CITATION: Trenchline Const. Inc. v. Unimac-United Mgmt. Corp., 2016 ONSC 7019
COURT FILE NO.: CV-12-454092
DATE: November 14, 2016
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF the Construction Lien Act, R.S.O. 1990, c.C.30
BETWEEN:
TRENCHLINE CONSTRUCTION INC.
Glenn Grenier for the plaintiff, Tel.: 416-307-4005; Fax: 416-865-7048.
Plaintiff
UNIMAC-UNITED MANAGEMENT CORP. and METROLINX
Greg Hersen for the defendant, Metrolinx Tel.: 416-863-1188; Fax: 1-888-812-2560.
Defendants
HEARD: June 2, July 6 and August 11, 2016.
DECISION: September 30, 2016
Master C. Wiebe
COSTS DECISION
(notice holdback issue)
I. INTRODUCTION
[1] On September 30, 2016 I rendered my decision on the trial of an issue of the notice holdback. I found that Metrolinx has notice holdback liability of $215,054.80. I must now determine the issue of costs.
[2] I asked for and received costs outlines from the parties on the last day of the trial hearing. Trenchline’s costs outline shows a partial indemnity amount of $176,918.45, and a substantial indemnity amount of $264,890.08. Metrolinx’s costs outline shows a partial indemnity amount of $110,580.02, and a substantial indemnity amount of $145,088.24.
[3] In my ruling, I authorized the parties to made further submissions in writing on costs in light of the outcome. On October 17, 2016 Mr. Grenier delivered the Costs Submissions of Trenchline. Trenchline seeks a costs order in the amounts shown in its costs outline. On October 17, 2016, Mr. Hersen delivered a brief containing the Metrolinx position on costs. Metrolinx submits that costs should be awarded to neither side for two reasons: the mixed success of the parties; and the public policy considerations raised in this trial of an issue.
[4] The parties exchanged responding and reply submissions. On October 28, 2016, Mr. Grenier delivered Responding Cost Submissions of Trenchline. On the same day, October 28, 2016, Mr. Hersen delivered the Metrolinx Responding Costs Submissions. In this brief, Mr. Hersen submitted that, if I am inclined to award costs to Trenchline, I should substantially reduce the amount due to factors listed in Rule 57.01(1).
[5] At the trial management conference on November 1, 2016, I ordered that the parties’ right to make reply submissions be extended to November 3, 2016, but that these submissions be no longer than two pages. I received these final submissions on November 2 and 3, 2016.
II. ISSUES
[6] Having reviewed the submissions, I have concluded that the following issues are to be determined:
a) Should there be no costs due to divided success?
b) Should there be no costs because the trial raised a novel point or concerned a matter of public interest?
c) If Trenchline is to get costs, should the award be reduced due to proportionality?
d) Should the award be reduced due to the unnecessary complexity of the case?
e) Should the award be reduced due to the lack of importance of the issues?
f) Should the award be reduced due to the reasonable expectation of Metrolinx?
g) Should the award be adjusted due to the conduct of the parties?
h) Should the award be reduced due to Trenchline’s refusal to make admissions?
i) Should the award be reduced due to Trenchline’s written offer to settle?
j) What is the appropriate amount to award, if any?
III. ANALYSIS
a) Should there be no costs due to divided success?
[7] The question of success was hotly argued. Mr. Grenier argued that Trenchline was, on balance, the successful party having succeeded in obtaining a result that enhanced Metrolinx’s holdback liability from $462,841.22 to $677,896.02, an increase of 46%. Metrolinx had, after all, taken the position throughout that it had no notice holdback liability. Furthermore, he pointed out that my finding as to the quantum of Metrolinx’s notice holdback liability, $215,054.80, was the highest quantum for notice holdback found in the cases to date. Finally, he pointed out that Trenchline succeeded on five of the seven issues I identified to be determined.
[8] Mr. Hersen argued that the success was divided. He pointed out that Trenchline succeeded in having only one of its ten alleged written notices of lien found to be in fact a written notice of lien. He pointed out that the quantum of the determined Metrolinx notice holdback liability, $215,054.80, was less than 20% of what Trenchline was claiming to be the quantum of the notice holdback liability, $1,085,210.09. He pointed out that Trenchline failed in its key arguments on the issues, namely the absence of a need for a warning in the notice and the “crystallization” of notice holdback liability. He argued that there should be no award as to costs in light of this divided success.
[9] I agree with Mr. Grenier. The purpose of this trial of an issue was to determine whether Metrolinx has notice holdback liability and, if so, what the quantum of that liability is. Success, or lack thereof, should, therefore, be viewed in light of this central purpose.
[10] Trenchline did not succeed on its primary argument concerning warning, but it did succeed in its alternative argument that at least one of the alleged notices contained the requisite warning for a notice. The success on that alternative argument created a potential success for Trenchline that was within 82% of its claim. It was Trenchline’s failure on the one subsequent issue, the “crystallization” issue, that caused the final quantum of notice holdback liability to be reduced to less than 20% of the claim. Trenchline succeeded on all of the other issues that Metrolinx raised. A deferral of interest determination is not a failure. Failure on one issue that results in a reduction of the notice holdback liability does not, in my view, disentitle Trenchline to a costs award.
[11] Trenchline was the successful party that merits a costs award. However, there will be a reduction in the award due to the success of Metrolinx in reducing its notice holdback liability.
[12] I distinguish the decision of Justice Roberts in DocuPartners Inc. v. Keele Copy Centre Inc. [2009] O.J. No. 4674 that is relied upon by Metrolinx. I agree with Mr. Grenier that Her Honour’s primary concern in deciding not to award costs was the fact that the result fell within the monetary jurisdiction of the Small Claims Court, which provides minimal costs recovery. That is not the case with this trial of an issue.
[13] I should also add that Trenchline was successful in this trial of an issue in raising an issue that may in the end result in a further recovery to Trenchline of $576,349.59, namely the section 39 issue. I bear that in mind as well.
b) Should there be no costs because the matter raised a novel point or concerned a matter of public interest?
[14] Mr. Hersen argued that there should be no award of costs because the trial dealt with a matter that was in the nature of a novel point, as there were no previous authoritative rulings on point. Alternatively, he argued that the trial concerned a matter of public interest and that both parties acted in good faith. On this last point, he referred me to the decision of Justice Sharpe in Mahar v. Rogers Cablesystems Ltd. [1995] O. J. No. 3711, wherein His Honour had made a ruling on a jurisdictional point in an application apparently concerning a proposed merger of two entities in the communications industry. He refused to award costs on the grounds that the application was being pursued for a public purpose.
[15] I accept neither of these arguments. As to the novel issue point, there have been many court decisions as to what constitutes a written notice of lien. At least three of these decisions, Craig, Mutic and Andrew Paving, have been viewed as authoritative. These decisions all dealt with the issue of warning, either directly or indirectly. What they perhaps lacked was clarity and precision on the point. But this does not amount to a “novel” point that disentitles Trenchline to costs. As to the public interest point, Justice Sharpe in Mahar made it clear that this argument against costs awards does not apply where the driver behind the litigation is the financial self-interest of the parties. There is no doubt that the driver behind the trial of an issue was the financial self-interest of the parties. Trenchline wanted to maximize its own recovery by maximizing Metrolinx’s holdback liability, while Metrolinx wanted to eliminate or minimize its holdback liability.
c) Should the award be reduced due to proportionality?
[16] Rule 57.01(1)(a) of the Rules of Civil Procedure specifies that one factor to consider in awarding costs is “the amount claimed and the amount recovered in the proceeding.” In this case, the recovery was $215,054.80. Trencline’s substantial indemnity costs claim of $264,890.08 exceeds the recovery. Its partial indemnity claim of $176,918.45 is 82% of the recovery. Are these claims disproportionate to the recovery?
[17] I find that there needs to be some reduction in this regard. In Mullin v. Lagace, 2015 ONSC 4267 (S.C.J.), Justice Cornell gave an award of costs of $102,000 on a recovery before trial of $190,000, namely 53.68% of the recovery. His Honour referred primarily to proportionality, but gave minimal reference to two other factors. I note that His Honour referred to the decision of the Court of Appeal in Elbakhiet v. Palmer, 2014 ONCA 544, where the court gave a costs award of $100,000 on a jury award at trial of $145,000, namely 68.96% of the recovery. The main factor applied in that case was proportionality. Justice Cornell also referred to the decision in Patene Building Supplies Ltd. v. Niagara Home Builder Inc., 2010 ONSC 468, where the court gave a costs award of $5,000 on a damage recovery of $15,000, namely 33% of the recovery.
[18] These decisions indicate that, while the proportionality factor should reduce the Trenchline costs claim, the reduction need not be pronounced, particularly if the claim is below the amount recovered, as it is with the Trenchline partial indemnity claim. I will use these cases as a guide as to what the reduction should be on the basis of proportionality.
d) Should the award be reduced due to the unnecessary complexity of the case?
[19] Another factor listed under Rule 57.01(1)(c) is the “complexity of the case.” Mr. Hersen argued that Trenchline unnecessarily complicated the trial of an issue by putting in issue numerous alleged written notices of lien on which it did not succeed, and by raising the “crystallization” issue.
[20] I do not fault Trenchline for doing this. The cases on point alluded to, but did not clarify precisely, whether written notices of lien required a warning and whether payments to the notice giver from impugned payments to the contractor reduced notice holdback liability. Given that background, it was not unreasonable for Trenchline to make the argument that a warning was not required and that notice holdback liability “crystallized.” I note that, had Trenchline’s argument about a warning been accepted, all of the alleged written notices of lien would have qualified as such. I will make not deduction for this factor.
e) Should the award be reduced due to the lack of importance of the issues?
[21] The importance of the issues is another factor to consider. Mr. Hersen argued that there was no importance to the issues in this trial of an issue, as the claims of the remaining lien claimants, including the claim of Trenchline, fall within the penal limit of the labour and material payment bond that was provided by Unimac and against which they have made claims.
[22] This fact was not challenged by Mr. Grenier. Indeed, in the phone trial management conference on November 1, 2016, Mr. Grenier proposed adjourning the scheduling of the trial I had ordered on the section 39 issue because the scheduled Trenchline bond claim trial now carried the potential for 100% recovery. However, he also pointed out that this fact emerged only with the dismissal of the single largest subtrade claim, namely the claim of Dalcor. This dismissal happened no sooner than in the late summer of 2016 when Dalcor failed to hire a lawyer. By this point, the final argument in the trial of an issue was done, and the costs of that trial were spent. I, therefore, do not accept Mr. Hersen’s argument.
[23] Mr. Grenier argued that the trial of an issue was vitally important when it was brought, particularly given my previous findings that Unimac, the general contractor, may be insolvent, and, therefore, may be unable to pay any contract judgment in the lien/bond proceedings. Therefore, the quantum of the owner’s holdback liability was important to the lien claimants. I accept that argument. The trial of an issue was important to Trenchline and the other lien claimants when it was brought.
f) Should the award be reduced because of the reasonable expectation of Metrolinx?
[24] Another factor to consider is what Metrolinx would reasonably expect to pay in costs. This issue turns to a large degree on the parties’ respective costs outlines; see C.N.R. v. Royal & Sun Alliance Insurance Co. of Canada (2005), 2005 CanLII 33041 (ON SC), 77 O.R. (3d) 612 (S.C.J.) at paragraph 10. I, therefore, compared the two costs outlines. The Metrolinx claim of $110,580.02 in partial indemnity costs is 62.5% of the Trenchline partial indemnity claim of $176,918.45. The Metrolinx claim of $145,088.24 in substantial indemnity costs is 54.77% of the Trenchline substantial indemnity claim of $264,890.08.
[25] Mr. Hersen made a further argument. Metrolinx should not reasonably expect to pay costs for issues raised by Trenchline on which it did not succeed.
[26] As to the two costs outlines, they do show some disparity that should be taken into account. But, as was stated by Justice Ground in the C.N.R. decision at paragraph 10, a defendant should expect that a plaintiff will spend more time than a defendant in pre-trial proceedings and preparation for trial. That was certainly the case here where I was impressed by the extensive and very helpful work that was done on the Notice Holdback Chronology, the Agreed Statement of Facts and the two volumes of productions. I will also take that into account.
[27] As to Mr. Hersen’s further point, I view this point to be another version of Metrolinx’s divided success argument, which I have dealt with.
g) Should the award be adjusted due to the conduct of the parties?
[28] Mr. Hersen argued that Trenchline unduly lengthened the proceeding by introducing issues on which it did not succeed, by making lengthy written submissions and “voluminous” productions, by improperly bringing a motion to validate service, and by objecting to Ms. Chanina’s affidavit.
[29] I do not accept these arguments. The question of the costs concerning unsuccessful issues I have dealt with. As to the lengthy written submissions and voluminous productions, I found that the written submissions and the productions were indeed lengthier than expected, but that this was in the end necessary and helpful, given the complexity of the facts and the legal issues. I made full use of them. The Trenchline motion to validate service stemmed from the unsuccessful issue about “giving” that was raised by Metrolinx. This was apparently a late issue. In any event, I do not fault Trenchline for bringing a motion to advance its position in the event it failed on the “giving” issue. Finally, I do not recall the objection Trenchline made to the Chanina affidavit. In any event, I considered the affidavit in the end. I, therefore, do not find fault with Trenchline’s conduct on the trial of an issue.
[30] Metrolinx’s conduct is another matter. The correspondence Metrolinx had with Trisura which underlay its section 39 response to Trenchline on the notice holdback issue was not a part of the brief of productions. It had to be entered by Trenchline as separate exhibits or by way of affidavit, as Trenchline obtained the correspondence from other sources. This correspondence clearly related to the notice holdback issue, as it pertained to one of the alleged written notices of lien. It should have been produced in a timely way by Metrolinx.
[31] As to the section 39 issue itself, I believe it has relevance to the issue of costs. I found in my reasons that Metrolinx acted in a “capricious” manner in this regard. Initially, after an internal investigation with legal help, it took the position with the bonding company that Trenchline’s November 21, 2011 claim on the Trisura bond (namely Written Notice of Lien No. 9) was a “written notice of lien.” Had it acted consistently with that position in this proceeding, Metrolinx would have been hard pressed to deny that many, if not all, of the other alleged written notices of lien were also “written notices of lien.” At the very least, that would have been the case with the one alleged written notice of lien I found to be a valid one, namely Written Notice of Lien No. 5. In short, had Metrolinx followed its initial position, the need for this trial of an issue would have been obviated.
[32] Instead, Metrolinx later, having held back $576,349.59 from Unimac on account of its position on Written Notice of Lien No. 9 and having asserted successfully a set-off against that amount, changed its position when its old position became inconvenient in this litigation on the notice holdback issue. That this new position was the correct one does not negate the fact that Metrolinx has through this “capricious” behavior obtained the benefit of $576,349.59 that was subject to a certificate of payment. Payment of this money could have also gone a long way to obviate this trial of an issue.
[33] In my ruling, I stated that this Metrolinx behavior “cried out for a remedy.” An award of costs is one such remedy. I will apply it. I have decided that the base standard of costs recovery for Trenchline should be its substantial indemnity claim.
h) Should the award be reduced due to Trencline’s failure to make admissions?
[34] Mr. Hersen argued that Trenchline’s costs claims should be reduced because of a failure to admit that most of its alleged written notices of lien were not such notices. I have dealt with this argument elsewhere in this ruling. I will not repeat myself.
i) Should the award be reduced due to Trenchline’s written offer to settle?
[35] On April 27, 2016 Trenchline made a written offer to settle the trial of an issue. The offer was to have Metrolinx inter alia pay notice holdback of $1,000,000, namely 92% of the claimed amount. Needless to say, the offer was not accepted. Mr. Hersen argued that this was not a real offer to settle, and should, I believe, be viewed by me as Trenchline’s overly litigious approach to this matter. Mr. Grenier pointed out in response that this was a genuine offer, as it was a compromise from Trenchline’s formal position, and that Metrolinx in turn made no offer to settle.
[36] I do not accept Mr. Hersen’s argument. The fact that Metrolinx made no offer to settle shows that it was Metrolinx that was the litigious party in this case. I will also take that into consideration.
j) What is an appropriate amount to award?
[37] I note that Metrolinx does not challenge the overall reasonableness of the quantum of the Trenchline costs outline other than to say correctly that Trenchline did not break down its figures in such a way that the court could determine what time was spent on each item of work. I will take that failing into consideration.
[38] Taking all of these factors into consideration, I have decided to award Trenchline $150,000 in costs. This is about 69% of the $215,000 recovery, which is comparable to the proportion that was awarded by the court in Elbakhiet. It is an amount that is comparable to Metrolinx’s substantial indemnity claim. It is also 57% of the total Trenchline substantial indemnity claim, which is an appropriate recognition that Trenchline’s success was only partial. It is also, most importantly, an appropriate amount given my comments about Metrolinx’s conduct.
IV. CONCLUSION
[39] I, therefore, find that Metrolinx must Trenchline costs in the amount of $150,000 for the notice holdback trial of an issue. I will issue another interim report incorporating this decision.
Released: November 14, 2016 __________________________
MASTER C. WIEBE
CITATION: Trenchline Construction Inc. v. Unimac-United Management Corp., 2016 NSC7019
COURT FILE NO.: CV-12-454092
DATE: November 14, 2016
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Trenchline Construction Inc.
Plaintiff
- and -
Unimac-United Management Corp. and Metrolinx
Defendants
COSTS DECISION
(notice holdback issue)
Master C. Wiebe
Released: November 14, 2016