Sky Solar v Economical Mutual Insurance, 2016 ONSC 6258

Court File and Parties

COURT FILE NO.: CV-14-118469 DATE: October 6, 2016 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SKY SOLAR (CANADA) LTD., Plaintiff/Moving Party AND: ECONOMICAL MUTUAL INSURANCE COMPANY and FIRSTBROOK, CASSIE & ANDERSON LIMITED, Defendants/Responding Parties

BEFORE: MASTER RONNA M. BROTT

COUNSEL: R. Huang, for the Plaintiff Fax: (416) 941-8852 M. Snowden, for the Defendants Fax: (416) 601-1818

HEARD: August 18, 2016

Endorsement

1In this proceeding the plaintiff, Sky Solar (Canada) Ltd. (“Sky”) seeks, inter alia, a declaration that a commercial general liability policy of insurance issued by Economical Mutual Insurance Company (“Economical”) to Marnoch Electrical Services Inc. was in force and effect at all material times and further, that Sky was named as an additional insured under the policy. The plaintiff also claims that the defendant broker, Firstbrook, Cassie & Anderson Limited (“FCA”) was negligent in the handling of the coverage issue.

2The defendants delivered a joint statement of defence alleging that there was no coverage.

3In early 2015 the parties exchanged affidavits of documents with FCA producing 15 documents and Economical 41 documents. The plaintiff brought a motion for a further and better affidavit of documents and Justice DiTomaso ordered the defendants to produce several categories of documents.

4Prior to examinations for discovery, in July 2015, FCA brought a motion for summary judgment seeking a dismissal of the action against it. The plaintiff advised the defendants that the motion was premature as the Order of Justice DiTomaso had not been complied with.

5The motion for summary judgment was served in October 2015. FCA alleged that it owed no duty to Sky as “FCA had no dealing with Sky” that would give rise to a duty of care or a duty of good faith. The motion materials contained no evidence on the issue of coverage or standard of care of an insurance broker to an additional insured.

6On December 9, 2015, FCA attended at assignment court to fix a timetable, including a date for the hearing of the motion. As the timetable contemplated an exchange of expert reports, Justice Edwards cautioned FCA that “given the use of experts, this might not be a case for a rule 20 motion.” The timetable was revised on April 13, 2016, with the hearing date of September 20, 2016 and with an understanding that if a July 2016 date opened up, the parties should be prepared to proceed on short notice.

7The plaintiff delivered an expert report authored by Maurice Audet on May 24, 2016. He opined that FCA breached the standard of care expected of an insurance broker in how to handle the coverage of an additional insured. FCA did not deliver a responding expert report nor did it seek to cross-examine Mr. Audet.

8On June 21, 2016 counsel for FCA advised that it was not proceeding with its summary judgment motion. On June 28, 2016 FCA served a Notice of Abandonment. FCA offered the following explanations for its decision to abandon the summary judgment motion:

1. It realized it could not be extricated from the lawsuit without dealing with the coverage issue;
2. As stated by Justice Edwards, this case was not suitable for summary judgment because of the use of experts; and
3. Mr. Audet’s report contained opinions that made the summary judgment motion unfeasible.

The Motion

A. Prima Facie Entitlement to Costs – Rule 37.09(3)

9Sky brings this motion seeking costs on a partial or substantial basis arising from FCA’s abandonment of the summary judgment motion. Pursuant to rule 37.09(3),

Where a motion is abandoned or is deemed to have been abandoned, a responding party on whom the notice of motion was served is entitled to costs of the motion forthwith, unless the court orders otherwise.

10A moving party’s chance of success on a motion for summary judgment depends upon the evidentiary record it relied on in bringing the motion. On a motion for summary judgment the moving party must demonstrate that there is no genuine issue that would require a trial.

11Pursuant to Rule 37.09(3), when FCA served its Notice of Abandonment, Sky became prima facie entitled to costs. The party who abandoned the motion is entitled to displace the responding party’s prima facie entitlement to costs and in order to do so, FCA submits that its motion for summary judgment was based on a review of the certificates issued to Marnoch and based on the fact that the plaintiff was never FCA’s client. Further, FCA surmised that absent Sky putting forward any expert evidence to raise a triable issue with respect to the breach of the standard of care of an insurance agent, it would have a reasonably good chance of success.

12In this regard, Sky’s affiant on the motion for summary judgment was cross-examined in February 2016 and at that time confirmed that Sky had its own insurance and insurance broker at the material time. Further, Sky’s evidence was that it did not discuss the adequacy of its coverage with its broker.

13Thereafter, immediately upon receipt by Sky of the Audet report FCA advised Sky of its intention to abandon the motion for summary judgment. FCA submits that because Sky had ample warning of its intention to bring a summary judgment motion and because it was abandoned in a timely fashion after receiving Sky’s expert report, it would be appropriate for the court to exercise its discretion and award no costs.

14It is well settled that simply asserting that the motion would not have achieved the desired result is insufficient to deprive the responding party of its costs (Parallel Medical Services Ltd. v. Ward, 2002 CarswellOnt. 1181 (Stinson, J)).

15In the circumstances and based on FCA’s evidence on this motion, I am not prepared to exercise my discretion to deny Sky its prima facie entitlement to costs. In my view FCA has failed to discharge its burden to displace the prima facie costs consequences under rule 37.09(3).

B. Rule 20.06 – Did FCA act unreasonably in bringing the summary judgment motion?

16Where the abandoned motion is for summary judgment, Rule 20.06 comes into play. Under Rule 20.06(1), substantial indemnity costs may be ordered if the moving party “acted unreasonably” by making the motion that had no or little chance of success, when the motion was brought.

17Sky asserts that FCA acted unreasonably because:

• It acted contrary to the court’s caution that the use of expert evidence made the motion an unsuitable case for summary judgment; and;
• Because coverage and standard of care are central to the claim, FCA’s motion for summary judgment had little or no chance of success.

18It is well established that where there are competing experts, summary judgment is typically not appropriate. Mr. Justice Edwards cautioned FCA in this regard on December 9, 2015 yet it chose to ignore the court’s warning.

19Because the issue of standard of care is central to the claim and FCA did not file an expert’s report on the summary judgment motion, it was clear that the motion for summary judgment had little or no chance of success. In my view, the moving party should have obtained sufficient evidence prior to bringing the motion for summary judgment. By launching the motion without the evidence, it acted unreasonably.

20FCA submits that it did abandon the motion shortly after being served with the expert’s report. FCA knew, at least since December 2015, of Sky’s intention to obtain an expert report. It still chose to proceed with the motion. It also chose to proceed without obtaining its own expert.

21The Court of Appeal in Sanzone v. Schecter, 2016 ONCA 566 notes at para 34 that by choosing not to put its best foot forward and abandoning the motion only after receipt of the responding party’s expert report, is considered to be engaging in an attempt “to use Rule 20 as a means to unfairly accelerate the delivery of an expert’s report by an opposing party”. I am not prepared to make a definitive finding here of FCA’s motivations, but by bringing the motion when it did, prior to complying with its production obligations and prior to completion of examinations for discovery when the true merits of the claim would be explored, I find that FCA did act unreasonably in bringing the motion. FCA’s materials failed to discuss coverage and further, failed to demonstrate that it discharged its duty of care. At the time it brought the motion, had it done all of its homework, it should have realized that there was a genuine issue for trial. As well, Justice Edwards’ comments on the likelihood of success on the motion given the involvement of experts appear to have been of limited concern to FCA.

22It is accordingly ordered that FCA shall pay to Sky the responding party’s costs of the summary judgment motion on a substantial indemnity basis.

Quantum

23Sky seeks $90,265.13 for substantial indemnity costs inclusive of a $10,000.00 disbursement for the expert report. On January 18, 2016 Sky served a Rule 49 offer wherein it agreed to a dismissal of the motion on a without costs basis on condition that in exchange for FCA’s admission that it owed and breached its duty of care to Sky, Sky agreed to withdraw its claim of bad faith against FCA. Sky did not ‘beat’ its offer as there has been no admission of liability.

24Rule 57 factors require the court to consider, as a factor, what the unsuccessful party would consider as a reasonable amount of costs. FCA’s costs outline provides partial indemnity costs of approximately $27,717.00 which is considerably less than the $65,300.00 amount claimed by Sky on a partial indemnity basis.

25FCA outlines numerous questions with respect to counsel’s time spent at discoveries and cross-examinations and submits those should be non-compensable. As the cross-examinations were tacked onto the examinations for discoveries, FCA takes issue with paying those costs. Further, the majority of the costs claimed by Sky are with respect to time spent by senior counsel. In Augustine v. Inco Ltd., [2005] O.J. No. 1618 the court criticized that practice in regards to preparation of materials.

26In regards to counsel fee, I find that there has unquestionably been duplication and some degree of over-zealous/over-preparation by Sky’s counsel. By the same token, Sky was facing a potential dismissal by one of the two defendants and accordingly significant preparation by skilled counsel was necessary. The hours spent for preparation of examinations for discovery and attendance are to be deducted. No dockets were filed. Counsel should be compensated for the time spent preparing for and attending cross-examinations. As well, $2268.00 for preparation of a costs outline is excessive.

27With respect to disbursements, the future costs of the litigation are, at this time, unpredictable. Because FCA put Sky into the position where it was forced to obtain and serve its expert report early on, FCA must be called upon to pay for it. However, in my view, given that Sky may now be required to retain another expert should there be a change in defence strategy, it is ordered that FCA shall pay for the report in the amount of $10,000.00 in any event of the cause.

28Taking into account these factors, costs are payable forthwith by FCA to the plaintiff fixed at $37,500.00 inclusive of HST and all disbursements (excluding the Audet report).

(original signed)