GROVES v. SEHGAL et al, 2016 ONSC 5053
CITATION: GROVES v. SEHGAL et al, 2016 ONSC 5053
COURT FILE NO.: C-52-12
DATE: 2016-08-10
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: SHERRI LISA GROVES, Plaintiff
AND:
SANDEEP RAMESH SEHGAL, TAKBO ENTERPRISES LIMITED, c.o.b. as Petro-Canada Outlet # 35109, SUNCOR ENERGY INC., and AMISHA ENTERPRISES INC., Defendants
BEFORE: The Honourable Mr. Justice D.A. Broad
COUNSEL: Bernard T. Verbanac, for the Plaintiff Lindsay Lorimer, for the Defendant Suncor Energy Inc.
costs ENDORSEMENT
[1] The parties have been unable to settle the issue of costs and have now delivered their written submissions on costs.
Position of the Defendant Suncor
[2] Suncor seeks costs of the action against the plaintiff on a substantial indemnity basis in the total sum of $74,624.15, comprised of fees in the sum of $60,174, HST thereon in the sum of $7822.62, and disbursements, inclusive of HST, in the sum of $6627.53. Alternatively, Suncor seeks costs of its motion for summary judgment on a substantial indemnity basis in the amount of $44,182.63, comprised of fees in the sum of $41,620.72 and disbursements in the sum of $2561.91.
[3] Suncor advances two bases for its claim to entitlement to costs on a substantial indemnity basis. Firstly, it relies on its Offer to Settle served on September 23, 2014 which provided for dismissal of the action as against Suncor, with the plaintiff to pay Suncor’s costs of the action on a partial indemnity basis. Secondly, Suncor submits that the plaintiff, through her counsel, took steps that were improper, vexatious, and that unnecessarily lengthened the duration of the proceeding.
[4] With respect to the second basis upon which it relies in support of its claim for substantial indemnity costs, Suncor submits that it provided plaintiff’s counsel with multiple opportunities to discontinue the action as against it before moving for summary judgment. On August 12, 2014, Suncor offered to consent to a dismissal of the action against it without costs, and later, as indicated above, served an Offer to Settle providing for dismissal of the action against it with costs, on a partial indemnity basis. Moreover, Suncor points to the plaintiff’s confirmation on discovery that she had no reason to believe that Suncor had a role in the hiring of the defendant Sehgal, and that, notwithstanding this admission that no known link existed between Suncor and Sehgal, plaintiff’s counsel refused to release Suncor from the action. The plaintiff brought two refusals motions, one of which was dismissed in its entirety and the other served only to delay the hearing of the summary judgment motion.
[5] Finally, Suncor submits that the plaintiff’s costs liability should be shared by her counsel Mr.Verbanac pursuant to rule 57.07(1) of the Rules of Civil Procedure. In this respect Suncor submits that Mr. Verbanac ought to have known that a sufficient link between Suncor and Sehgal did not exist after reviewing the Area Retail Licensee Agreement (“ALRA”) between Suncor and the defendant Takbro in July, 2012. Suncor states that there is no evidence that the plaintiff is a sophisticated litigant, and it is therefore apparent that the refusal to discontinue the claim against Suncor was Mr. Verbanac’s decision and was not the result of instructions from the plaintiff herself.
Position of the Plaintiff
[6] The plaintiff submits that no costs should be awarded to Suncor notwithstanding its success on the motion for summary judgment. She further submits that, if it is found that costs should be awarded, the amount should it be reduced substantially from that claimed by Suncor to reflect the expectations of the parties.
[7] The plaintiff argues that the court should recognize that Suncor is a large, sophisticated corporation, well aware of the permutations that result from unpredictable litigation and is better able to sustain any loss resulting from this litigation than the plaintiff who is an individual with limited resources. The plaintiff also points out that the ALRA included an indemnity provision whereby Takbro agreed to indemnify Suncor for circumstances such as in this action. Suncor has recourse for recovery of its legal costs from Takbro and, as such, an award of costs against the plaintiff would not be appropriate. The plaintiff says that it was reasonable to include and maintain Suncor as a defendant in the action given the interconnected relationship between Suncor and Takbro.
[8] The plaintiff does not take issue with the hourly rates as set forth in Suncor’s Bill of Costs, however, she argues that the Bill of Costs is not sufficiently particularized and also argues that the counsel time spent on the motion for summary judgment was excessive.
[9] The plaintiff submits that, if an amount for costs is awarded to Suncor against her, payment should be stayed until the issue of Takbro’s liability is determined at trial, as the plaintiff will request a Sanderson order if Takbro is held liable, being an order that Takbro, as the unsuccessful defendant, but not the plaintiff, pay the costs of Suncor, the successful defendant.
[10] Plaintiff’s counsel Mr. Verbanac submits that no amount in respect of costs should be awarded against him personally. He says that, by including Suncor as a defendant in the action, he was doing his due diligence in advocating for the plaintiff by ensuring that all parties involved in the matter were named and held responsible. Mr. Verbanac argues that an award of costs against a lawyer is rarely granted and when it has been awarded it involved a solicitor’s actions which fundamentally undermined the fairness of the trial, a solicitor’s unprofessional conduct, or circumstances where the solicitor pursued litigation with a vindictive agenda. He says that none of those factors are relevant in this case. Moreover he says that Suncor has failed to show how he acted negligently, nor has it tendered any evidence to suggest that he was acting contrary to or without the instructions of the plaintiff.
Guiding Principles re Costs Generally
[11] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, provides that "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 the costs shall be paid."
[12] The factors to be considered by the court, in the exercise of its discretion on costs, are set forth in subrule 57.01(1), as follows:
57.01 (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, various factors, including:
(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.
[13] The usual rule in civil litigation is that costs follow the event and that rule should not be departed from except for very good reasons (see Gonawati v. Teitsson 2002 41469 (ON CA), [2002] CarswellOnt 1007 (Ont. C.A.)], 2002 41469 and Macfie v. Cater, 1920 401 (ON SC), [1920] O.J. No. 71 (H.C.J.) at para 28).
[14] The Court of Appeal has observed that modern costs rules are designed to foster three fundamental purposes: (1) to indemnify successful litigants for the cost of litigation; (2) to encourage settlements; and (3) to discourage and sanction inappropriate behavior by litigants (see Fong v. Chan (1999) O.J. No. 3707 (CA) at para. 24).
[15] It is well known that the overall objective in dealing with costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful party. The expectation of the parties concerning the quantum of costs is a relevant factor to consider. The court is required to consider what is "fair and reasonable" having regard to what the losing party could have expected the costs to be (see Boucher v. Public Accountants Council (Ontario), 2004 14579 (ON CA), [2004] O.J. No. 2634 (Ont. C.A.) at para. 26 and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC, 2005 1042 (ON CA), [2005] O.J. No. 160 (Ont. C.A.)).
[16] Armstrong, J.A. in Boucher cast the overriding principle of reasonableness as an access to justice issue. At para 37 he stated as follows:
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.
Analysis
[17] It is clear that Suncor was successful on the motion and in the action. I see no good reason to depart from the usual rule that costs should follow the event. The plaintiff has cited no authority for the proposition that the court should deny Suncor costs in successfully defending the action because it is in a better position than the plaintiff to bear the costs of the litigation. Such a proposition would be contrary to the first fundamental principle of the cost rules as identified by the Court of Appeal, namely, to indemnify successful litigants for the cost of litigation. Moreover the fact that Suncor may have a contractual right of indemnity against Takbro for any costs which it has incurred in respect of the action would not disentitle it from seeking costs against the plaintiff. No authority was cited by the plaintiff in support of the proposition that an unsuccessful litigant may be relieved of the obligation to pay costs by reason of the successful litigant having a contractual right of indemnity in respect of such costs against a third party. Suncor is therefore entitled to costs against the plaintiff.
[18] However, I would not give effect to Suncor’s submission that its Offer to Settle should give rise to an award of substantial indemnity costs. In my view, in order to be considered for this purpose, an offer to settle must represent a compromise of the issues in the action. The terms of the offer providing for dismissal of the action and payment of costs by the plaintiff on a partial indemnity basis simply represents the expected disposition if Suncor were completely successful in the action, and therefore does not represent a compromise.
[19] I would similarly not give effect to Suncor’s position that substantial indemnity costs are warranted by reason of the manner in which the litigation was conducted by the plaintiff. Although her action against Suncor was ultimately dismissed on the summary judgment motion I do not find that the manner in which the plaintiff conducted the action was improper, vexatious, an abuse of process or otherwise of such a nature as to attract an award of substantial indemnity costs.
[20] In recognizing that there were two changes in representation of Suncor during the course of the proceeding which would be expected to have resulted in some duplication and in applying the principles of reasonableness, in terms of the plaintiff’s reasonable expectations concerning costs, and proportionality I would fix Suncor’s partial indemnity costs at $25,000 in respect of fees, HST thereon on the sum of $3250 and disbursements, inclusive of HST in the sum of $6627.53 for a total of $34,877.53.
Stay Pending Final Disposition of action against Takbro re Possible Sanderson Order
[21] As indicated above, the plaintiff seeks a temporary stay of any costs award against her until final disposition of her action against Takbro as she intends to seek a Sanderson order against Takbro in the event that it is found liable to her.
[22] Section 106 of the Courts of Justice Act R.S.O. 190, c. C.43 provides that “ a court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just.”
[23] In my view it would not be just to stay enforcement of the costs award in favour of Suncor unless there exists a reasonable prospect of a Sanderson order being made against Takbro in the event that the plaintiff is successful against it. It is not the court’s role or purpose at this stage to determine whether such an order would or should be made, but rather whether a claim for such an order would have a reasonable chance of succeeding.
[24] The leading authority on the test for determining whether a Sanderson order is appropriate is the case of Moore (Litigation Guardian of) v. Wienecke (2008) ONCA 162 (C.A.). The court in that case stated at para. 41 that, as a first step, courts ask a threshold question, namely whether it was reasonable to join the several defendants together in one action. If the answer to that question is “Yes”, the courts must use their discretion to determine whether a Sanderson order would be just and fair in the circumstances.
[25] The Court of Appeal in Moore at paras. 46-50 identified a number of factors that are relevant to a decision whether to exercise the discretion to grant a Sanderson order, while indicating that the factors need not be applied mechanically in every case. The factors identified by the court in Moore are as follows:
a) whether the defendants at the trial tried to shift responsibility onto each other, as opposed to concentrating on meeting the plaintiffs’ case;
b) whether the unsuccessful defendant caused the successful defendant to be added as a party;
c) whether the two causes of action were independent of each other; and
d) the ability of the successful defendants to collect costs from the unsuccessful defendant.
[26] In my view, it was not reasonable to join Suncor in the action against Sehgal and Takbro. It is apparent from a review of the Statement of Claim that the plaintiff knew, prior to commencement of the action, that Takbro operated the Petro-Canada gas station and was the employer of Sehgal. In July 2012 plaintiff was given a copy of the ALRA by which Suncor licensed Takbro to operate station under the Petro-Canada name. The plaintiff knew or should have known that the assault committed by Sehgal was an incidental or random attack that merely happened to take place during working hours on the premises licensed by Suncor to his employer, and that to impose vicarious liability on Suncor “would not respond to common sense notions of fairness” (see Bazley v. Curry 1999 692 (SCC), [1999] 2 S.C.R. 534 (S.C.C.). It is therefore unlikely that the claim for a Sanderson order would pass the threshold question identified in Moore.
[27] Moreover, in relation to the other factors referred to in Moore, there is no indication that Suncor and Takbro tried to shift responsibility onto each other as opposed to concentrating on meeting the plaintiff’s case, nor that Takbro caused Suncor to be added as a party. I also find that the cause of action against Suncor was independent of the cause of action against Takbro. The liability of each of these parties, whether direct or vicarious, was to be assessed independently.
[28] On this basis I find that it would not be just to stay enforcement of the costs award against the plaintiff a pending final disposition of her action against Takbro.
Claim that Counsel for the Plaintiff Pay Costs Personally
[29] Mr. Verbanac did not request that a separate hearing to be held to consider Suncor’s claim that he should be personally responsible for all or part of the costs awarded against the plaintiff pursuant to rule 57.07(1). Rule 57.07(2) provides that no order shall be made unless the lawyer has been given a reasonable opportunity to make representations to the court. One would have thought that, given the obvious conflict between Mr. Verbanac and his client on the issue of responsibility for Suncor’s costs, he would have retained counsel to separately represent him. In the event that I were to find that Suncor’s claim under rule 57.07(1) had merit I would not proceed to make a determination without providing Mr. Verbanac with an opportunity to present evidence, should he so choose, and to be separately represented by counsel.
[30] However, I do not find Suncor’s claim to attach personal responsibility for costs to Mr. Verbanac warrants the costs to the parties in conducting a hearing to determine the issue. In the case of Best v. Ranking, 2015 ONSC 6279 (S.C.J.) Healey, J. after conducting a review of the case-law applying rule 57.07(1), stated at para. 37:
Counsel are in agreement that it is not necessary to show negligence, bad faith or some reprehensible conduct in order to justify an award of costs under rule 57.07. In all of the above-referenced cases relied upon by the Caribbean defendants, the quality that seems to have tipped the scales in favour of awarding costs against a solicitor was the nature of the proceeding commenced by each solicitor of record, each constituting an abuse of process, and steps taken in the litigation that run contrary to the interests of justice.
[31] In dismissing the appeal at 2016 ONCA 492 Pardu, J.A.., observed at para. 50, as follows:
I agree with the submission of the appellant that the fact that a lawyer starts an action which is unlikely to succeed is not, on its own, a basis to award costs personally against that lawyer.
[32] Suncor, in its submissions, argued “Mr. Verbanac ought to have known that a sufficient link between Suncor and Sehgal did not exist after reviewing the ARLA in July 2012. Nonetheless, Mr. Verbanac refused to discontinue this action against Suncor.” In essence, Suncor’s position is simply that Mr. Verbanac should not have continued with the action because it was unreasonable to do so. In my view, this is not a sufficient basis to support a claim under rule 57.07(1) that he pay costs personally.
Disposition
[33] For the reasons set forth above, it is ordered that the plaintiff pay costs to the defendant Suncor in respect of the action, including the motion for summary judgment, fixed, on a partial indemnity basis, in the all-inclusive sum of $34,877.53. This amount is payable within 30 days hereof.
D.A. Broad J.
Date: August 10, 2016