CITATION: Marshall v. Shaw, 2016 ONSC 7436
COURT FILE NO.: 225/07
DATE: 2016-11-29
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JANICE MARSHALL
Plaintiff
– and –
WAYNE HAROLD SHAW
Defendant
– and –
RUTHERFORD FARMS LIMITED and WESSUC INC.
Third Parties
Brian R. Kelly, for the Plaintiff
Gregory Brimblecombe, for the Defendant
Stephen T. Brogden, for the Third Party Rutherford Farms Limited
Robert W. Dowhan, for the Third Party Wessuc Inc.
HEARD: December 9, 10 & 11, 2014, August 24, 25 & 26, 2015; written argument completed April 1, 2016; transcripts received May 16, 2016; judgment released August 3, 2016; costs submissions completed October 3, 2016
REASONS FOR JUDGMENT ON COSTS
Heeney R.S.J.:
[1] I have now reviewed the submissions of counsel as to costs.
[2] The plaintiff was unsuccessful in this action, and her claim was dismissed in its entirety. The third party claims were also dismissed, as a natural consequence.
[3] The plaintiff does not dispute her liability to pay partial indemnity costs to the defendant Shaw. However, she does dispute her liability to pay the costs of the third parties, and submits that these should be paid by the defendant Shaw who brought the third party proceedings. I will deal with this issue before addressing the issue of quantum.
[4] In Guarantee Co. of North America v. Resource Funding Ltd., [2009] O.J. No. 3279 (S.C.J.), Newbould J. set out the circumstances under which a plaintiff may be held liable to pay a successful third party’s costs. He said this, at para. 5:
The normal rule is that an unsuccessful plaintiff will not be charged with the costs of the third party but there may be situations in which fairness requires an unsuccessful plaintiff to bear a successful third party's costs. In Milina v. Bartsch (1985), 1985 454 (BC SC), 1 C.P.C. (2d) 269, McLachlin J. (as she then was) reviewed case law in Western Canada and stated:
The normal rule is that a plaintiff who is unsuccessful against the defendant will not be charged with the costs of the third party. The plaintiff did not sue the third party, did not want him in the case and was not responsible for joining him. In these circumstances it has been thought to be unfair to visit the third party's costs on the plaintiff: see Fink v. Bourassa, 1973 908 (SK QB), [1974] 2 W.W.R. 84 at 85-86. As stated in R. D. Bristowe Ltd. v. Bennett & White Const. Co. (1958), 1958 495 (BC SC), 26 W.W.R. 477 at 478:
I do not see why the plaintiff should be burdened with the costs of the third party he did not want, and against whom he could not directly recover ...
There may be situations where, on the peculiar facts of the case, fairness requires that an unsuccessful plaintiff bear a successful third party's costs. Courts have held that such an order may be appropriate where one or more of the following situations was present:
Where the main issue litigated was between the plaintiff and the third party: Coast Crane Co. v. Dom. Bridge Co. (1961), 1961 389 (BC SC), 29 D.L.R. (2d) 383; Credit Foncier Franco-Can. v. Bennett (1964), 1964 449 (BC CA), 47 W.W.R. 369.
Where the third party was brought or kept in the matter by reason of the act or neglect of the plaintiff: Coast Crane Co. v. Dom. Bridge Co., supra.
Where the case involves a string of contracts in substantially the same terms for the sale of goods: R. D. Bristowe Ltd. v. Bennett & White Const. Co., supra.
Where the third party proceedings follow naturally and inevitably upon the institution of plaintiff's action, in the sense that the defendant had no real alternative but to join the third party: Credit Foncier Franco-Can. v. Bennett, supra.
[5] This approach was approved by the Ontario Court of Appeal in Sanofi Pasteur Ltd. v. UPS SCS Inc., 2015 ONCA 88 at para. 77. The court added that whether an unsuccessful plaintiff should be ordered to pay a third party’s costs depends on the circumstances of the particular case, and the discretion to do so must be exercised judicially.
[6] This case was grounded in nuisance and negligence. It concerned an allegation that the plaintiff’s well had been contaminated by the application of municipal waste (“biosolids”) to the lands of the defendant Shaw, which migrated through the water table to the plaintiff’s well. Shaw did not apply the biosolids, but merely provided his consent, as owner of the land, to the application. He was not actively farming the property, but had rented it out to the third party Rutherford. Rutherford did not apply the biosolids either, but had retained the third party Wessuc to do so.
[7] The threshold factual issue was identified in para. 3 of my Reasons for Judgment as follows: “did the application of biosolids by Wessuc during the week of August 27, 2007 cause the plaintiff’s well to become contaminated?”
[8] This case therefore falls within the first category of cases identified by McLachlin J., where the main issue litigated was between the plaintiff and the third party. The other third party Rutherford, and the defendant Shaw, participated in the litigation of that issue as well, since their liability also hinged on it. It is noteworthy that both third parties pled into the main claim pursuant to r. 29, and thereby took on the status of defendants.
[9] This case also falls squarely into the fourth category of cases identified by McLachlin J., in that the third party proceedings followed naturally and inevitably upon the institution of plaintiff's action, in the sense that the defendant had no real alternative but to join the third parties. The key allegation was that the biosolids were negligently applied to Shaw’s land, in circumstances where they knew or ought to have known that the biosolids would cause the plaintiff’s well to become contaminated. At trial, this crystallized into the allegation that the biosolids were applied at a time when there were visible drought cracks present in the field, which provided a preferential pathway for the biosolids to enter the water table and thereby contaminate the plaintiff’s well.
[10] Since Shaw took no part in the application, he did nothing that was negligent, but may well have been liable in nuisance if the contamination emanated from his land, due to the application of biosolids to which he consented. If the plaintiff was correct that the application was done negligently, those negligent acts were committed by the third party Wessuc, at the direction of the third party Rutherford, who had hired Wessuc to do the job. Shaw therefore had no choice but to add both Rutherford and Wessuc as third parties, so that he could be indemnified in the event that negligence was proven.
[11] I am satisfied that this is an appropriate case for the plaintiff to be held liable to pay the costs of the successful third parties.
[12] I now turn to the assessment of the costs claimed by the defendant and the third parties.
[13] In considering the factors set out in r. 57.01(1), the first is the amount claimed. The plaintiff initially claimed general damages in the amount of $50,000 and special damages of $50,000, for a total claim of $100,000. This claim was increased on November 18, 2008 to a total claim of $500,000. It appears that this was related to a claim for diminution in value of the land. While this claim was never abandoned, no expert evidence was ever obtained, which would have been necessary to prove such a claim, and it was never an issue at trial.
[14] In practical terms, the case really concerned her claim for the cost of replacing the well, which I found to be just under $20,000, as well as her claim for inconvenience, stress and upset, which I provisionally assessed at $20,000. The damages claimed by the plaintiff in written argument consisted of general damages of $25,000 and special damages of just under $23,000. Thus, despite the fact that the amount claimed was stated to be $500,000, it was in reality a relatively modest case.
[15] Given that, it is regrettable that it did not settle, and resulted in a six-day trial involving four parties, all represented by counsel. The only Offer to Settle that was served came from Shaw, dated November 7, 2012. It simply agreed to a dismissal on a without costs basis if accepted within 20 days, and thereafter to dismissal with costs payable of $5,000. That offer does not represent a compromise and Shaw does not rely upon it as a factor in assessing costs.
[16] The case was relatively complex, in that it involved conflicting expert evidence in the field of hydrogeology.
[17] The issues were important to the parties, particularly to Wessuc, whose professional reputation was potentially at stake. Counsel for Wessuc argues that the case is of enhanced importance to his client for the additional reason that his client is, functionally, not insured for losses of this nature, whereas both the defendant and the other third party are.
[18] As to conduct that tended to shorten or lengthen unnecessarily the duration of the proceeding, Wessuc argues that the plaintiff misled her expert by failing to disclose adverse water testing results until the eve of trial. She provided her expert with only one test result, dated August 16, 2004, showing 0 e. coli. and 0 total coliform. However, tests were also done by the plaintiff on September 2, 2004 and August 11, 2005. While both results showed e. coli. readings of 0, they revealed total coliform counts of >80 in the first sample and 22 in the second, both of which meant that there was “significant evidence of bacterial contamination”, such that the water “may be unsafe to drink”.
[19] Had this information been disclosed earlier, her expert may well have had a different opinion since, in arriving at his conclusions, he had relied on her assertion that additional water analysis was conducted between August 2004 and August 2007 which reportedly revealed no evidence of bacteriological contamination.
[20] The plaintiff’s explanation is that she did not remember ever getting test results that high. She said she had asked the County for all of their water records the week before the trial was to commence, and was told all of her water records were missing. When she returned a few days later, she was provided with a pile of documents, which included the two reports just discussed.
[21] On the evidence I am not prepared to find that the plaintiff intentionally misled her expert. However, it is fair to say that she was not as diligent as she should have been in ensuring that her expert was provided with all available test results.
[22] The next relevant factor is a party’s denial of or refusal to admit anything that should have been admitted. Here, both sides had expert witnesses who told them their position was correct. While I found that the science supported the experts called by the third parties, and rejected the expert opinion offered by the plaintiff’s expert, it cannot be said that she acted unreasonably in relying upon that opinion.
[23] Ultimately an award of costs should represent a reasonable amount that the unsuccessful party should pay, rather than an exact measure of the actual costs incurred by the successful party. A costs award must be within the reasonable expectations of the unsuccessful party in order to preserve access to justice.
[24] The defendant Shaw incurred fees in the total amount of $26,564.40 plus HST, based on a partial indemnity rate of $188 per hour. The actual rate was $285 per hour. Disbursements were $535.01. However, he is prepared to restrict his claim to fees of $20,000 plus HST of $2,600, plus disbursements of $531.01.
[25] The third party Rutherford incurred total costs of $71,340.37 defending the action, consisting of $49,251.50 in fees, $5,992.50 in GST and HST, and $16,096.37 in disbursements. The largest disbursement was for its expert, who proved to be a key witness at trial. On a partial indemnity basis, Rutherford has reduced its claim to $40,000, consisting of $24,000 in fees and $16,000 in disbursements.
[26] The third party Wessuc incurred total costs of $91,895.42, consisting of fees of $78,494, disbursements of $3,549.24 and taxes. However, a portion of those costs related to an unsuccessful motion for summary judgment brought by Shaw, which accounted for $9,500.50 in fees and $1,250.06 in taxes plus disbursements. The balance remaining is $78,947.74.
[27] Of that, Wessuc claims, on a partial indemnity basis, fees of $55,000, disbursements of $2,700.53 and HST of $7,150, for a total claim of $64,850.53.
[28] The plaintiff responds to Shaw’s claim by conceding that he should recover costs on a partial indemnity basis. However, those costs should be reduced to reflect the time spent on his unsuccessful motion for summary judgment, and therefore submits that an appropriate award is $20,000 all inclusive.
[29] With respect to the third party Rutherford, the plaintiff argued that if they are to be paid by the plaintiff and not by Shaw, they should mirror the costs awarded to Shaw.
[30] As to the third party Wessuc’s claim, the plaintiff argues that the costs as claimed are outside of the reasonable expectations of the parties, and are disproportionate to the costs claimed by Shaw. If costs as claimed by Wessuc are to be awarded, the plaintiff submits that she be liable only for a costs award mirroring the award to Shaw, and that Shaw pay any balance.
[31] The costs claimed by each of the defendant and the third parties are not, in and of themselves, unreasonable, had they been the only successful party to be receiving an award of costs. However, as I have already noted, costs must be proportionate to the amount in dispute, and must be within the reasonable expectations of the parties. Those principles must be applied to the totality of the costs claimed by the three successful parties, given that they will be paid by one party alone.
[32] It is regrettable that the defendant and each third party had to be represented at trial by a separate lawyer, and that no arrangement was made whereby one lawyer could, in effect, carry the ball for all of them. As noted at the outset, the essential factual dispute to be litigated was between Wessuc and the plaintiff. It appears that, at one point, discussions were underway whereby Shaw would be released from the action, leaving the third parties to carry the defence. On December 20, 2012, Wessuc advised that they would consent to the dismissal of the action against Shaw, but would not indemnify or assume the liability of Shaw from that point forward. Their counsel wrote:
The problem in this case is that the entirely of the Plaintiff’s case flows through your client. The Plaintiff has failed to name any other party as liable, so while my client will consent to the dismissal against your client, it cannot and will not assume your client’s liability for tort.
That is my client’s position and no further persuasion will alter it.
[33] I do not find that to be a reasonable position. As already noted, Shaw had nothing to do with the application of biosolids other than signing his name to the application form signifying his consent. He did nothing wrong, and could only be found liable if Wessuc had negligently applied the biosolids. If the court had found that to be the case, liability would have flowed through to Wessuc, and Wessuc would have been required to indemnify Shaw. There was, therefore, nothing to be lost by releasing Shaw from the action and assuming Shaw’s potential liability. There would, however, have been a considerable savings in costs.
[34] Similar comments apply to the third party Rutherford. Any liability that it might have attracted for the negligent application of biosolids would have flowed through to Wessuc.
[35] It is also disturbing that the only Offer to Settle came from Shaw, and it offered no damages at all but merely a proposal for dismissal of the action without costs. As already noted, this case primarily involved the replacement of the plaintiff’s well at a cost of less than $20,000. It was, despite the inflated numbers in the Statement of Claim, a modest case. The practical realities of litigation, well known to litigation counsel, are that even if a claim is successfully defended, their client will still end up considerably out of pocket after a trial by reason of the difference between partial indemnity costs and the actual costs incurred. For that reason, it is common for modest cases to be disposed of by an “aggravation payment”, which in most cases leaves the party making the payment better off financially than if they had gone to trial and won.
[36] I would have thought that, among the defendant and the two third parties, an aggravation payment from each of them would have gone a long way toward resolving this case. Whether it actually would have done so is unknown. What is known, though, is that they instead chose to play hardball, and did not make an Offer to Settle to pay even one cent toward the plaintiff’s claim. This left the plaintiff with no choice but to either walk away or have a trial. Given that her expert was telling her that she had a case, it was not unreasonable for her to have proceeded. The result was a trial that continued over six days where, in the end, everybody lost once costs are taken into account.
[37] Considering all of the above, I find that a reasonable total amount for the unsuccessful plaintiff to pay in costs is $70,000, inclusive. This will be apportioned as follows: the defendant Shaw: $17,000; the third party Rutherford: $23,000; and, the third party Wessuc: $30,000. To explain this allocation, Rutherford has received more than Shaw due to the disbursements incurred in retaining its expert. Wessuc has received more than the other two parties because it did more of the “heavy lifting” in defending the action, and thereby incurred more costs.
“T. A. Heeney R.S.J.”
T. A. Heeney R.S.J.
Released: November 29, 2016
CITATION: Marshall v. Shaw, 2016 ONSC 7436
COURT FILE NO.: 225/07
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JANICE MARSHALL
Plaintiff
– and –
WAYNE HAROLD SHAW
Defendant
– and –
RUTHERFORD FARMS LIMITED and WESSUC INC.
Third Parties
REASONS FOR JUDGMENT ON COSTS
HEENEY R.S.J.
Released: November 29, 2016.