Court File and Parties

COURT FILE NO.: 5925/16 DATE: 20160916 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

9147-4501 QUEBEC INC. and 9206-6778 QUEBEC INC. Plaintiffs – and – JOHN ERB, MARK ERB, RACHEL ERB and SHELLEY ERB Defendants

Counsel: Patricia L. McLean, for the Plaintiffs Stefan Zhelev, for the Defendants

HEARD: September 8, 2016

Reasons for Judgment

J. WILCOX

[1] The defendants moved under Rule 56 for an order for security for costs on the grounds that the plaintiffs are Quebec corporations and have insufficient assets in Ontario. At the outset, the plaintiffs’ counsel agreed that there was no issue about whether the plaintiff should give security for costs. The issues were the quantum of the security, the schedule of its payment, and who should hold the security.

[2] The case arises out of an alleged agreement between the plaintiffs and defendants with respect to the mineral rights of some land in Ontario. The Statement of Claim seeks a declaration that the defendants breached the agreement, and specific performance of it. In the alternative, it claims damages of two million dollars plus interest and costs. The defendants delivered a Statement of Defence.

[3] The defendants produced a Bill of Costs indicating the expected costs of defending the action from the initial review of the Statement of Claim through trial, including this motion for security for costs. Total fees, disbursements and HST were projected to be $42,420.06. The defendants sought security for costs of $50,000.00, to be paid in one lump sum into court.

[4] I note that, in checking the calculations in the defendants’ Bill of Costs, I get a total of $45,471.36 which I will use as my starting point.

[5] Plaintiff’s counsel took issue with the $50,000.00 amount claimed. First, she indicated that it exceeds the defendants’ total projected bill. Then, she went through it line by line, submitting that various items should be reduced or removed.

[6] I agree that the costs of the present motion should be removed.

[7] I also agree that there is some overlap in the items for conducting searches/reviewing file (8.3hrs claimed), drafting Statement of Defence (9.0hrs claimed) and preparing defendants’ Affidavit of Documents (8.0hrs claimed) totalling 25.3hrs, and would reduce that to 12hrs.

[8] The 8hrs each for drafting Pre-trial Memorandum and preparation for pre-trial I agree should be reduced to 4hrs and 1 hour, respectively.

[9] The plaintiffs’ counsel took issue with the inclusion of travel time, relying on the decision of MacRae v. Santa, [2002] O.J. No. 3539 (SCJ) (par. 19-21). That case acknowledged that the court has a discretion to consider travel expenses of counsel in the assessment of costs, but that there was authority for disallowing the travel costs of non-resident counsel unless special circumstances existed in which it was not reasonable to retain resident counsel. I should point out that the defendants’ counsel in this case is from Sudbury, not from the area of Haileybury where the case is taking place.

[10] On the other hand, defence counsel filed the case of Vespra Country Estates Ltd. v. 1522491 Ontario Inc. (c.o.b. Pine Hill Estates) [2012] O.J. No. 121 (SCJ) which stated that “travel costs are frequently discounted by 50%”, and then went on to acknowledge appellate authority that “the assessment process is ultimately not a mechanical exercise” (par 8).

[11] I note that the Haileybury area does not have a large bar, and that counsel from other parts of the province frequently attend on cases there. Indeed, the plaintiffs’ counsel in this case is from Toronto, considerably further afield than Sudbury.

[12] In these circumstances, I would allow something for travel. I will allow the travel time as claimed, which was charged at half rate.

[13] Consequently, I would leave the disbursements for travel, accommodation and food in.

[14] Defence counsel had projected a three day trial. Plaintiffs’ counsel estimated two days. In my experience, counsel often under estimate the time required. So, I will accept the longer three day estimate.

[15] The time estimate for trial preparation was challenged. Both sides relied on an excerpt from Orkin’s The Law of Costs on this point. With respect, it appears that the plaintiff’s factum contains an error when it says at paragraph 26 that Orkin “sets out that typically the court will allow two to three hours of preparation in time for each day of trial…”. In fact, Orkin says it is two to three hours of preparation for each hour of trial time, and there are five hours of trial time per day. For a three day trial, that amounts to 30 to 45 hours of preparation time. The 35 hours claimed by the defence is within that range and I will not disturb it. I would, however, reduce the hours for a three day trial from the 30 claimed to 15, in line with Orkin.

[16] With these changes, I calculate a revised total to the defendants’ Bill of Costs for fees, disbursements and HST of $30,153.36.

[17] Given that total for the defendants’ bill of costs, the next issue is what scale of costs there should be security for. Plaintiffs’ counsel submitted that it should be partial indemnity. Rule 56 gives no guidance on this issue, leaving it to be determined by the court. There have been cases in which security has been ordered “dollar for dollar”, in the full amount of the costs without discount (see eg Hawaiian Airlines, Inc. v. Chartermasters, Inc. et al (1985), 50 O.R. (2d) 575, and Philip Services Corp. v. Green (1999) 92 ACWS (3d) 585). However, the court in the Philip case indicated that security for costs is customarily on the party and party (i.e. partial indemnity) scale. The results of the more recent cases provided to me bear this out. (see for example Monk Development Corp. v. CVC Ardelleni Investments Inc. 2016 ONSC 178, and Multicover Solution Inc. v. Aecon Construction Group Inc., 2013 ONSC 455).

[18] There is authority for calculating partial indemnity costs at 60% of the time charged (Stetson Oil and Gas Ltd. v. Stifel Nicolus Canada Inc., 2013 ONSC 5213 par. 25). Sixty percent of $30,153.36 is $18,092.02.

[19] The next issue is the scheduling of the payment of the security. Requiring the plaintiff to pay at an early stage the full amount of the security for the entire case up to the conclusion of the trial has been found to be unfair (Hawaiian Airlines, Inc. v. Chartermasters, Inc. et al (1985), 50 O.R. (2d) 575 page 3) although it is not unheard of (see Philip Services Corp. v. Green (1999) 92 ACWS (3d) 585 par. 8). Instead, the payments may be staged. This has the advantage of protecting the defendant while not being unduly burdensome on the plaintiff. It is also practical, in that many cases settle after discoveries or at the pre-trial stage and do not go on to trial with the expenses that that entails. I find that a staged order is appropriate here.

[20] Therefore, I am exercising my discretion to require that the plaintiff pay as security for costs $9,000.00 within 60 days to cover the costs up to the end of pre-trial. If the matter does not settle then, the plaintiff shall pay a further $9,000.00 to cover costs through trial.

[21] A further issue, which is not highly contentious, was to whom the security should be paid, the court or the plaintiffs’ lawyer, in trust. I order that it be paid into court.

Costs

[22] The plaintiffs were successful in the two contested issues, being the quantum and the scheduling of the security payments, and are presumptively entitled to costs in this matter. Both parties served offers. The defendants’ was for security in the amount of $30,000.00 payable in four installments at given stages of the litigation. The plaintiffs’ was for the deposit of $8,000.00 as security for costs up to the commencement of pre-trial. Neither side achieved a result as favourable to them as the respective offers with respect to quantum. Both offers appear to accept a staged approach. The plaintiffs’ offer would have left it open to the defendants to seek a further amount of security for costs if the case proceeded further than pre-trial. Overall, the plaintiffs’ offer most closely resembles the order made. The plaintiffs’ Costs Outline claimed partial indemnity costs of $1,986.00 based on an estimated one hour appearance. However, the motion took approximately two hours. Therefore, taking into account the general principals in Rule 57 and the principal of proportionality in Rule 1.04(1.1), I award the plaintiffs partial indemnity costs of $2,180.00 plus HST for this motion, to be paid by the defendants within 30 days.

J. A. S. WILCOX Released: September 16, 2016