CITATION: Alofs v. Blake, Cassels & Graydon, 2016 ONSC 7078

COURT FILE NO.: 06-CV-322357

ENDORSEMENT RELEASED: November 18, 2016

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: PAUL ALOFS v. BLAKE, CASSELS & GRAYDON and RACHEL INGRAM

BEFORE: Master R. Dash

COUNSEL: Eli Lederman and Ian MacLeod, for the plaintiff Daniel Schwartz and Larissa Moscu, for the defendants

COSTS ENDORSEMENT

[1] On November 8, 2016 I determined a motion brought by the defendants to compel production by the plaintiff of certain documents from the files of the policy manager of his subrogating insurer over which he claimed privilege. I ordered some documents to be produced, some of which were ordered redacted, and I denied production of other documents. The examination and production of each document was opposed by the plaintiff. I also ordered the examination of a representative of the policy manager pursuant to rule 31.03(8). This endorsement is concerned with the costs of that motion.

[2] The defendants claim that they were substantially successful and seek costs of $37,998. They calculate their partial indemnity costs as 60% of actual costs and seek 80% of those partial indemnity costs as an appropriate reduction based on the division of success. The plaintiff submits that costs be in the cause, or alternatively that no costs be ordered given the division of success and the utility of the productions to the determination of issues at trial.

[3] There are two ways I have considered success on the motions. The first is issues based. The plaintiff claimed both solicitor-client privilege and litigation privilege over every document plus settlement privilege over a few. On the contested legal issues related to privilege I found in favour of the defendants’ position on each of the following issues: (a) a solicitor-client relationship between Encon and LS did not commence until after the defence costs decision of Justice Siegel, thus eliminating solicitor-client privilege on communications between Encon and LS before that date; (b) there were two separate retainers – in the Fiorillo Action and then in the Current Action, rather than a continuous retainer; (c) the Encon employees who were lawyers were acting in the ordinary course of business of claims analysts and not providing legal advice; (d) much of the file documentation was for the dominant purpose of claims and coverage assessment, not the Fiorillo action and thus not protected by litigation privilege; (e) there was an exception to settlement privilege claimed. I found in favour of the plaintiff on the following issues: (a) once a document was protected by litigation privilege in the Fiorillo action, it remained protected in the Current Action, which I found to be a closely related proceeding; (b) memorialization of legal advice and reports in the claims notes during the joint retainer were protected by solicitor-client privilege and could be redacted. On an issues basis, the defendants were clearly more successful.

[4] The second method of measuring success is the number of documents ordered produced. Of the 39 documents in issue, I ordered unredacted production of 21 documents, production of a further 12 documents with varying degrees of redaction and found 3 documents protected by privilege in their entirety and need not be produced. Although an additional three documents, the “Claims Audits” were not ordered produced on the basis of relevance I stated “while I understand why these documents were sought given the paucity of description, I have examined these documents … They contain no relevant information.” Using this analysis, the defendants were overwhelmingly successful. I add that to the extent that some documents were redacted or ordered not produced I stated: “In the absence of detailed evidence from Encon as to dominant purpose on a document by document basis, I have been forced to look to the document itself to make a determination from its contents as to the dominant purpose. In so doing I am granting a significant indulgence to Encon, who bore the evidentiary burden of establishing dominant purpose for each document.”

[5] In my view, despite some division, the defendants were substantially successful on the motion whether using a number of documents analysis or a determination of issues analysis. The defendants were also successful in obtaining a rule 31.03(8) examination of Encon and, despite objection by the plaintiff, I set some parameters for the scope of the examination, although not to the detail requested by the defendants. They are entitled to their costs.

[6] I reject the plaintiff’s suggestion that costs be in the cause to enable the trial judge to assess whether these productions have any benefit to the advancement of the cause or the ultimate determination of the issues at trial. This is a discreet step in the proceeding and I am not satisfied that there are any compelling reasons to depart from the presumptive provision of rule 57.03(1) that costs be payable within 30 days unless a different order would be more just.

[7] I also reject the suggestion that costs be in the cause because the productions supported an untenable defence, making the defendants’ success of a “technical nature.” I already disposed of that argument in my reasons for decision, where I stated: “I must however determine the motion based on the pleadings in their current state. The predicament the plaintiff finds itself in is of its own making as a result of strategic decisions made not to attack the pleadings.” It is disingenuous to raise that issue again in costs submissions.

[8] I accept the defendants’ suggestion that 80% of costs on a partial indemnity scale would appropriately and adequately reflect the division of success. I also accept the defendant’s analysis of partial indemnity costs as 60% of actual costs.[^1]

[9] The approach of the defendants in their costs outline was to reduce the actual hourly rate charged by each of the three lawyers plus clerk who worked on the motion to 60% of actual to reflect a partial indemnity rate. I find appropriate both the actual rate and partial indemnity rate of each based on their respective experience as well as the allocation of work among lawyers of different seniority. On this basis the defendants claim fees (other than counsel fee at the hearing) at $38,515 based on .7 hours for very senior counsel, 35.8 hours for a 10 year lawyer, 81.5 hours for 4 year lawyer and 9.3 hours for the law clerk, all plus HST. Together with counsel fee for two lawyers at the hearing of $5,378 and disbursements of $3,604, the total costs on a partial indemnity scale amount to $47,498. This was then reduced to $37,998, or 80% of partial indemnity costs, to account for the division of success.

[10] Pursuant to section 131 of the Courts of Justice Act, costs of a step in the proceeding are in the discretion of the court and the court may determine by whom and to what extent the costs are to be paid. The fixing of costs is not simply a mathematical exercise of multiplying hours spent by an appropriate hourly rate nor is its purpose necessarily to indemnify the winning party with respect to its costs incurred. Rather the court must consider the factors in rule 57.01 and fix costs in an amount that is fair in reasonable and within the reasonable expectations of the losing party.

[11] Considering some of the factors under rule 57.01, the amount at stake, indemnity for $850,000, is not insignificant and the professional reputation of lawyers is in issue. The motion was both factually and legally complex and a variety of issues relating to solicitor-client privilege, litigation privilege and settlement privilege had to be addressed and considered. The defendants are of the view that the motion is important since they have been attempting for some time to obtain documents that would address their mitigation defences (why did the plaintiff not pursue a due diligence defence or appeal the trial decision of Justice Lederer) and their ex gratia defence (why did Encon pay the judgment despite exclusions in the policy). The plaintiff is of the view that the issues are not important because the ex gratia defence is untenable and because the productions do not assist the defendants with their defences. I discount this argument because the plaintiff failed to move to strike the “untenable” defence and because the utility of the productions could not be made known because the plaintiff was resisting production. The conduct of the plaintiff in (a) resisting the refusals based on relevance and privilege, (b) once I ordered the listing of additional documents in Schedule A or B, only 23 additional documents were listed, requiring a further case conference to set out the requirement of documentation starting from an earlier date, (c) claiming both litigation privilege and settlement privilege over each and every document requiring the within motion and (d) providing an inadequate description of each document’s contents requiring an examination of each document by the court, thereby lengthening these proceedings. I do not say that the opposition to listing and production was unreasonable, only that it caused the defendants to incur significant costs. On the other hand, the defendants were focussed seeking production of only 39 of 199 listed Schedule B1 documents.

[12] Considerable time was spent on the motion by defendants’ lawyers. They considered the Schedule B documents, took time to narrow their request, prepared a motion record, a supplementary record and a reply record as well as a factum and authorities and attended the cross-examination of the plaintiff’s affiant. The motion was a full day and I was attended by two lawyers for the defendants, both of whom addressed the court on different issues. Likewise the plaintiff prepared a responding record, factum and authorities as well as a compendium of disputed documents for inspection by the court. Two lawyers for the plaintiff also attended and addressed the court. The motion was hard fought by both sides.

[13] The plaintiff’s cost outline seeks total costs on a partial indemnity scale of $15,889, considerably less than the defendants. While that is a factor, it is not determinative. The defendants were the moving parties and as is typical, put in more work than the responding party. The plaintiff’s lawyers docketed less time, but in addition the plaintiff’s claim to partial indemnity costs was approximately 45% of actual costs, whereas the defendants’ were 60% of actual, a percentage approved by the Court of Appeal. The estimate for counsel fees was less.

[14] While the court should not second guess the time spent by successful counsel, I take into account that this was, in essence, a productions motion, albeit a rather complex productions motion, further hampered by broad claims of privilege and inadequate description of the documents over which privilege was claimed. The rule 31.03(8) motion was an additional and discreet head of relief. I consider the totality of the costs to be somewhat excessive and disproportionate to what was at stake, but not significantly.

[15] In all the circumstances I find that costs of $30,000 inclusive of HST and disbursements are fair and reasonable and ought to have been within the reasonable expectations of the plaintiff given the broad claims of privilege over and opposition to production of each and every document.

ORDER

[16] I hereby order as follows:

The plaintiff shall pay to the defendants their costs of this motion within 30 days fixed in the sum of $30,000.

Master R. Dash

DATE: November 18, 2016

[^1]: Inter-Leasing Inc. v. Ontario (Revenue), 2014 ONCA 68, [2014] O.J. No. 263 (C.A.) at para 5.