Introduction

[1] Settling costs at the best of times is a bit of a mug’s game. Settling costs several months after the release of the operative judgment is like trying to reconstruct an easily forgotten or suppressed experience. It is simply hard to remember all the details of the events that unfolded at the time of trial. The task is made all the more curious when asked to decide costs for a case that is now the subject-matter of an appeal and a cross-appeal. The exercise might prove academic in the final analysis.

Background

[2] At its simplest, this was, as I suggested in my Reasons for Judgment, a wrongful dismissal action.[^1] There were added complications to the case engendered by the fact that: (1) the plaintiff alleged that the defendant acted in bad faith in the manner in which bonuses were historically awarded during her employment; and (2) the defendant led evidence and argued that, at the time of termination, it offered the plaintiff a position of alternative employment which she ought to have taken as mitigation.

[3] In my view, there are several discrete issues that touch the issue of costs and the ultimate exercise of my discretion in awarding the same: (1) the offers to settle; (2) the suggested divided success and a request for a distributive costs order; (3) the claim of bad faith; and (4) the operation of Rule 57. I will deal with each issue but briefly.

(1) Offers to Settle

[4] The defendant made several offers to settle throughout the course of the litigation, at least two of which were purportedly made in accordance with Rule 49. Several others were intended to entice the plaintiff to rethink her position as certain benchmark events were to occur in an effort to avoid the ever increasing costs and fees that were continuing to mount over the almost seven years of litigation.[^2]

[5] This issue is governed by Rule 49.10(2) and (3) of the Rules of Civil Procedure,[^3] which provides as follows:

49.10 (2) Defendant’s offer – Where an offer to settle,

(a) is made by a defendant at least seven days before the commencement of the hearing;

(b) is not withdrawn and does not expire before the commencement of the hearing; and

and the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless the court orders otherwise.

(3) Burden of proof – The burden of proving that the judgment is as favourable as the terms of the offer to settle, or more or less favourable, as the case may be, is on the party who claims the benefit of subrule (1) or (2).

[6] The defendant had two offers that were arguably outstanding at the commencement of trial. The earlier offer, delivered in March 2010, did not come close to matching or bettering the amount of net damages awarded to the plaintiff. It is, in my view, of no moment.

[7] Because of the manner in which it was framed, the second offer, made in February 2016, requires me to consider extraneous ‘evidence’ to determine if the amount equaled or bettered the award at trial. Assuming, without deciding, that I am permitted to look at the covering letter that has further details of the amount offered for claim and costs, which is not broken out in the formal offer itself, I am not persuaded that the defendant succeeds on this point. The offer for damages does not equal or better the amount awarded.

[8] Furthermore, the offer fell into the category of a ‘declining’ or ‘diminishing’ offer, which made its application to the Rule a virtual impossibility. In my opinion, declining offers, while designed to give the offeree some pause for thought if the offer is not accepted with dispatch, have the tendency of backfiring, as it did in this case.

[9] I would further observe that the defendant was simply too cute by half in using this form of offer, when it was known from all the correspondence filed before me in this proceeding, including on the issue of costs, that the plaintiff was intent on pursuing her ‘bad faith’ claim. This meant that any tinkering with the amount for the ‘wrongful’ aspect of the claim was, by definition, fraught with peril.

[10] The folly of this offer is underscored by the fact that the defendant had received an opinion from its solicitors at the time of the proposed ‘termination’ that its exposure on damages for wrongful dismissal could well exceed the ultimate award. But for the bargaining course it chose to follow at the time of the plaintiff’s constructive dismissal, the defendant was seemingly prepared to pay the plaintiff more than the February 2016 offer, which made its decision to deliver a declining offer curious.

[11] I conclude, therefore, that the two offers described above do not qualify as a Rule 49 offer, but may, however, qualify for consideration under Rule 57.

(2) Divided Success and Distributive Costs

[12] In its costs submissions, the defendant argued that the costs award should proportionately reflect the amount of trial time that was spent on the plaintiff’s unsuccessful allegations of bad faith. Bad faith and its present incarnation, the breach of honest performance recently discussed in Bhasin v. Hrynew[^4], was an issue at trial that cannot be as clearly delineated as the defendant argues. It was, admittedly, a discrete and separate issue that the plaintiff and her counsel rode to the bitter end, notwithstanding the doubts I repeatedly expressed throughout the course of the trial, and upon which I had to render decision.

[13] However, the evidence in respect of that issue was, to some extent, relevant to at least one of the central defences, namely whether the plaintiff was obliged to accept the offer of alternative employment by way of mitigation. In that regard, it was necessary for me to hear evidence, perhaps more than was required, about the bonus plans, their genesis, implementation, and the manner in which amounts were meted out in any given year.

[14] I would observe that the evidence was also relevant to my assessing the amount of reasonable notice since I had to hear and understand where the plaintiff fit in the overall “partnership” structure. And indeed, as part of my task, I was obliged to make an assessment of damages for the admitted constructive dismissal, including an amount in respect of the two levels of bonus, which could not have been made without regard to the various financial matrices associated with the compensation system and formulae.

[15] While no doubt this issue occupied significant trial time, and probably inordinate time ramping up to trial, the plaintiff had a theory of her case which was not dispelled until trial because, strategically or otherwise, the defendant witness on discovery was John Bellamy, and not David Roland. There was a marked difference between these witnesses, and hence the defendant’s position was only seen in the light of day, as it were, when David Roland testified at trial and persuaded me as to his thought processes on several issues, including his treatment of the plaintiff after she became ill.

[16] I would observe that the plaintiff grudgingly acknowledges that perhaps some amount should be deducted for the costs claimed in respect of this issue, which she suggests should be limited to 20%, an amount which I think is a tad too low.

[17] That said, I am not persuaded that this issue warrants a distributive costs award or that the defendant’s success on this issue should otherwise disentitle the plaintiff to her costs, absolutely. I believe the comments of the Court of Appeal in Wesbell Networks Inc. v. Bell Canada[^5] are most instructive:

We are of the view that the costs award cannot stand. The trial judge erred in focusing on individual issues in the litigation and disregarding the overall success achieved by Wesbell. … The general rule is that, absent exceptional circumstances, a successful party is entitled to its costs of a proceeding…

[18] While I agree that some deduction should be made in respect of this issue, and will endeavor to unscramble the evidentiary trial egg when considering the Rule 57 criteria, I am not persuaded the defendant’s argument on this issue carries the day.

(3) Bad Faith Argument and the Breach of Honest Performance

[19] The defendant argued that the plaintiff ought to be chastised, as it were, with an award of costs against her on a substantial indemnity basis for making “unfounded allegations of improper conduct.” Specifically, the plaintiff alleged, and to some extent sought to prove at trial, bad faith on the part of her employer’s historical distribution and allotment of bonuses.[^6] It was the defendant’s position that the allegations were seriously prejudicial to the character and reputation of the company and had to be vigorously defended.

[20] There is little doubt that serious allegations were levelled against the defendant starting with Mr. Goldman’s initial demand letter to his opening at trial, which on reflection was more than a little over the top. Regrettably, this is the manner in which some counsel practice, which, parenthetically, is not a method I would endorse nor countenance in any respect.

[21] However, when push came to shove at the trial, the plaintiff’s case was reduced to one of a breach of honest performance since the allegations of discrimination and those of a ‘human rights nature’ fell away. In my opinion, the decision of the Supreme Court of Canada in Hamilton v. Open Window Bakery Ltd. [^7] is of some moment in deciding this issue:

An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and-client costs, since not all such attempts will be correctly considered to amount to ‘reprehensible, scandalous or outrageous conduct.’

[22] I have no doubt that the breach of honest performance gambol will develop into something of a cottage industry until a court of appeal reigns it in. Ironically, I would observe that the decision in Bhasin did not change the law in respect of the performance of employment contracts which had long adopted the tests expressed by Cromwell J.

[23] While I personally think allegations of bad faith and breach of honest performance should not be levelled at defendants willy-nilly, there was some—not a lot—evidentiary basis for commencing suit with these allegations front and center because of the statements attributed to the plaintiff’s immediate supervisor during a performance review, as discussed in detail in the Reasons for Judgment. Whether this line of attack should have been pursued to final argument in light of the countervailing evidence put forward by the defendant through David Roland and in light of the observations I made during trial is another matter.

[24] Finally, the defendant carries on business in a rough and tumble industry and environment. I did not hear evidence, as I now recollect, that the allegations were prejudicial to the character and reputation of the defendant or any of the ‘partners’ who testified before me.

(4) Rule 57 Considerations

[25] I do not intend to reproduce Rule 57.01(1) or s. 131 of the Courts of Justice Act.[^8] In addition to the offers to settle that were made by the defendant in the years ramping up to the trial, including the ‘informal’ offer of $250,000 ‘all in’ made last February, I think the following issues should weigh in the mix in the proper exercise of my discretion, which I have borrowed, in part, from the defendant’s written argument:

(a) 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;

(b) the amount claimed and the amount recovered in the proceeding;

(d) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; and

(e) a party’s denial of or refusal to admit anything that should have been admitted.

[26] First, it is well-settled law that when fixing costs, the court does not engage in a scrutiny of every docket and every invoice claimed. Rather, it should attempt to fix an amount of costs that is fair and reasonable for the unsuccessful party to pay in the circumstances of the case.[^9]

[27] I am also mindful of the fact that the plaintiff recovered but a fraction of what she claimed, even absent her claim for damages for bad faith or breach of honest performance. That fact alone, as I observed in another case, is not dispositive of the issue.[^10] While not necessarily relevant to the issue of costs, the plaintiff may yet persuade the Court of Appeal that my method of calculating damages was in error, in which case she may well be awarded an amount in excess of the gross amount determined in the Reasons for Judgment.

[28] Furthermore, I do not propose to evaluate the forensic skills of plaintiff’s counsel which I found, at times, to be vexing if not frustrating as defendant’s counsel urges me to do. Leaving aside for the moment the fact that I thought he should have re-evaluated his position in respect of the bad faith argument after he closed his case, let alone after all the evidence was heard, I am not persuaded that his ‘style’ unduly lengthened the trial, as was suggested by defendant’s counsel. I believe I was able to keep him in check as he seemingly tended to wander in his questioning of witnesses.

[29] I would also observe that the bills of costs submitted by the parties are not so markedly different in terms of amounts claimed, making allowances for the differences in hourly rates and in the case of the defendant, the inclusion of amounts for in-house counsel and the involvement of others in the defendant’s law firm. This congruity suggests to me that the claim for costs now put forward by the plaintiff is not markedly inconsistent with the reasonable expectations of the combatants to the litigation.

[30] I cannot leave this portion of the analysis without observing that it is not unusual for positions to change as the litigation process continues. The defendant took the position prior to trial that the plaintiff had not been constructively dismissed, an issue which they smartly abandoned at the commencement of trial. That still left a whole range of ‘wrongful dismissal’ issues, including whether the offer of alternative employment was reasonable in the circumstances. These last mentioned issues occupied significant trial time.

Conclusion

[31] After reviewing the bills of costs and the submissions of counsel on the issues summarized above, and the informal offer to which I made reference, it is my view that a fair and reasonable award of partial indemnity costs should be fixed at $171,000 inclusive of HST.

[32] I am not, however, prepared to accede to the plaintiff’s request that she receive indemnification for the disbursements incurred on account of experts’ fees. In the first place, neither expert was called because I determined early in the trial, if not through discussions in the pre-trial/management sessions, that the evidence of the proposed experts did not satisfy the R. v. Mohan[^11] test of relevance and necessity. While some of the handiwork of Mr. Macaulay was admitted on consent, namely his tables, charts and graphs, I was not provided with a breakdown of the costs associated with the preparation of that material. I will, therefore, fix that portion of the cost of that material filed at $10,000, inclusive of HST, which sum will be recoverable from the defendant. The plaintiff will be entitled to recover, as well, the balance of disbursements plus applicable HST, without deduction, since none of those amounts claimed appear to be in issue.

[33] I will leave it to counsel to crunch the numbers, inclusive of disbursements, as set out above.

GANS J.

Date: December 1, 2016

[^1]: Evans v. Paradigm Capital Inc., 2016 ONSC 4286.

[^2]: The plaintiff made at least two offers to settle, neither of which fit into the calculus or the analysis having regard to the quantum sought.

[^3]: Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[^4]: Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494 [“Bhasin”].

[^5]: Wesbell Networks Inc. v. Bell Canada, 2015 ONCA 33 at paras. 21-22. See also the decision in William Allan Real Estate Co. v. Robichaud (1990), 1990 6884 (ON SC), 72 O.R. (2d) 595 (H.C.) at 615, additional reasons to 72 O.R. (2d) 595 (H.C.).

[^6]: 1175777 Ontario Ltd. v. Magna International Inc., [2007] O.J. No. 2549 (S.C.), at para. 32.

[^7]: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 26.

[^8]: Courts of Justice Act, R.S.O. 1990, c. C. 43.

[^9]: Boucher v. Public Accountants Council (Ontario) (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) at para. 24. See also Zesta Engineering Ltd. v. Cloutier (2002), 2002 25577 (ON CA), 21 C.C.E.L. (3d) 161 (C.A.) at para. 4.

[^10]: Jacobson v. Trace Sciences International Corp., [2001] O.J. No. 4603 (S.C.).

[^11]: R. v. Mohan, 1994 80 (SCC), [1994] 2 S.C.R. 9.

Evans v. Paradigm Capital Inc., 2016 ONSC 7500

Case Summary

Introduction

Background

Conclusion

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Expert Witnesses

Financial Outcomes

Issues

Statutory Provisions 3

Legal Tests 3

Legislation 2