CITATION: Brough v. Lebeznick, 2017 ONSC 1392
COURT FILE NO.: 13-187
DATE: 2017 02 28
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Brough and Whicher Limited, Plaintiff
- and -
Donald Lebeznick and Lynn Lebeznick, Defendants
BEFORE: LEMAY J
COUNSEL: E. Treslan, Counsel for the Plaintiff
M. Raithby, Counsel for the Defendants
HEARD: In Writing
COSTS ENDORSEMENT
[1] This was a seven day trial of a construction lien action that took place before me in Owen Sound last April. The parties provided detailed written submissions in June, and I released my reasons in January. It is now time to fix the costs for this case.
[2] In assessing costs, it is important to note that neither party was completely successful in advancing their claims. The Plaintiff was unsuccessful in claiming the entirety of the contract price because of deficiencies in the work the Plaintiff had performed. The Defendants were unsuccessful in advancing their counterclaim because they made a number of claims that were both remote and excessive. I will return to my assessment of which party was being more reasonable below. The total recovery by the Plaintiff, however, was $30,595.63.
[3] I also note that none of the offers made by either party trigger the provisions of Rule 49 of the Rules of Civil Procedure.
[4] Finally, I note that I asked the parties to address the principle of proportionality in advancing their costs claims. I will also address this issue in my analysis.
Positions of the Parties
[5] The Plaintiff asserts that it should be entitled to costs in the sum of $22,298.00 inclusive of HST and disbursements, which are two thirds of the Plaintiff’s substantial indemnity costs. The Plaintiff advances this claim on the bases that it was the more successful party in this case, the offers to settle made by the Plaintiff were more reasonable in this case than the offers made by the Defendant, and the Defendants position on the counterclaim was unreasonable.
[6] The Defendants assert that they should be entitled to costs in the sum of $39,146.65, inclusive of HST and disbursements. The Defendants advance this claim on the basis that the Plaintiff engaged in unreasonable conduct by, inter alia, not accepting that there were deficiencies in the work that the Plaintiff performed. In addition, the Defendants assert that they were required to retain experts in order to advance their case because of the Plaintiff’s position on the quality of the work.
Law and Analysis
a) The Applicable Principles
[7] The key principles for deciding costs awards are set out in Rule 57.01. For the purposes of this case, I am of the view that the most important principles are as follows:
a) The outcome of the proceeding.
b) The complexity of the proceeding.
c) The conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding.
[8] In addition, I note that there is a general rule that costs usually are awarded to the successful party. As a result, in my view, when success is clearly divided, neither party should be entitled to costs.
[9] Finally, I note that the principle of proportionality can apply in certain cases. However, I also note the decision in Aacurate General Contracting Ltd. V. Tarasco (2015 ONSC 5980) where McCarthy J. noted (at paragraph 15):
I am mindful that the principle of proportionality calls upon the court to consider the amount claimed for costs in relation to the amount recovered in the judgment, as well as the reasonable expectation of the parties. In my view, however, proportionality cannot and should not be routinely invoked to save litigants from the actual costs of proceedings in circumstances where those litigants have put forth a wholly unmeritorious defence to a legitimate claim or have caused the proceeding to become unduly prolonged or complicated. The principle should be applied thoughtfully and in a balanced fashion along with the other factors set out in rule 57.01.
[10] In other words, the principle of proportionality should not be used to deprive a successful litigant of its costs simply because the claim is small. Overapplying the principle of proportionality will tend to encourage litigants who are resisting legitimate but modest claims to act unreasonably, either in their positions or in the conduct of the litigation.
d) Application to This Case
[11] I start with the principle of proportionality. In this case, it is simply one of the factors that informs what the reasonable expectations of the parties would be in this case. In reviewing the amounts claimed by both counsel, it appears to me that those amounts appropriately reflect the need to ensure proportionality. Both sides had a considerable number of experts, and the trial consumed seven full days of court time. In the circumstances, claims for less than $40,000.00 all inclusive are entirely reasonable in my view. They are also amounts that the other side would expect to pay for this case.
[12] Given that the parties have actually claimed only those amounts, I do not have to consider the question of whether the actual costs incurred by the parties are reasonable. I acknowledge, however, Mr. Treslan’s concerns about the over-resourcing of the file.
[13] I now turn to the outcome of the proceeding. The principle that costs generally follow the cause is also a relevant consideration in this case. Mr. Treslan argues that the Plaintiff was successful in recovering approximately 55% of its claim, while the Defendants recovered virtually none of their counterclaim. On that basis, Mr. Treslan argues that this principle favours an award of costs in favour of the Plaintiff. He argues that the Plaintiff was at least half successful on its claim, and almost entirely successful on resisting the Defendants’ counterclaim.
[14] The problem with this argument is the definition of success. The Plaintiff asserted throughout most of this action that the construction work had been performed in a proper and workmanlike manner. In addition, the Plaintiff’s experts supported that assertion. I rejected that assertion. My rejection of that assertion was a key reason why the Plaintiff did not recover the bulk of its claim.
[15] As a result, in my view, it cannot be said that the Plaintiff was more successful than the Defendants. On one of the key issues in the case, the quality of the work performed, the Plaintiff was unsuccessful. Further, Mr. Evans in his testimony minimized his responsibility (and his company’s responsibility) for errors in the workmanship. It was clear from his testimony as to why this litigation was commenced. He was not prepared to back down and acknowledge that there were problems with the work his company did.
[16] However, the Defendants also advanced issues that should not have been advanced in this case. They were unsuccessful, for example, on their claim for several years of mortgage payments on their house in Windsor. However, as Ms. Raithby points out, the evidence and argument on this issue consumed a very small amount of the trial time. On my calculations, the counterclaim was less than 1/7th of the total Court time.
[17] In my view, the outcome of this case favours a small award of costs for the Defendants because they were successful on the key issue in this case, which was the quality of the workmanship performed by the Plaintiff.
[18] This brings me to the most important factor in this case, which is the reasonableness of the positions of both parties. In his submissions on costs, Mr. Treslan quite rightly points out that the Defendants’ offer to sell the Plaintiff their house for $350,000.00 as a resolution to the litigation was an unreasonable position.
[19] However, I agree with Ms. Raithby that the Plaintiff also did not make a reasonable offer until the very eve of trial. Further, that offer was for $39,999.00, but envisioned each party assuming their own costs. It was served less than a week before the trial of this matter started, and after a significant amount of legal costs had been incurred by the Defendants.
[20] The pre-litigation offer of the Defendants to resolve this matter for $30,000.00 is not a Rule 49 offer (see Scanlon v. Scanlon (2002) 2002 CanLII 20549 (ON CA), 57 O.R. (3d) 767 (C.A.)). However, it is a factor that I view as being relevant in the consideration of costs in this case because it demonstrates that, at the outset of the action, the Defendants were prepared to be reasonable.
[21] It was the Plaintiff in this case that acted unreasonably from the outset of the litigation. As I noted in my decision (at paragraph 73):
Further, the way that the Plaintiff addressed this issue is indicative of its approach to this project. That approach can best be described as one where the Plaintiff lacked attention to detail in the work it performed, and sought ways to cut corners to improve the profitability of the project. When challenged by the Defendants, the Plaintiff then either tried to ignore the issue or adopted an aggressive approach to the issues raised by the Defendants.
[22] The Plaintiff adopted the same approach to the litigation. Although I acknowledge that Mr. Treslan conceded a number of deficiencies at trial, none of these concessions were made in advance of trial. In my view, many of these deficiencies were obvious from the time that the expert report was delivered in 2014. Some of these deficiencies should have been obvious in July of 2013, when the Plaintiff alleged that the building was completed.
[23] In particular, I note the deficiency that I pointed out at paragraph 132(b) of my reasons for judgment. I repeat that the photographs of this deficiency clearly show that the workmanship was lacking. The Plaintiff should not have taken a “hard line” approach to the issues that the Lebeznicks raised at the outset of the litigation in light of this type of problem.
[24] However, I again acknowledge that the Defendants advanced a counterclaim that was unreasonable in most respects. However, as I have noted above, this claim did not consume very much Court time.
[25] As a result, the reasonableness of the parties positions favours a modest award of costs to the Defendants.
Conclusion
[26] As I have noted above, at the outset of this litigation, it was the Defendants who took the reasonable position at the outset of the litigation. It was also the Plaintiff’s intransigence that resulted in this litigation commencing. These two factors are the key reasons why the Defendants should be entitled to recover a modest amount of costs in spite of the fact that the Plaintiff is entitled to recover money from the Defendants in this case.
[27] However, the Defendants also adopted unreasonable positions in this litigation as it progressed. In particular, the vast majority of the counter-claim should never have been advanced. As a result, the costs that the Defendants should recover from the Plaintiff should be significantly reduced.
[28] Balancing all of the factors outlined above, I am of the view that the Plaintiff should pay costs to the Defendants in the sum of $15,000.00 inclusive of HST and disbursements.
[29] If the parties agree, then these costs will be set-off against the amounts owing by the Plaintiff to the Defendant. If the parties do not agree on treating the costs as a set-off, then the costs are to be paid within sixty (60) days of today’s date.
___________________________
LEMAY J
Released: February 28, 2017
CITATION: Brough v. Lebeznick, 2017 ONSC 1392
COURT FILE NO.: 13-187
DATE: 2017 02 28
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Brough and Whicher Limited
Plaintiff
- and -
Donald Lebeznick and Lynn Lebeznick
Defendants
COSTS ENDORSEMENT
LEMAY J
Released: February 28, 2017