CITATION: Construction Distribution & Supply Co. v. King Packaged Materials, 2016 ONSC 7397

COURT FILE NO.: CV-15-519486

DATE: 20161207

ONTARIO

SUPERIOR COURT OF JUSTICE

RE: CONSTRUCTION DISTRIBUTION & SUPPLY CO. INC., Plaintiff

AND: KING PACKAGED MATERIALS COMPANY, Defendant

BEFORE: Mr. Justice M. D. Faieta

COUNSEL: Alan B. Dryer, for the Plaintiff

Ted Frankel & Colin Pendrith, for the Defendant

C O S T S E N D O R S E M E N T

BACKGROUND

[1] The Plaintiff brought this action for damages arising from the Defendant’s termination of a distribution agreement. Its Amended Statement of Claim increased the damages claimed to $10,000,000 plus punitive damages in the amount of $500,000. I granted the Defendant’s motion for summary judgment. As a result, the Plaintiff’s claim was dismissed and the Defendant’s counterclaim of $93,890.49 was granted: see Construction Distribution & Supply Co. v. King Packaged Materials Co., 2016 ONSC 4042. The Defendant seeks costs of this action on a substantial indemnity basis in the amount of $155,844.95 or, alternatively, on a partial indemnity basis in the amount of $109,162.52.

ANALYSIS

[2] I agree with the following statement made by Justice Myers in Fimax Investments Group Ltd. v. Grossman, 2015 ONSC 2048, at para.7:

The fixing of costs is a discretionary decision under s.131 of the Courts of Justice Act. That discretion is generally to be exercised in accordance with the factors listed in Rule 57.01 of the Rules of Civil Procedure. These include the principle of indemnity for the successful party (57.01(1)(0.a)), the expectations of the unsuccessful party (57.01(1)(0.b)), the amount claimed and recovered (57.01(1)(a)), and the complexity of the issues (57.01(1)(c)). Overall, the court is required to consider what is “fair and reasonable” in fixing costs, and is to do so with a view to balancing compensation of the successful party with the goal of fostering access to justice: Boucher v. Public Accountants Council (Ontario), 2004 14579, (2004), 71 O.R. (3d) 291 (Ont. C.A.), at paras 26, 37.

[3] To the above principles I add an observation regarding proportionality. Rule 1.04(1.1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, provides that:

In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

[4] The introduction of the principle of proportionality to the Rules of Civil Procedure that came into effect in 2010 was a response to concerns about the excessive cost and delay of the civil justice system.[^1] Amongst other things, it responds to the inefficiencies associated with time-based billings, which Justice Farley referred to as the “mindless multiplicand of an hourly rate times docketed hours”: see Martin Teplitsky, Q.C., LSM, “Making civil justice work: A new vision” (2008) 27:3 Advocates’ J. 7, at paras. 9-11.

[5] I now turn to assess the various relevant considerations in assessing costs in this matter.

Offers to Settle

[6] There is no evidence that either party made an offer to settle this action.

Principle of Indemnity

[7] The Defendant’s Bill of Costs claims the following fees, the totals of which include HST:

Hours Claimed

Partial Indemnity

Steinhart - $630/hr Frankel - $420/hr Pendrith - $290/hr Clerk - $210/hr

Substantial Indemnity Steinhart - $865/hr Frankel - $580/hr Pendrith - $400/hr Clerk - $290/hr

Pleadings

Steinhart – 0.7 hours; Frankel – 8.0 hours; Pendrith – 13.0 hours

$8,555.23

$11,803.42

Discovery

Frankel – 5.8 hours; Pendrith – 19.8 hours; Law Clerks – 19.6 hours

$13,892.22

$19,173.84

Cross-Examinations

Frankel – 39.1 hours; Pendrith – 9.8 hours

$21,768.32

$30,055.74

Summary Judgment Motion

Frankel – 90.1 hours; Pendrith – 67.7 hours

$64,946.75

$89,651.94

Total Fees

$109,162.52

$150,684.94

[8] The Plaintiff submits that the hourly rates charged by counsel for the Defendant and the time docketed on this matter are excessive.

Hourly Rates

[9] The Plaintiff submits that the hourly rates billed by counsel for the Defendant is excessive given the following notice issued by the Costs Subcommittee of the Civil Rules Committee in 2005:

Information for the Profession

In preparing its report to the Rules Committee that led to the changes in fixing costs to be implemented on July 1, 2005, the Costs Subcommittee gathered substantial information and consulted widely. Based on this, the following may provide some guidance to the profession as these changes are implemented.

It is anticipated that in considering rates, as one of the various relevant factors, courts will normally treat the rates set out below as maximum rates when fixing partial indemnity costs. These rates are the maximums that were available under the costs grid. It is further anticipated that the maximum rates would apply only to the more complicated matters and to the more experienced counsel within each category. The rates used in costs submissions will normally come within the range established by these maximums as appropriate to the particular matter after giving consideration to the factors set out in r. 57.01(1) which now include the amount an unsuccessful party could reasonably expect to pay and the principle of indemnity. Finally, it is the intention that these guidelines will be reviewed periodically so that their currency can be maintained, in light of accumulated experience.

In addition to the hearing itself, these guidelines encompass mediation under r. 24.1, discovery of documents, drawing and settling issues on a special case, setting down for trial, pre-motion conferences, examinations, pre-trial conferences, settlement conferences, notices or offers, preparation for hearing, attendance at assignment court, orders issuing or renewing a writ of execution or notice of garnishment, seizure under writ of execution, seizure and sale under writ of execution, notices of garnishment or any other procedure authorized by the Rules of Civil Procedure.

Law Clerks

Maximum of $80.00 per hour

Student-at-law

Maximum of $60.00 per hour

Lawyer (less than 10 years)

Maximum of $225.00 per hour

Lawyer (10 or more but less than 20 years)

Maximum of $300.00 per hour

Lawyer (20 years and over)

Maximum of $350.00 per hour

[10] The Plaintiff submits that the above Information Notice should be applied with the result that the hourly rates of the Defendant’s counsel should be assessed on a partial indemnity basis as follows: 1) Frankel – not to exceed $300; 2) Pendrith – not to exceed $225; 3) Law Clerks – not to exceed $80.

[11] I reject this submission for two reasons. First, the Costs Subcommittee’s Information Notice is not binding on this Court. It is not included in the Rules of Civil Procedure nor was it issued pursuant to s. 66 of the Courts of Justice Act, R.S.O. 1990, c. C.43. At best, it is a guideline that is not afforded any particular weight by legislation.[^2] Second, it is out of date. In Inter-Leasing, Inc. v. Ontario (Minister of Revenue), 2014 ONCA 683, the Ontario Court of Appeal stated, at para. 5:

I agree with the appellant that the cost rates set out in the Information for the Profession set out in the preamble to Rule 57 of the Rules of Civil Procedure are now out of date, and that amounts calculated at 55%-60% of a reasonable actual rate might more appropriately reflect partial indemnity, particularly in the context of two sophisticated litigants well aware of the stakes.

[12] Using the above approach, I have assessed partial indemnity rates as follows:

Actual Rates

Year of Call

Partial Indemnity Rates (57.5% of Reasonable Actual Rates)

Steinhart

$965

1981

$554.88

Frankel

$655

2004

$376.63

Pendrith

$450

2011

$258.75

Law Clerk (Plue)

$320

$184

Law Clerk (Stallone)

$305

$175.38

Time Docketed

[13] With one small exception, two lawyers and two clerks worked on this file for the Defendant. There were no examinations for discovery. About 67 hours is claimed by the Defendant for the pleading and discovery stages. Each party cross-examined two affiants. The Defendant claims about 49 hours in relation to the cross-examinations. The Plaintiff claims 16 hours. Each party provided a Factum, a one-volume Brief of Authorities and a two-volume Motion Record of about equal size. The Defendant claims a total of about 157 hours for the preparation and attendance at this one-day motion for summary judgment. In this regard, the Plaintiff claims 45 hours. I accept the Plaintiff’s submission that the time claimed by the Defendant is excessive. I would reduce the time claimed by the Defendant by one-third.

Disbursements

[14] The Defendant claims disbursements, inclusive of HST, in the amount of $5,160.01.

[15] The Plaintiff submits that a disbursement of $2,481.58 for “copies and tabs, etc.” is excessive. I note that counsel for the Plaintiff has not included a similar disbursement in his Bill of Costs. Obviously, the costs of the materials used to prepare the documents filed with this Court are recoverable. The Plaintiff has not explained why this charge is unreasonable nor has it stated how much it was charged for these materials by its own counsel.

[16] The Plaintiff also submits that the charge of $1,512.15 for “agency fees and disbursements” is included without any supporting explanation or documentation to explain why this charge was incurred. As a result, I accept the Plaintiff’s submission that this amount should be struck.

The Amount that an Unsuccessful Party could Reasonably Expect to Pay

[17] The Plaintiff states that its costs of this motion were $31,695.50 on a substantial indemnity basis and $24,973.00 on a partial indemnity basis. The Plaintiff submits that it reasonably expected the Defendant’s costs to be a similar amount.

The Amount Claimed and the Amount Recovered

[18] As noted, the Plaintiff’s claim for $10,500,000 plus interest and costs was dismissed.

The Complexity of the Proceeding

[19] This motion was of moderate complexity. It raised the issue of whether reasonable notice of termination of a non-exclusive oral distributorship agreement was required and, if so, what amount of notice was required.

The Importance of the Issues

[20] Given the dearth of case law, the main issue raised by this motion was not only of importance to the parties but also of modest jurisprudential importance.

The Conduct of any Party that Tended to Shorten or Lengthen Unnecessarily the Duration of the Proceeding

[21] Neither party engaged in conduct than tended to unnecessarily shorten or lengthen the duration of the proceeding.

Whether any Step in the Proceeding was Improper, Vexatious or Unnecessary or Taken Through Negligence, Mistake or Excessive Caution

[22] Subject to the comments below, there is no suggestion that either party took a step in the proceeding that was “improper, vexatious or unnecessary or taken through negligence, mistake or excessive caution”.

A Party’s Denial of or Refusal to Admit Anything that Should Have Been Admitted

[23] There is no suggestion that either party denied or refused to admit anything that should have been admitted.

Any Other Matter Relevant to the Question of Costs

[24] The Defendant claims substantial indemnity costs. Such costs are generally awarded where the conduct on the part of one of the parties satisfies the standard of “reprehensible, scandalous or outrageous conduct”: see Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3, at p. 134; Davies v. Clarington (Municipality), 2009 ONCA 722, at paras. 28-29.

[25] The Defendant submits that the Plaintiff claimed that the Defendant had breached its duty of good faith and fair dealing in connection with the termination of the distribution agreement by making false and/or misleading statements about the Defendant’s motives for terminating the agreement; that the Defendant refused to fulfill the Plaintiff’s orders and purposely withheld product in order to cause harm to the Plaintiff; and that the Defendant misled customers with a view to driving the Plaintiff out of the business of selling a line of products equivalent to the Concrete Products Line.

[26] In my view, these allegations were not strenuously advanced on the motion for summary judgment and I am not satisfied, in any event, that such allegations meet the requisite standard.

Conclusions

[27] Applying the considerations described above, including the principle of proportionality, I find that it is fair and reasonable to award the sum of $80,000 in respect of its costs of this action, inclusive of disbursements and HST, to the Defendant.

Mr. Justice M. D. Faieta

Released: December 7, 2016

[^1]: The principle of proportionality was a central theme of the recommendations made by The Honourable Coulter A. Osborne, Q.C. in his report for the Attorney General of Ontario entitled “Civil Justice Reform Project: Summary of Findings and Recommendations” (November 2007).

[^2]: This is unlike, for instance, the situation under s. 3(5) of the Planning Act, R.S.O. 1990, c. P.13, which requires land use planning decisions to “be consistent with” a policy statement issued by the Minister of Municipal Affairs and Housing.