CITATION: Dolvin Mechanical Contractors Ltd. v. Edge on Triangle Park Inc., (Pacific Hardwood Limited, moving party) 2016 ONSC 7012
COURT FILE NO.: CV-16-548795
DATE: November 10, 2016
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Dolvin Mechanical Contractors Ltd.
K. Sherkin for responding party Dolvin Tel:416-224-2400; Fax: 416-224-2408
Plaintiff (responding party)
- and -
Edge on Triangle Park Inc., Edge Residential Inc., Toronto Standard Condominium Corporation 2448, Urbancorp Equity Inc., Aviva Insurance Company of Canada, Terra Firma Capital Corporation
Not appearing
Defendants
- and –
Pacific Hardwood Limited
Moving party
C. Francis[^1], for moving party Pacific Tel: 416-369-4137; Fax: 416-864-9223
CONSTRUCTION LIEN MOTION COSTS ENDORSEMENT
Introduction
Pacific Hardwood Limited (“Pacific”) succeeded on its motion to discharge the construction lien and vacate the certificate of action registered by Dolvin Mechanical Contractors Ltd. (“Dolvin”) against the two condominium units and corresponding parking spaces owned by Pacific (Pacific’s Property”). I heard the motion on April 20, 2016 and June 28, 2016 and released my decision on August 30, 2016. The parties were unable to agree on costs and I invited them to file written submissions, which they have done.
Pacific was entirely successful on the motion. I determined that Dolvin had no lien rights as against Pacific and that it had no legal basis to claim a lien against Pacific’s Property. I further found that even if Dolvin had lien rights against Pacific such rights would have expired by reason of Dolvin’s failure to perfect its lien claim as against Pacific. I further found that contrary to Dolvin’s assertion, section 80(2) of the Construction Lien Act, R.S.O. 1990, c.C.30 does not apply to the conveyance of the condominium units to Pacific because Pacific was never a lien claimant. Dolvin was unsuccessful on every aspect of the motion.
Pacific filed a costs outline claiming fees and disbursements of $27,326.11 on a partial indemnity scale (based on fees of $22,089.30 net of HST and disbursements) and $43,966.72 on a full indemnity scale (based on fees of $36,815.50 net of HST and disbursements, being the actual fees docketed). Pacific claims costs on a substantial indemnity scale but did not provide its calculation of costs on a substantial indemnity scale. Applying the definition in the rules of practice, substantial indemnity fees claimed would be quantified at $33,133.95, net of disbursements and HST (calculated as 90 percent of actual fees, or 1.5 times partial indemnity fees).
General Principles
- As a general principle costs in a proceeding under the Construction Lien Act, as in an ordinary action, are in the absolute discretion of the court[^2]. In fixing costs the court must consider the facts and circumstances of the particular case; it is not a mechanical exercise. The court must be fair and reasonable in exercising its discretion to award costs: Boucher v. Public Accountants Council for the Province of Ontario[^3].
Relevant Factors
- Rules 57.01(1), 49 and 1.04 describe factors for the court to consider when fixing costs. The list is non-exhaustive and includes:
(a) the principle of indemnity;
(b) the reasonable expectation of the payor;
(c) the outcome;
(d) the complexity of the proceeding;
(e) the importance of the issues;
(f) the conduct of any party that unnecessarily lengthened the proceeding; and
(g) proportionality[^4].
The court must also consider any rule 49 settlement offer served and outstanding at the opening of the proceeding.
Also relevant to costs in a construction lien proceeding is section 86 of the Construction Lien Act which provides, in part, that costs of a motion are in the discretion of the court and may be made on a substantial indemnity basis.
I have considered each of these factors, which in my view are relevant to exercising discretion and determining an appropriate costs order in this case.
Rule 49 settlement offer
Dolvin argues that it offered to consent to Pacific vacating the lien claim and certificate of action as against the units owed by Pacific upon the posting security calculated on the basis of a pro-rated share of the $2,313,335.03 lien claim. Dolvin asserts that it offered to consent to security of $6,613.96 for the lien plus $1,653.49 for costs for a total of $8,267.45.
Pacific submits that the flaw in Dolvin’s assertion is that (1) Dolvin did not serve a formal rule 49 offer to settle, (2) by the time Dolvin proposed the option of vacating the lien upon posting pro-rated reduced security Pacific’s motion materials had already been prepared, the parties had attended on the motion on April 20, 2016 and the motion had been adjourned at Dolvin’s request for cross-examinations, Dolvin having filed responding materials the day prior to the return date of the motion, and (3) had Pacific agreed to Dolvin’s last minute proposal it would have had no recourse to recover the costs incurred to prepare the motion and the ultimate remedy sought, namely a discharge of the lien as against the units owned by Pacific. The ultimate result sought would not have been achieved.
I agree with Pacific that Dolvin did not serve a rule 49 offer. Even if Dolvin’s proposal to consent to vacating the lien claim and certificate of action upon the posting of pro-rated security had been a rule 49 offer, I find that Pacific achieved a better result on the motion, namely the complete discharge of the lien claim as against Pacific’s Property. I find that there are no qualifying rule 49 offers to settle that have any impact on costs of the motion.
Indemnity
Generally the successful party is entitled to costs. There is no reason to depart from this practice in this case. Pacific was the successful party and is entitled to costs.
Pacific claims costs based on partial and full indemnity hourly rates, respectively, of (1) $390.00 and $650.00 for C. Francis (a lawyer of 27 years’ experience) for 48.4 hours, (2) $186.00 and $310.00 for E. Kutner (a lawyer of 4 years’ experience) for 4.8 hours, and (3) $105.00 and $175.00 hours for a total of 22.1 hours for someone identified as K. Fox but not described as a lawyer, a paralegal, an administrative assistant or a secretary. The onus is on the party claiming costs to provide sufficient information for the court to make a determination as to the reasonableness of the claim. In the absence of sufficient information regarding the claim for the time input by K. Fox I have not included the amounts claimed for this timekeeper in my assessment of a reasonable costs award.
As to the hourly rates claimed on a partial indemnity basis I find that they are reasonable but question why a lawyer at C. Francis’ rate input 48.4 hours of time when much of the work could have been carried out by a more junior lawyer at a lower rate. As to the full indemnity rate shown on the costs outline, it is the wrong scale for purposes of costs claimed on a substantial indemnity basis. In any event, I find that while the court may consider costs on a substantial indemnity scale, full indemnity costs are not warranted in this case. I calculate the substantial indemnity hourly rates as (1) $585.00 for C. Francis and (2) $279.00 for E. Kutner.
Dolvin submits that some of the time docketed to this motion does not properly belong to the motion but rather applies to another file, that excessive amounts of time were docketed for preparation of motion materials, internal discussions, scheduling and preparing the costs outline. I agree. I note that the motion raised an unusual issue (the section 80 issue), required detailed facts and chronologies, and included cross-examinations. Nevertheless, I find that the amount of time claimed is excessive for the purpose of fixing costs. In fixing a reasonable quantum for costs I have taken this factor into account.
I find that a reasonable allocation of time for C. Francis would have been 25 hours, pushing down 10 hours to E. Kutner for a total of 15 hours for E. Kutner. This translates to $9,750.00 for C. Francis and $2,790 for E. Kutner for fees on a partial indemnity scale and $14,625.00 for C. Francis and $4,185.00 for E. Kutner for fees on a substantial indemnity scale.
Pacific claims disbursements that include a motion filing fee of $127.00. There is no such filing fee for motions in construction lien cases. This disbursement is disallowed. All other disbursements are reasonable and allowed.
Reasonable expectation of payor
Access to justice requires that a costs award ought to be in the reasonable expectation of the unsuccessful party. The key concept is reasonableness.
The costs provisions of the Construction Lien Act and the Rules should reasonably have informed Dolvin to expect to pay costs if unsuccessful. The usual manner by which the court is guided as to the unsuccessful party’s reasonable expectation as to costs is that party’s costs outline which is usually filed prior to disposition of the motion. In this case Dolvin did not file a costs outline and in its submissions on costs following disposition of the motion Dolvin suggests that a reasonable quantum for costs on a partial indemnity scale is $6,500.00 inclusive of disbursements and HST. Query what Dolvin’s position on costs would have been had it been the successful party on the motion. Dolvin provided no backup or breakdown for its post-disposition quantification of a reasonable quantum for costs, nor did it provide its lawyer’s dockets and costs outline.
Given that disbursements alone exceed $2,000 Dolvin’s suggestion that the motion fees should be in the range of $2,500.00 is unreasonable.
Rather, I draw the inference that in the absence of a detailed costs outline from Dolvin delivered prior to disposition of the motion, and in the absence of Dolvin’s lawyer’s dockets for the motion, Dolvin’s own fees would have been in a similar range as those of the moving party and Dolvin ought reasonably to have expected to pay fees in the range of $12,000.00 on a partial indemnity scale or $18,000.00 on a substantial indemnity scale, plus HST and disbursements.
The Outcome
- Another relevant factor is the outcome. Pacific was entirely successful on the motion. Dolvin was entirely unsuccessful.
Complexity
- I am satisfied that much but not all of the time spent by Pacific to prepare the motion was required. Pacific’s lawyer attended well prepared and responded to the arguments despite not having been provided with Dolvin’s legal argument in the form of a factum or case law prior to the actual motion hearing. The section 80 issue in particular was novel and added complexity.
Importance of the issues
- The issues on the motion were extremely important to Pacific. As an owner trying to sell its two condominium units it was important to Pacific to obtain clear title. Dolvin had improperly encumbered Pacific’s title and while vacating the lien claim as against Pacific’s Property would have allowed the sale to proceed, it would not have determined Dolvin’s lien rights as against Pacific. The motion did just that, resulting in a finding that Dolvin has no lien rights as against Pacific’s Property. The motion determined the issue in its entirety.
Conduct
In my view, Dolvin’s conduct of the motion unnecessarily lengthened the duration of the proceeding.
Firstly, when Pacific learned of the lien claim in January 2016 and contacted Dolvin to release the lien claim as against Pacific’s Property so that the pending January 29, 2016 sale could close, Dolvin refused to do so. The claim for lien registered against Pacific’s Property was for $2,313,335.03. Dolvin did not offer at that time to consent to have the lien claim vacated upon the payment of a pro-rated share ($8,267.45). That offer was not made on or prior to the first attendance on the motion on April 20, 2016 and was not made until two weeks prior to the return date of the motion in June 2016. By that time Pacific had incurred significant legal fees for the preparation of the motion materials and attendance on the motion.
Pacific had little choice but to bring the motion. Then, on April 19, 2016, 15 days after having been served with Pacific’s motion record and just one day prior to the motion hearing, Dolvin served responding motion materials. Dolvin asked for an adjournment of the April 20, 2016 motion date for the purpose of cross-examination. Pacific opposed the adjournment but it was granted for the purpose of cross-examinations. Dolvin, despite having requested an adjournment to cross-examine Pacific’s deponent, chose not to cross-examine. Dolvin’s conduct delayed the motion by over two months.
Conduct of a party through its lawyer is specifically addressed in the portion of section 86 of the Construction Lien Act, addressing a costs award made against a lawyer. While Pacific does not claim costs against Dolvin’s lawyer, section 86 is important in that it describes the type of conduct that invites sanction, as follows:
“…knowingly participated in the preservation or perfection of a lien…where it is clear that the claim for a lien is without foundation, or is for a grossly excessive amount, or that the lien expired”
The Construction Lien Act provides that where there is an inconsistency or conflict as between the Act and the rules of practice, the Construction Lien Act prevails. While an award of substantial indemnity costs under the rules is rare, it is a tool available under the Construction Lien Act to discourage improper registration of construction liens. The policy underlying the broad discretion under the Construction Lien Act for the court to award costs on a substantial indemnity basis is that the Construction Lien Act creates the extraordinary entitlement of a lien claimant to encumber another person’s property. That entitlement must be exercised reasonably and responsibly and when it is not, the court should take such conduct into account in awarding costs to compensate the property owner for an improperly placed construction lien.
In this case Dolvin registered a claim for lien for $2,313,335.03 against property in circumstances where there had been no contract between Dolvin and the property owner (Pacific) and the claim for lien was never perfected as against the property owner (Pacific). When confronted to release the lien as against Pacific’s Property Dolvin refused to do so.
Taking into account Dolvin’s conduct in registering the claim for lien as against Pacific’s Property, and its conduct throughout the course of the motion proceeding, I find that this is an appropriate case in which to exercise the court’s discretion under section 86 of the Act and award Pacific costs on a substantial indemnity basis, adjusted as explained in these reasons as to hourly rates and number of hours docketed.
Proportionality
- The principle of proportionality applies. Costs should be proportionate to the matters in issue. In this case the claim for lien registered against Pacific’s property is for $2,313,335.03 million. The costs award herein is proportionate to the amount in issue particularly in view of the fact that the motion disposed entirely of the lien claim issue as it relates to Pacific’s Property.
Conclusion
For all of these reasons I find that an appropriate award of costs of Pacific’s motion on a substantial indemnity basis is $18,810.00 for fees plus HST on fees of $2,445.30 plus disbursements of $2,238.20 for a total costs award payable by Dolvin to Pacific of $23,493.50.
Dolvin Mechanical Contractors Ltd. shall pay costs to Pacific Hardwood Limited fixed at $23,493.50.
______________________________________
MASTER C. ALBERT
CITATION: Dolvin Mechanical Contractors Ltd. v. Edge on Triangle Park Inc., (Pacific Hardwood Limited, moving party) 2016 ONSC 7012
COURT FILE NO.: CV-16-548795
DATE: November 10, 2016
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Dolvin Mechanical Contractors Ltd.
Plaintiff
- and -
Edge on Triangle Park Inc. et al
Defendants
- and -
Pacific Hardwood Limited
Moving party
COSTS OF MOTION
Master C. Albert
Released: November 10, 2016
[^1]: Assisted in part by Mr. Rutherford [^2]: Courts of Justice Act, R.S.O. 1990, c.C.43, s.131; Construction Lien Act, R.S.O. 1990, c.C.30, s.86 [^3]: 2004 14579 (ON CA), 71 O.R. (3d) 291; [2004] O.J. No. 2634; 2004 14579 (Ontario Court of Appeal) per Armstrong, J.A. at paras. 24 and 26, cited by D.G.Price, J. in Blankers.v.Stewart 2010 ONSC 3978 per at paras 39 and 40 [^4]: Rule 1.04