2395446 Ontario Inc. v. King’s & Queen’s Custom Homes Inc., 2016 ONSC 8104

CITATION: 2395446 Ontario Inc. v. King’s & Queen’s Custom Homes Inc., 2016 ONSC 8104

COURT FILE NO.: CV-15-540783

DATE: 2016-12-28

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 2395446 Ontario Inc. and Nikolay Chsherbinin, Plaintiffs/Moving Parties

AND:

King’s & Queen’s Custom Homes Inc. and Sula Kogan, Defendants/Responding Parties

BEFORE: Sean F. Dunphy J.

COUNSEL: Gregory Sidlofsky, for the Plaintiffs/Moving Parties Benjamin Salsberg, for the Defendants/Responding Parties

HEARD: In Writing

COSTS ENDORSEMENT

[1] The defendants successfully defended this motion for summary judgment made in the context of an action brought under the Simplified Procedure of Rule 76 of the Rules of Civil Procedure. I dismissed the plaintiff’s action and requested written submissions on costs. I have received and reviewed the parties’ submissions on costs.

[2] The amount claimed by the plaintiff unsuccessfully was approximately $50,000. The costs expended here were out of proportion to the amount at issue. This dispute appeared to me to have spiraled into one of those proverbial “matter of principle” cases.

[3] The defendant has submitted an Outline of Costs claiming partial indemnity costs of $23,974.04 inclusive of HST and disbursements on a partial indemnity basis and $29,669.24 on a substantial indemnity basis (from the time of a settlement offer with partial indemnity calculated before).

[4] The plaintiff has not submitted his own Outline of Costs but has taken issue with the reasonableness of the defendants’ claimed costs. Among other reasons for taking this position, the plaintiff notes the failure of the defendants to abide by the agreed timetable for the motion, the extremely late delivery of an affidavit of documents and the defendants’ decision to conduct an examination of a non-party witness resulting in evidence of no material value to the hearing. The conduct of the defendants has, in the plaintiff’s submission, increased costs and this should be recognized in any costs award. Further, although the plaintiff did receive an offer to settle that proved advantageous, it was received after most of the pre-hearing steps had already been undertaken and should be given little weight. Having regard both to the amounts at issue and the principles of assessing costs on simplified procedures matters, the plaintiff suggests that $10,000 would be a reasonable amount of costs to order.

[5] The defendants respond that the case timetable had been set without accounting for the individual defendant’s previously planned extended absence out of the country by reason of a miscommunication on her counsel’s part. As soon as counsel became aware of it, he took the initiative of scheduling a new CPC case conference to deal with it. There is no evidence that any actual increase in costs resulted from this one miscommunication.

[6] I agree that the defendants were forced to respond to a large variety of issues raised by the plaintiff, many of which were clearly overblown or frivolous. This expanded the time needed to respond and ran up costs. On the other hand, the defendants took the decision of examining a non-party witness and delivered their affidavits of documents quite late in the process. This added needless costs to the process without advancing it materially to resolution.

[7] The defendants must bear some responsibility for the relatively high proportion costs incurred bear to the amount at issue. Some adjustments on this account are clearly warranted. There was insufficient attention paid to the principles of proportionality and reasonableness exhibited in this litigation by both sides. That is not a fault that I lay solely at the defendants’ feet by any stretch, but the needless examination cost and late production of documents warrants at least some weight when assessing the defendants’ costs.

[8] I turn now to consider the appropriate scale. The defendants claim substantial indemnity costs at a rate of $600 per hour compared to a partial indemnity rate claimed of $360. The “substantial indemnity premium” claimed here amounts to approximately $5,040 having regard to the 21 hours of post-offer time sought to be charged out at the higher rate ($5,695 including HST).

[9] The defendants appear to be claiming full indemnity costs after the date of the settlement offer instead of substantial indemnity costs. Substantial indemnity costs are fixed by the Rules of Civil Procedure at 1.5 times partial indemnity costs, implying a substantial indemnity rate of $540 per hour based on the $360/hr partial indemnity rate claimed. Recalculating the premium at this rate, the substantial indemnity premium would be $4,271 (including HST).

[10] The defendants suggest three factors that might motivate me to consider a higher than partial indemnity scale of costs here. Firstly, the plaintiff conducted the litigation in a fashion that elevated expenses. Secondly, the plaintiff rejected a settlement offer that might have avoided all of this. Thirdly, the plaintiff showed a level of tactical vindictiveness in pursuing Ms. Kogan personally with little realistic basis for doing so.

[11] The plaintiff counters by referencing the failures of the defendants to cooperate in getting the matter heard efficiently necessitating two attendances at CPC and the somewhat ragged witness examinations due in part to the defendants’ delay in producing an affidavit of documents, a factor that reduced the examination of the plaintiff largely to an exercise of introducing the defendants’ documents into the evidentiary record due to the failure to have produced the affidavit of documents earlier. Ms. Kogan was the sole director and officer of the company and her addition as a party added no costs to the process. As well, the plaintiff claimed a reasonable basis to have added her on the wording of the contract.

[12] On the question of adding Ms. Kogan as a personal defendant, the mere fact that a corporation is small and has a single director and officer does not warrant the automatic discarding of the corporate personality in favour of pursuing the director and officer personally. The pursuit of Ms. Kogan personally was without foundation and ought not to have been done. This is, in my view, a factor that I may take into account among others in assessing costs whether or not it resulted in a measurable change in the costs incurred by either side.

[13] I have determined that $22,500 all inclusive is a fair and reasonable award of costs in favour of the successful defendant in this case and I so order. My award is a hybrid between what I would have awarded on a partial indemnity basis throughout and what I would have awarded had I assessed substantial indemnity costs after the date of the offer (using the $540/hr rate). It reflects some credit for an advantageous settlement offer but I have made downward adjustments to reflect the contribution of the defendants to the cost-inefficient manner in which the litigation was undertaken as regards to examinations and production of documents while recognizing the plaintiff’s negative contributions to the overall process. An award of costs must be reasonable in all of the circumstances and cannot be reduced to a simple mathematical exercise.

[14] The plaintiff is ordered to pay the defendants’ costs of the proceeding that I fix at $22,500.

S.F. Dunphy J.

Date: December 28, 2016