days of the hearing being wasted just trying to figure out what samples the plaintiff was shown and which were not provided. While the plaintiff repeatedly accuses the defendant of being unwilling to negotiate with her, she fanned the flames throughout.
[25] Finally, while I will not assess dockets closely at all, 179 hours of student time, especially time preparing for and attending to watch examinations is excessive. Students should freely be brought to examinations and to court to watch and to learn. But where there are already two billing counsel in attendance, the student learning time is overhead to the firm unless the students are making a contribution of value to the proceeding.
[26] I have considered the fact that there was a 12 day motion/mini-trial, several case management hearings, and many days of examinations out of court. It seems to me that there was much duplication in the examinations of Krismer and Hart that was avoidable. There was a full banker’s box containing over a dozen thick volumes of documents demanded as answers to undertakings and put before the court by plaintiff with only one or two individual documents ever being referred to. In short, there were excessive and unnecessary steps by the plaintiff. There was excessive billing of time for the proceedings against Krismer, Crayon, and for students. I also find that in conducting its own settlement calculus, the defendant cannot be taken to expect that the plaintiff would incur costs anywhere near to the value of her entire claim. That just cannot be a proportional approach.
[27] The hourly rates charged by counsel for the defendant were higher than those charged by counsel for the plaintiff. Yet their bill to their client came in just over $300,000. It seems to me that on a partial indemnity basis it is fair, reasonable, and appropriate for the defendant to have considered itself at jeopardy for partial indemnity costs of $225,000 all-in and I fix the costs that it is to pay to the plaintiff at that amount.
F.L. Myers J.
Released: February 12, 2016