CITATION: F.M. Hunt Construction Company v. Van Jaarsveld 2016 ONSC 8189
COURT FILE NO.: CV-12-0797
DATE: 20160827
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
F.M. HUNT CONSTRUCTION
COMPANY
Plaintiff
– and –
ISOLDE VAN JAARSVELD and
BARRY VAN JAARSVELD
Defendants
Neville C. Johnston and C. Ellis, for the Plaintiff
Michael D. Swindley, for the Defendants
HEARD at Brockville: 27 September 2016
COSTS DECISION
mew j. (ORALLY)
[1] In this construction lien action, the parties agreed shortly before the scheduled trial to refer the issue of quantum to a panel of arbitrators. The arbitrators returned an award of $120,521.66 in favour of the plaintiff. The arbitrators also awarded prejudgment interest in addition to that amount.
[2] The parties have returned to court to obtain a judgment which incorporates the arbitrators’ award and to resolve the issue of costs.
[3] Specifically, the parties ask the court to fix the plaintiff’s costs of the action including the cost of the arbitration.
[4] The parties have agreed the amount of disbursements payable to the plaintiff is $4,724.93 inclusive of HST.
[5] The plaintiff seeks fees of $88,525 plus HST of $11,508.25 for a total of $100,033.25. This is predicated upon a partial indemnity of scale up to the making of an offer of settlement on 21 December 2012, and substantial indemnity fees thereafter.
[6] At issue are the following:
a. the scale of costs, having regard to the effect of the plaintiff’s offer to settle of 21 December 2012 and in particular, whether the costs consequences of Rule 49.10(1) of the Rules of Civil Procedure are engaged; and
b. quantum of costs.
[7] Turning first then to the scale of costs issue. The plaintiff’s offer to settle, served on the 21December 2012, offered to settle, “the action and the counterclaim herein”, on the basis that the defendants, “shall forthwith pay to the plaintiff $125,000 together with costs to be agreed upon or assessed”.
[8] The offer to settle was silent on the issue of prejudgment interest.
[9] The plaintiff argues that a comparison between the offer and the amount recovered in the action can only be ascertained by adding to the $120,521.66 awarded by the arbitrators, the applicable amount of prejudgment interest either to the date of the arbitrators’ award or to today’s date, both of which calculations would yield a total greater than a $125,000.
[10] In support of its argument, the plaintiff relies upon the maxim inclusio est exclusion alterius, a canon of construction holding that to expressly include one thing implies the exclusion of the other, or of the alternative. Applying this principle to the offer which it made, the plaintiff says that an offer for an amount of money which makes specific reference to costs in addition should be interpreted as excluding from that amount of money any prejudgment interest which the sum would attract.
[11] The plaintiff concedes that, in the absence of specific reference to the accrual of prejudgment interest from the date of the offer, if its offer had been accepted say six months after it had been made, the plaintiff would not have had an enforceable claim to prejudgment interest on the sum of $125,000 from the date the offer was made.
[12] The defendants say that in order to compare the arbitration award to the offer to settle, the correct approach is to take the principal amount of the arbitration award and calculate the prejudgment interest that would have accrued to the date of the offer to settle. The result of that calculation is $121,317.89.
[13] Both parties referred in argument to the decision in Emery v. Royal Oak Mines (1995), 1995 7223 (ON SC), 26 O.R. (3d) 216 (Ont. Ct. Gen. Div.) as supportive of their arguments.
[14] In that case, the plaintiff served an offer to settle for $700,000 inclusive of prejudgment interest. Although the principal amount subsequently recovered at trial was less than that, after prejudgment interest calculated as at the date of the offer was factored in, the plaintiff’s recovery was held to have beaten the offer.
[15] In articulating the approach to be taken, Madam Justice Chapnik observed as follows:
In Mathur v. Commercial Union Insurance Company of Canada, (1988), 24 C.P.C. (2d) 225 at p. 227, 28 O.A.C. 55 (Div. Ct.), Chief Justice Parker determined that the proper approach in determining whether a party has beaten an offer to settle, is to consider the amount of the damages at trial, plus prejudgment interest to the date of offer as compared with an offer which is inclusive of prejudgment interest. The relevant date for this calculation is the date of the offer not the date of the judgment. The approach was followed by Mr. Justice Rosenberg in Merrill Lynch Canada Inc. v. Cassina (1992), 15 C.P.C. (3d) 264 (Ont. Gen. Div.).
[16] Both parties also urge, as a principle of interpretation, that in considering an offer, the context in which the parties were operating - or “the factual matrix” - needs to be considered. In Puri Consulting Limited v. Kim or Barristers PC, 2015 ONCA 727, van Rensburg J.A. states, at para. 28:
“The purpose of Rule 49 is to encourage parties to make reasonable offers to settle and to facilitate the early settlement of litigation”: Rooney (Litigation Guardian of) v. Graham (2001), 2001 24064 (ON CA), 53 O.R. (3d) 685 per Laskin J.A. at para. 45. When a party makes an offer to settle, the other party must give serious consideration to whether to settle by accepting the offer or to continue the litigation. Continuing litigation in the face of a reasonable offer can be risky. This is referred to in Rule 49.10 which sets out the cost consequences of the failure to accept an offer that the offeror betters at trial. Rule 49 “is a simple recognition that if an offer is accepted it should carry with it party and party costs of that date.”: Rooney, per Carthy J.A. at para. 31.
van Rensburg J.A. continues, at para. 29:
The respondent’s interpretation of the Offer, which interpretation was accepted by the motion judge, would mean that rather than acting as an incentive to encourage early settlement, the value of the Offer would decline over time as the parties approached their trial date and the appellant’s legal cost increased.
[17] Part of the context in Puri Consulting was an offer to settle for $50,000 in full and complete satisfaction of the plaintiff’s claim. The offer made no reference to costs. The defendant subsequently accepted the offer. The issue which arose was whether the plaintiff was entitled to recover costs in addition to the $50,000 specified in the offer. The timing of both the making and the acceptance of the offer were found by the Court of Appeal to be part of the factual matrix.
[18] Furthermore, the motions court judge was found to have erred by assuming that an offer to settle the “claim” necessarily meant an offer to settle all of the claims advanced in the plaintiff’s action, which included, in addition to a claim for damages, claims for interest and costs as separate items.
[19] In the present case, there is no room for doubt as to what the plaintiff was offering to settle. It was “the action and the counterclaim”. Following the approach taken by the Divisional Court in Mathur v. Commercial Union, the correct approach is to take the principal amount awarded by the arbitrators and calculate the prejudgment interest that had accrued on that amount up to the date of the plaintiff’s offer. That amount, $121,317.89, falls short of the principal amount which the plaintiff offered to settle for on 21 December 2012. Accordingly, the costs consequences of Rule 49.10(1) are not engaged. The plaintiff is therefore presumptively entitled to only partial indemnity cost throughout.
[20] Turning then to the quantum issue. The defendants challenge the quantum of costs claimed on two broad grounds.
[21] They say that having regard to the reasonable expectations of the defendants, the fees claimed by the plaintiff are excessive.
[22] The plaintiff is represented by senior counsel with fifty years of experience at the Bar. He is the only advocate in his three person firm. Most of the work done on the case was done by him. A total of 278.5 hours of fee earners’ time was expended on the case.
[23] By contrast, the defendants’ lawyers spent a 178 hours on the case, employing a range of fee earners from the partner level to law clerks.
[24] It is not the function of a trial judge when fixing costs, to conduct to what amounts as an assessment hearing. In Zesta Engineering v. Cloutier, 2002, 25577 (ONCA), the Court of Appeal stated, at para. 4:
...the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.
[25] Bearing in mind that in this case, which involved a paper-intensive construction dispute, the plaintiff bore the onus of proof, it is hardly surprising that the plaintiff expended more time on the case than the defendants. While Rule 57.01(0.b) invites the court when exercising its discretion to award costs, to take into account the amount of costs that the unsuccessful party could reasonably expect to pay, the fact that the defendant engaged a more junior lawyer in a larger firm with better lawyer and clerk support than the plaintiff does not necessarily displace the indemnity principle which is also articulated by the rule. Counsel for the defendants conceded that he took no issue with the hourly rate claimed by the plaintiff’s lawyer, which on a partial indemnity scale was $210 per hour.
[26] Accordingly, I do not regard the reasonable expectations of the defendants as requiring me to second guess the plaintiff’s choice of lawyer or that lawyers’s deployment of the resources available to him in prosecuting this action on his client’s behalf.
[27] The second broad ground of concern raised by the defendants relates to specific line items in the plaintiff’s bill of costs and supporting dockets which the defendants say should not be included when determining an amount of costs that is fair and reasonable in all of the circumstances.
[28] Consistent with the approach I have already articulated in relation to the reasonable expectations issue, I will not engage in a detailed assessment of the time spent by the plaintiff’s lawyer. However, there are certain services which the plaintiff’s lawyer provided to his client for which I do not consider it reasonable for the defendants to provide indemnity.
[29] Some 11.5 hours was spent preparing a motion to strike a jury notice which was never brought because upon receipt by the defendant’s lawyer of a letter from the plaintiff’s lawyer inviting him to dispense with the jury, the defendant’s lawyer promptly agreed to do so. A further five hours was spent by an associate of the plaintiff’s lawyer attending a pretrial conference without any obvious need for two counsel to be present. And what I would regard as excessive time, by any standard, was devoted to the plaintiff’s expert report and to post-arbitration proceedings to correct the arbitrators’ award.
[30] The claim for costs by the plaintiff calculated on a partial indemnity scale throughout was $58,185 plus $7,564.05 for GST. Having regard for the concerns which I have expressed with respect to certain services for which indemnity is claimed, I fix the plaintiff’s fees at $50,000 inclusive of HST, plus the previously agreed upon disbursements of $4,724.93 also inclusive of HST.
Graeme Mew J.
CITATION: F.M. Hunt Construction Company v. Van Jaarsveld 2016 ONSC 8189
COURT FILE NO.: CV-12-0797
DATE: 20160827
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
F.M. HUNT CONSTRUCTION
COMPANY
Plaintiff
– and –
ISOLDE VAN JAARSVELD and
BARRY VAN JAARSVELD
Defendants
COSTS DECISION
Mew J.
Released: 27 September 2016 (orally)