Court File and Parties

2016 ONSC 5988 Court File No.: CV-08-089749-00 Date: 20160922 Ontario Superior Court of Justice

Between: GRAND FINANCIAL MANAGEMENT INC. Plaintiff – and – SOLEMIO TRANSPORTATION INC., and SAMI ULLAH Defendants

Counsel: George Corsianos, for the Plaintiff Matthew Tubie, for the Defendants

Heard: July 15, 2016

Ruling Regarding Costs

MCKELVEY J. :

Introduction

[1] The plaintiff in this action, Grand Financial Management Inc. (Grand Financial) brought an action for breach of a factoring agreement against the defendant Solemio Transportation Inc. (Solemio). Also named as a defendant in the action was the principal of Solemio, Sami Ullah. Grand Financial claimed the sum of $219,250 from Solemio pursuant to the factoring agreement. This claim was denied by the defendants. In addition, Solemio brought a counter claim alleging that the actions of the plaintiff adversely affected Solemio’s business.

[2] After a five day trial Grand Financial was given a judgment against Solemio in the amount of $200,000. Solemio was successful in its counterclaim and was given judgment against Grand Financial for the sum of $175,000 for intentional interference with economic relations. Following trial this court made an order that there would be no costs awarded to either the plaintiff or defendants in the action.

[3] Solemio appealed the trial decision to the Court of Appeal and the plaintiff cross-appealed as well. The Court of Appeal allowed Solemio’s appeal and set aside the judgment rendered against it. The cross-appeal was dismissed by the court of appeal. The Court of Appeal granted Solemio its costs of the appeal and remitted the trial costs back to this court for determination based on the results of the appeal. I am advised by the parties that leave to appeal the decision of the Court of Appeal has been sought by Grand Financial. The parties are currently awaiting the decision from the Supreme Court of Canada with respect to this leave application.

The Parties’ Positions

[4] Solemio argues that it is entitled to substantial indemnity costs throughout. They claim the sum of $124,245 plus HST and disbursements for their costs on a substantial indemnity basis.

[5] Grand Financial takes the position that there should be no order for costs. In the alternative they argue that Solemio should not receive more than around $15,000 inclusive of HST and disbursements for their partial indemnity costs. Grand Financial takes the position that the amounts claimed by Solemio are “grossly excessive and are alarmingly suspect, to say the least”.

Is there a basis for an award of costs on a substantial indemnity scale?

[6] Solemio argues that it should be entitled to a substantial indemnity costs on the basis of an oral offer to settle which it says was made prior to the commencement of trial. Further it argues that the conduct of Grand Financial justifies a substantial indemnity costs award.

[7] I have concluded that there is no basis for an award of substantial indemnity costs in this action.

[8] With respect to the offers to settle, Solemio did not introduce any evidence of these offers which it stated were verbally exchanged at mediation. During its submissions counsel for Solemio stated that Grand Financial at a mediation before trial verbally offered to settle its claim for something in the area of $27,000 to $29,000. Solemio says it countered with a demand for something in the area of $70,000 to settle its claim. The position of Solemio is that it made sincere and serious efforts to settle the action before trial as opposed to Grand Financial. For its part Grand Financial denied the accuracy of the information provided by Solemio concerning the offers to settle and further argued that it was taken by surprise given that no reference to offers to settle was made by Solemio in the material filed with the court prior to argument.

[9] This situation highlights the requirement under the rules for written offers to settle. Under Rule 49.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 an offer to settle by a party is to be in accordance with form 49A which requires a written record of the offer. There is residual discretion of the court to consider other offers under Rule 49.13 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 but this provision also requires a written offer. This Rule states:

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. (emphasis added)

[10] The information provided by Solemio about its recollection of the offers was not precise with respect to the amounts involved nor were the terms and conditions of the offer provided. In my view if a party wishes to rely upon an offer to settle for cost purposes it must be in writing so that there is no ambiguity about the terms and conditions. As there were no written offers exchanged in this case I am not prepared to consider any alleged verbal offers in the context of an enhanced claim for costs based on those verbal discussions.

[11] Solemio also argues that it should be entitled to substantial indemnity costs based on the intentional conduct of Grand Financial. In my decision at trial, on the claim for intentional interference with economic relations, I found that the actions of Grand Financial were directly intended to both harm Solemio as well as enriching itself at the expense of Solemio. The evidence which I accepted supported a conclusion that the representative of Grand Financial decided to take any steps within his power, whether lawful or unlawful, to get the money he thought he was owed.

[12] In Akhagi v. Synergy Group (2000) Inc. (2015), 2015 ONCA 771, 128 O.R. (3rd) 64, the Court of Appeal considered circumstances when it might be appropriate to order substantial indemnity costs based on the conduct of a party. At para. 31 it notes that the general rule is that costs are awarded on a partial indemnity basis. In some, generally rare circumstances, however, the level of costs may be increased to substantial indemnity costs. One of those circumstances is “where it is necessary ʽto mark the court’s disapproval of the conduct of the party in the litigation’”.

[13] While the conduct of Grand Financial merits consideration of an award of substantial indemnity costs, it would be inappropriate in my view to focus solely on the conduct of one party in isolation. In the present case, while I consider the conduct of Grand Financial to be egregious, the conduct of Solemio and its principal contributed in a significant way to the development of an unhealthy relationship between the parties. For example at para. 89 of my judgment I comment as follows:

I have considered the context of Grand Financial’s actions. There is no dispute about the fact that Solemio ran up a very substantial debt in connection with the Wild Lions’ invoices which were owed to Grand Financial. This debt was incurred in circumstances where Solemio was receiving prompt payment from Arnold Bros. on account of the services provided by Wild Lions. While this does not excuse the conduct of Grand Financial it does suggest that Solemio contributed in its own way to an unhealthy business relationship developing between it and Grand Financial.

[14] I have come to the conclusion that there was egregious conduct by both parties in the litigation. In these circumstances it would be unfair to single out the conduct of Grand Financial as being reprehensible and ignore the conduct of the defendants.

[15] There was also reason to be suspicious about some of the evidence of Mr. Ullah, the principal of Solemio, in connection with his evidence on damages. This is referred to at para. 78 of my decision.

[16] Finally, as noted in my decision, the award of $175,000 for damages made in favour of Solemio takes into account the serious nature of the legal abuse which occurred here.

[17] For the above reasons I decline to make an award for substantial indemnity costs in this action.

Factors Relating to Costs

[18] Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 sets out the criteria which a court should consider in awarding costs. The particular factors which appear to be the most relevant in this case are as follows:

i) the results of the proceeding; ii) 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 the lawyer; iii) the amount of costs that the unsuccessful party could reasonably expect to pay; iv) the amount claimed and the amount recovered in the proceeding; v) the complexity of the proceeding; vi) the importance of the issues.

[19] With respect to the result in the proceeding it is apparent that Solemio was substantially successful in the action. With the benefit of the Court of Appeal decision Solemio has successfully defended the claim against it by Grand Financial which was worth approximately $200,000. In addition, Solemio was successful against Grand Financial on its claim for intentional interference with economic relations and was awarded $175,000 under that heading. Mr Ullah also avoided personal liability on the guarantee which he signed.

[20] It is true that Solemio was not successful on all of its claims in the action. For example it was not successful on its claim for punitive damages and Mr. Ullah’s personal claims were denied. Grand Financial also points to the fact that the damages awarded of $175,000 to Solemio were modest in comparison with its claim which was asserted to be worth $1,250,000. In my view, however, while Solemio was not successful on every issue in the litigation, it was successful on the critical issues which were litigated. I do not accept that Solemio’s partial indemnity costs should be reduced on the basis that its award fell short of what was claimed or because there were some minor issues where it was not successful at trial. I do not view the result in this case to be one of divided success.

[21] I have also concluded that the issues in this action were complex. They involved a number of different claims against a fairly complex factual background. I accept that the issues were important to the parties. For example, if Grand Financial had been successful in its claim against Mr. Ullah on the personal guarantee (a claim which was denied in my judgment) it would have represented a major financial liability for Mr. Ullah personally.

[22] Taking all of these factors into account I conclude that the defendants should be entitled to their partial indemnity costs both in defending the main action and in pursuing the counter claim.

What is a reasonable assessment of the defendants’ partial indemnity costs?

[23] The calculation of an appropriate amount for the defendant’s partial indemnity costs has been made extremely difficult by virtue of the material which was put before the court by Solemio in support of its claim for costs. The material included a Bill of Costs dated June 30, 2016. Mr. Tubie certified in this Bill of Costs, “I certify that the hours claimed have been spent, that the rates shown are correct and that each disbursement has been incurred as claimed”. There is good reason to question the accuracy of this statement.

[24] Mr. Tubie submitted an earlier Bill of Costs after trial, dated March 28, 2014. In reviewing the two bills of costs it is apparent that there are serious discrepancies between the two and no satisfactory explanation to account for these discrepancies has been presented by Mr. Tubie. Some of the discrepancies which concern me are as follows:

1. In the March 28, 2104 Bill of Costs it indicates that the defendants’ original counsel, Courtney Betty worked a total of 220 hours on the file at $350 per hour for a total of $77,000. In the Bill of Costs, dated June 30, 2016, it states that Mr. Betty worked a total of 150 hours. Based on the actual fees claimed on behalf of Mr. Betty his hourly rate has now been changed to $400 per hour. Mr Tubie’s explanation of the discrepancy was that Mr. Betty subsequently told him there was an error in the earlier hourly rate and that his correct hourly rate was $400. Even accepting this, there is still no explanation for the discrepancy in the number of hours charged.
2. While Mr. Betty is alleged to have had carriage of the file until it was transferred to Mr. Tubie before discoveries, documentation included in the plaintiff’s costs brief strongly suggests that the carriage of the file was not with Mr. Betty, but rather with Christopher Smart, an associate in Mr. Betty’s office. Mr. Smart initially wrote to plaintiff’s counsel advising of their retainer. He delivered the statement of defence as well as the draft affidavit of documents. He also sought copies of the productions from Grand Financial. On March 19, 2009 he wrote to counsel in the action advising that he was leaving Mr. Betty’s law office, effective March 20, 2009. He advised, “as such after that date, please direct your correspondence directly to Mr. Courtney Betty, Senior Partner of the firm”. Against this background it is very surprising that Mr. Smart is not even listed as one of the counsel from Mr. Betty’s office involved in the management of the file. Only Mr. Courtney Betty is listed with an hourly rate of $400 per hour. Mr. Tubie advised at the costs hearing that Mr. Betty gave him a summary of his hours and did not make any reference to the involvement of Mr. Smart. He also stated that he asked but was not given any specifics of the time spent by Mr. Betty. I find all of this to be very concerning, especially in light of the fact that the hours claimed by Mr. Betty changed in a significant way between the Bill of Costs dated March 28, 2014 and June 30, 2016.
3. In the Bill of Costs, dated June 30, 2016, the first description of services reads as follows,

   Interview of client to receive instructions from client; review of client’s file and legal research of matters; correspondences with plaintiff’s lawyer; preparation of statement of defence and counterclaim. Mr. Tubie has claimed 21.5 hours under this heading while Mr. Betty has claimed 78 hours and an associate of Mr. Tubie, Bolah Akainnusi, has claimed 11.5 hours. This is troubling as Mr. Tubie was not retained to get involved in the case until after pleadings had been completed. Mr. Tubie’s explanation for this apparent inconsistency is that his claim for 21.5 hours relates to time spent after he took over management of the file and reflected his involvement at that time. I have some difficulty accepting this explanation as the bill of costs appears to go in chronological order. The next description in the bill of costs for which Matthew Tubie has claimed 42 hours is described as follows, Several meetings with client to receive further instructions; review of other numerous materials from plaintiff’s counsel; preparation for examinations; and preparation for mediation. This reinforces my concern that Mr. Tubie may be claiming for time spent on this file before he was retained.

4. In the Bill of Costs, dated March 28, 2014, Mr. Tubie uses an actual hourly rate of $300 per hour for all attendances prior to trial and an hourly rate of $350 per hour for his attendance at trial. In the Bill of Costs, dated June 30, 2016, Mr. Tubie uses an hourly rate of $350 across the board. Mr. Tubie stated that his trial rate of $350 an hour was his standard trial rate. The figure of $300 was his standard rate for non-trial work. In preparing the Bill of Costs, dated June 30, 2016, he decided to charge $350 an hour across the board as he felt the matter was complex and stressful and that this justified the increase in his hourly rate. This was a decision Mr. Tubie must have made well after the trial was over and his original Bill of Costs dated March 30, 2014 was prepared. This leads me to ask what were the actual fees charged to his client. There can be no way of knowing exactly what was charged to Mr. Tubie’s client in these circumstances. I therefore conclude that at least some of the information contained in the bills of costs is misleading.
5. In the latest bill of costs, Mr. Tubie claims that a total of 330 lawyer hours was spent on the file prior to trial. I view this figure with skepticism. Neither the length of the examinations for discovery, nor the volume of productions, nor the case briefs filed at trial appear to be consistent with such a large amount of time being spent on the file.
6. There are also discrepancies with respect to the disbursements charged. In the Costs Brief, dated March 28, 2014, Mr. Tubie claimed $950 for airfare for their witness, Ms. Dueck. He also claimed for one night’s accommodation and food for the witness. Finally he claimed for his own client’s miscellaneous expenses including accommodation and transportation for Mr. Ullah for six days. However, in the Bill of Costs, dated June 30, 2016, there is a claim for “hotel accommodation for Sami Ullah and Ms. Dueck and her spouse for a total of 13 nights”. There is also no specific breakdown of any disbursements other than travel. In the March 28, 2014 Bill of Costs, disbursements other than travel are claimed in the sum of $11,200 for this action. In the Bill of Costs dated June 30, 2016, the non-travel expenses claimed are $5,391. As there is no breakdown for any of the non-travel disbursements it is impossible to reconcile this apparent discrepancy.

[25] I have reluctantly come to the conclusion that the information contained in both bills of costs, is not reliable or accurate. They are misleading and do not represent a basis for me to make an appropriate assessment of Solemio’s partial indemnity costs.

[26] The plaintiff has submitted its own bill of costs for the file which uses an actual hourly rate of $250 for Mr. Corsianos and $120 for his associate. By my calculation the total number of hours docketed by lawyers for the plaintiff total 144.2 hours. Based on an hourly rate of $300 per hour, the actual fees incurred would total $43,260. On a partial indemnity basis or 60 percent, the partial indemnity legal fees would total $25,956. In my view this represents the most reliable estimate of the plaintiff’s partial indemnity costs.

[27] There is no way to calculate the disbursements incurred by Solemio as they have not provided any breakdown for these expenses. It is apparent that some of the expenses claimed are not properly chargeable on an assessment. For example, in his Bill of Costs, dated June 30, 2016, Mr. Tubie claims for travel and hotel accommodations for his client. In the plaintiff’s bill of costs the disbursements are properly broken down and total $3,637.58. I am prepared to accept for purposes of my calculation that Solemio’s disbursements would have been comparable.

[28] Finally I have considered the overriding principle of reasonableness and what an unsuccessful party could reasonably expect to pay in relation to these proceedings. As noted in Boucher v. Public Accountant’s Counsel (Ontario), [2004] 71 O.R. (3rd) 291:

The expressed language of Rule 57.01 (3) makes it clear that the fixing of costs is not simply a mechanical exercise. In particular, the rule makes it clear that fixing of costs does not begin and end with a calculation of hours times rates. The introduction of the costs grid was not meant to produce that result, but rather to signal that this is one factor in the assessment process, together with the other factors in Rule 57.01. Overall, as this court has said, the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.

[29] I conclude that a reasonable amount in this case is the sum of $25,956 plus HST plus disbursements in the sum of $3,637.58. This figure is based on the hours reflected in the plaintiff’s bill of costs which I consider to be the most reliable estimate of what was reasonably required in the circumstances. It is also based on an actual hourly rate of $300 per hour which, although it is slightly higher than the rate used by the plaintiff’s counsel, is still reasonable in the circumstances. I therefore order that these costs be paid by the plaintiff to the defendants.

Justice M. McKelvey

Released: September 22, 2016