CITATION: Emmott v. Your Community Realty Inc., 2016 ONSC 7446
COURT FILE NO.: CV-10-098973
DATE: 2016-12-02
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
RANDI EMMOTT
Plaintiff
– and –
YOUR COMMUNITY REALTY INC. c.o.b. as ROYAL LEPAGE YOUR COMMUNITY REALTY
Defendant
Gianfranco G. Piccin for the Plaintiff
Adam Marchioni for the Defendant
- and -
THE FAIRFIELD CLASSIC COLLECTION LIMITED and PAUL F. ANISMAN
Third Parties
Robert B. MacDonald for the Third Parties
HEARD: October 31, 2016
Ruling on Costs
Boswell J.
OVERVIEW
[1] A real estate deal started to go sideways when the purchaser failed to come up with a $300,000 deposit. The purchaser’s agent – the plaintiff in this action – put up $100,000 of her own money to keep the deal alive. When the transaction ultimately failed, the plaintiff sought her money back from the listing broker. But the broker had already given the money to the vendor.
[2] The plaintiff sued the broker, seeking to recover her $100,000. The broker added the vendor and its principal as third parties.
[3] The third parties defended the main action as well as the third party claim. Following a pre-trial conference, they moved for summary judgment in both proceedings. The plaintiff capitulated and agreed to a dismissal of the action. Both the main action and third party claim were dismissed on consent on October 12, 2016. The only live issue remaining is that of costs.
[4] The third parties seek their costs against the defendant, fixed on a substantial indemnity basis. The defendant seeks its costs against the plaintiff on a partial indemnity basis and argues that the plaintiff should also be responsible for the third parties’ costs. The plaintiff accepts that it should pay the defendant’s costs, but says they should be fixed at a modest sum given the limited steps taken to date in the proceedings. The plaintiff further submits that the defendant should pay the third parties’ costs.
[5] In view of the parties’ positions, the following issues are to be determined by the court:
(a) Liability for the third parties’ costs;
(b) The quantum of costs payable to the third parties; and,
(c) The quantum of costs payable by the plaintiff to the defendant.
GOVERNING PRINCIPLES
[6] The award of costs is governed by section 131 of the Courts of Justice Act, R.S.O. 1990 c. C.43 and by Rule 57.01 of the Rules of Civil Procedure. Section 131 provides for the general discretion to fix costs. Rule 57.01 provides a measure of guidance in the exercise of that discretion by enumerating certain factors that the court may consider when assessing costs. Those factors include, but are not limited to the following:
(a) the complexity of the proceeding;
(b) the importance of the issues;
(c) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(d) whether any step in the proceeding was improper, vexatious or unnecessary or taken through negligence, mistake or excessive caution;
(e) the principle of indemnity; and,
(f) the concept of proportionality, which includes at least two factors:
i. the amount claimed and the amount recovered in the proceeding; and,
ii. the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed.
[7] The Court must also be mindful of the purposes that costs orders serve. As Perrell J. summarized in 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (S.C.J.), at para. 10:
Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements (internal citations omitted).
[8] While the weight to be accorded to different factors will vary from case to case, there are certain overarching principles that apply when fixing any award of costs and these are fairness and reasonableness: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.); and Moon v. Sher (2004), 246 D.L.R. (4th) 440 (C.A.). Embedded in the principle of reasonableness is the concept of proportionality: see Rule 1.04(1.1).
[9] In fixing liability for costs, the general rule is that costs follow the event and will be awarded on a partial indemnity basis: Bell Canada v. Olympia & York Developments Limited et. al. (1994), 17 O.R. (3d) 135 (C.A.). In special circumstances, costs may be awarded on a higher scale, but those cases are exceptional and generally involve circumstances where one party to the litigation has behaved in an abusive manner, brought proceedings wholly devoid of merit, and/or unnecessarily run up the costs of the litigation: Standard Life Assurance Company v. Elliott (2007), 86 O.R. (3d) 221 (S.C.J.).
[10] The phrase “follow the event” generally means that costs are awarded to the successful party. Determining the successful party in a one plaintiff/one defendant case is usually straightforward. The determination becomes more difficult when additional parties are involved in the litigation.
[11] Here, the plaintiff was not successful, having capitulated at the summary judgment motion. But the plaintiff did not sue the third parties; that step was taken by the defendant. The defendant was clearly successful in the main action, but it is not so easy to say who succeeded on the third party claim. It was no longer litigated given the termination of the main action.
[12] In 1985, Justice Beverley McLachlin, as she then was, addressed the issue of whether a third party’s costs should be borne by the plaintiff or by a defendant who was absolved of liability in the main action (in other words, the same situation present here). The case was Milina v. Bartsch, [1985] B.C.J. No. 2789 and the learned justice held as follows, at para. 4:
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, [1974] 2 W.W.R. 84 at 85-86. As stated in R. D. Bristowe Ltd. v. Bennett & White Const. Co. (1958), 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 . . .
[13] McLachlin J. went on to hold that there may be cases where fairness requires that the normal rule not be followed. She described a short list of situations that might call for an order awarding a third party’s costs against a plaintiff:
(a) Where the main issue litigated was between the plaintiff and the third party;
(b) Where the third party was brought or kept in the matter by reason of the act or neglect of the plaintiff;
(c) Where the case involves a string of contracts in substantially the same terms for the sale of goods; or,
(d) 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.
[14] The decision in Milina v. Bartsch has been followed in Ontario on numerous occasions, including in Bonello v. Gores Landing Marina (1986) Ltd., 2016 ONSC 6674; Cohen v. Brin 2013 ONSC 1302 (Ont. Master); Greater Toronto Airports Authority Assn. Inc. v. Foster Wheeler Ltd., 2011 ONSC 3377; and Canada (Attorney General) v. Bitove Corp., [1996] O.J. No 682 (Gen. Div.).
[15] Justice McLachlin’s list is not exhaustive, of course, of circumstances where a plaintiff may be ordered to pay a third party’s costs. The awarding of costs is a discretionary function of the trial judge. The exercise of the discretion will always depend on the circumstances of the particular case: Sanofi Pasteur Ltd. v. UPS SCS Inc., 2015 ONCA 88.
POSITIONS OF THE PARTIES
[16] The third parties seek their costs against the defendant fixed, on a substantial indemnity basis, at $57,592.22. In terms of liability, the third parties rely on the decision in Milina v. Bartsch and argue that there are no circumstances present here that would justify a departure from the usual rule that a third party’s costs will be paid by the defendant who brought them into the litigation. In terms of quantum, the third parties submit that the defendant asserted fraud-like allegations against them which had no merit. They argue that cases of unfounded fraud have historically justified substantial indemnity costs.
[17] The defendant seeks its partial indemnity costs against the plaintiff fixed at $43,606.70. It objects to the assertion that it should cover the third parties’ costs. While it accepts that Milina v. Bartsch is the governing authority, it argues that the main action and third party action were inexorably tied together. It submits that it essentially had no choice but to add the third parties – something that was altogether foreseeable by the plaintiff.
[18] In terms of quantum, the defendant asserts that there are no factors present here that would warrant an award of substantial indemnity costs, either in relation to the main action or third party claim. It says that its allegation of fraud-like conduct was conditional and, in any event, not pursued. Moreover, there was never a determination of the third party claim on its merits.
[19] The plaintiff joins the third parties in asserting that the third parties’ costs should be paid by the defendant. It denies that it was inevitable that the third party claim would be issued. In fact, it argues that there was no need to advance a third party claim in the circumstances of this case in order to resolve the issues between the plaintiff and the defendant. There was, it is submitted, no nexus between the issues in the main action and those raised in the third party claim.
[20] In terms of quantum, the plaintiff suggests a costs award in favour of the defendant in the amount of $7,500, arguing that anything higher is disproportionate and not rationally connected to the amount of work done on the file.
DISCUSSION
The Pleadings
[21] In order to properly consider the allocation of liability for costs, particularly within the Milina v. Bartsch framework, it is necessary to take a moment to examine the content of the pleadings.
[22] The plaintiff’s claim was commenced on April 13, 2010. She sought a declaration that an agreement of purchase and sale between Dieter Wehr as purchaser and The Fairfield Classic Collection Limited (“Fairfield”) is null and void; the return of $100,000 provided by the plaintiff to the defendant in connection with the purchase and sale transaction; and a declaration that the sum of $100,000 provided by the plaintiff to the defendant constituted trust funds held by the defendant for the benefit of the plaintiff.
[23] Interestingly, neither Dieter Wehr nor Fairfield were added as parties to the claim, even though their interests were directly implicated in the relief requested.
[24] The body of the claim explained how the plaintiff was a real estate agent representing Mr. Wehr in the purchase of a residential property in King Township. The named defendant was the listing broker of the property. Fairfield was the builder and vendor of the home.
[25] The agreement of purchase and sale required Mr. Wehr to pay a $300,000 deposit. He failed to do so within the required time. In an effort to keep the deal alive, the plaintiff delivered the sum of $100,000 of her own money to the defendant. She described this payment as a “good will gesture” and not a deposit.
[26] Ultimately Mr. Wehr never provided the $300,000 deposit and the deal fell apart. The plaintiff asked for her $100,000 back but it was never provided. The defendant informed her that it had paid the $100,000 to Fairfield in accordance with a written direction provided to it by Fairfield.
[27] Royal Lepage filed a statement of defence on May 11, 2010. It denied any liability to the plaintiff. It alleged that the plaintiff delivered an envelope to its office containing a $100,000 bank draft without any indication on its face what it was in relation to. The defendant deposited the money to its general account. Subsequently, it received a direction from its client, Fairfield, to release the $100,000 to it. It complied with the direction.
[28] Royal LePage issued a third party claim on August 30, 2011. The defendants were Fairfield and its president, Paul F. Anisman. Royal LePage sought contribution and indemnity for any money it was required to pay to the plaintiff in the main action; $100,000 in damages for misrepresentation and conversion; and a declaration that the $100,000 provided by Royal LePage to the third parties were trust funds held by the third parties for the benefit of Royal LePage.
[29] The body of the third party claim recited how the $100,000 had been paid by Royal LePage to Fairfield and went on to add, at para. 10:
The Defendant states that if the monies delivered to the builder pursuant to the Direction received by it were converted by the builder to its own use, then such conversion was improper and in breach of trust and the Defendant claims return of the aforesaid funds to it.
[30] The third parties defended both the main action and the third party claim. In the defence to the main action, the third parties characterized the $100,000 received as a partial deposit that was forfeited when the transaction failed to close. The third parties also pleaded the provisions of the Limitations Act, 2002, c. 24, Sch. B. The assertion was that the deposit was forfeited on May 9, 2005 and the plaintiff’s claim was not commenced until almost five years later. The third parties’ position was that the claim was statute-barred after two years.
[31] In the defence to the third party claim the third parties described the claim against Mr. Anisman for misrepresentation and conversion as “scandalous” and declared their intent to seek substantial indemnity costs. The balance of the defence to the third party claim mirrored the defence to the main action.
Liability for the Third Party’s Costs
[32] I accept that the ruling in Milina v. Bartsch is the governing authority. In accordance with its principles, in the normal course Royal LePage would be responsible for the costs of the third parties.
[33] Royal LePage argues, however, that this case falls squarely within one of the exceptions to the general rule identified by Justice McLachlin. In particular, they say that in this case the third party proceedings followed naturally and inevitably from the institution of the plaintiff's action, in the sense that the defendant had no real alternative but to join the third parties.
[34] I cannot say that Royal LePage had no alternative but to join the third parties. It could have made a stand on the limitations issue, or on the characterization of the $100,000 payment as a deposit, both reasonable defences in the circumstances.
[35] On the other hand, this case includes the peculiar feature where the plaintiff has sought relief against the third party, Fairfield, without actually naming it as a party defendant. Not only that, but the plaintiff was well aware that her $100,000 had been paid to Fairfield. Royal LePage was just the middleman. A reasonable plaintiff would have undoubtedly anticipated that Royal LePage would turn to the ultimate recipient of the funds for recovery. In my view, this is a clear case where the third party claim naturally and inevitably flowed from the institution of the main action. Indeed, I believe one would be hard pressed to find a clearer case.
[36] In the result, I find that this is an appropriate case to depart from the normal rule and I find that the plaintiff is liable for both the defendant’s costs and those of the third parties.
The Third Parties’ Costs
[37] The usual award of costs is on a partial indemnity scale. The third party seeks substantial indemnity costs on the basis of what it characterized as an allegation of fraud-like conduct.
[38] I am not persuaded that costs should be awarded on an elevated scale. Here are the reasons why:
(a) I have just fixed liability for the third party’s costs against the plaintiff. The plaintiff made no allegations of fraud against either third party;
(b) The defendant’s allegation of fraud-like behaviour was conditional. It provided that if it was found that the builder converted the $100,000 to its own use then such conversion was improper. I read this provision as a perhaps poorly worded attempt to say nothing more than that if the plaintiff is successful in her pursuit against Royal LePage, then the $100,000 should be repaid to Royal LePage by the third parties;
(c) In any event, the allegation of fraud-like conduct was not pursued nor was it ultimately adjudicated upon; and,
(d) Finally, I accept that unsuccessful allegations of fraud do frequently result in elevated costs awards: A-C-H International Inc. v. Royal Bank of Canada, [2005] O.J. No. 2048 (C.A.). But it is not the case that the mere assertion of fraud automatically leads to such a result: Royal Bank of Canada v. Gentra Canada Investments Inc., [2000] O.J. No. 3028 (S.C.J), appeal dismissed, [2001] O.J. No. 2344 (C.A.). All the circumstances must be considered. The circumstances here do not, in my view, justify substantial indemnity costs.
[39] The third parties seek $57,592.22 on a substantial indemnity basis. On a partial indemnity basis, their recoverable costs are said to be $39,220.35. These costs are consistent with the partial indemnity costs claimed by the defendants, which are $43,606.70.
[40] The plaintiff submitted that the defendant’s costs should be fixed at $7,500 and, presumably, the same figure would apply to the costs of the third parties, for the reasons advanced by the plaintiff. Those reasons include the simplicity of the action; the straightforward pleadings; the limited discoveries; the short pretrial and the motion for summary judgment that was ultimately conceded.
[41] The plaintiff has not produced its own dockets or bill of costs despite arguing that the defendant and third parties have spent unreasonable sums in defending the litigation. As Winkler J., as he then was, noted in Risorto v. State Farm Mutual Automobile Insurance Co., [2003] O.J. No. 990, an unsuccessful litigant is not required to submit its own counsel’s dockets, but they would be helpful to the court in assessing some of the factors enumerated in Rule 57. Without them, the unsuccessful litigant is waging an “attack in the air”.
[42] The “attack in the air” reference is particular fitting in this instance. The suggestion that $7,500 is a reasonable award of costs in the circumstances of this case is nothing more than a Hail Mary pass. No reasonable party, in this day and age, would proceed this far in a Superior Court action with the expectation that her exposure to costs was less than $10,000. Instead, she would, or should, expect that her exposure was in the tens of thousands.
[43] In any event, I must still consider those factors enumerated in Rule 57 as well as the overarching principles of fairness, reasonableness and proportionality.
[44] I make the following findings:
(a) The issues raised in the case were of modest complexity;
(b) The amount at stake, $100,000, is not insignificant, but in today’s world, it is still a small enough number that it is difficult to litigate over it in an economically efficient way;
(c) The pleadings were straightforward;
(d) Documentary disclosure was minimal;
(e) Discoveries were brief;
(f) One relatively brief judicial pre-trial was held; and,
(g) A motion for summary judgment was prepared and responded to. This motion was, in my view, the most significant aspect of the proceeding.
[45] As a general rule, the Court will not overly analyse counsel’s docketed time. As Nordheimer J. noted in Basedo v. University Health Network, [2002] O.J. No 597 (S.C.J.), “it is not the role of the court to second guess the time spent by counsel unless it is manifestly unreasonable in the sense that the total time spent is clearly excessive or the matter has been overly lawyered.”
[46] At the same time, the assessment of costs is not simply a mechanical exercise, where the court merely applies an hourly rate to the number of hours claimed. Any award must reasonably reflect the amount warranted by the proceedings: Gratton-Masuy Environmental Technologies Inc. (c.o.b. Ecoflow Ontario) v. Building Materials Evaluation Commission, [2003] O.J. No. 1658.
[47] While I do not intend to parse the Cost Outlines filed by the defendant and the third parties on a line-by-line basis, I do have some broad concerns about the amount of lawyer-hours claimed by each of them for what I consider a relatively straightforward case.
[48] For instance, in the case of the third parties, there wasn’t a single step in the proceedings that did not involve the time of multiple lawyers and/or clerks. In my view, this proceeding did not warrant that level of attention. This is particularly apparent in relation to the motion for summary judgment. There were over 120 hours of work claimed in relation to that motion which, ultimately, was never argued. The motion was undoubtedly important and, as I have found, it was the most significant aspect of this case. But I find that the value attributed to it is disproportionate.
[49] In the case of the defendants, over 52 hours were claimed in relation to the summary judgment motion. I find that too, to be disproportionate.
[50] In view of the modest complexity of the case and the relatively limited number of steps involved, I fix the third parties’ costs at $20,000 on a partial indemnity basis, plus HST and disbursements of $6,705.62.
The Defendant’s Costs
[51] The Cost Outlines of the defendant and third parties were not dissimilar. In my view it is appropriate that there be some parity in the costs awarded. For the reasons I set out above, I fix the defendant’s costs at $20,000, plus HST and disbursements fixed at $866.19.
Boswell J.
Released: December 2, 2016