CITATION: Evoke Solutions Inc. v. Chive Inc., 2017 ONSC 1684

COURT FILE NO.: CV-11-435443

DATE: 20170314

ONTARIO

SUPERIOR COURT OF JUSTICE

RE: EVOKE SOLUTIONS INC., Plaintiff / Defendant by Counterclaim

AND: CHIVE INC., Defendant / Plaintiff by Counterclaim

BEFORE: Mr. Justice M. D. Faieta

COUNSEL: David A. Schatzker, for the Plaintiff

Allison A. Thornton, for the Defendant

C O S T S E N D O R S E M E N T

BACKGROUND

[1] The defendant, Chive Inc. was solely a wholesale supplier of flower vases when it decided to sell them on a retail basis as well. Chive retained the plaintiff, Evoke Solutions Inc., to create a website for its wholesale and retail business.

[2] Evoke claimed $36,242.74 for unpaid invoices. It also claimed 2% of all gross sales made by Chive until August 31, 2014, estimated at trial to be a further $88,000. Chive alleged that Evoke forfeited any right to payment for its services because it delivered a retail portal that took about six months to make functional and because it never delivered a functional wholesale portal. By counterclaim, Chive sought $80,000 in damages for lost sales.

[3] For reasons dated January 9, 2017, and following a four-day trial, judgment was awarded to the plaintiff in the amount of $41,608.83, plus pre-judgment interest. The defendant’s counterclaim was also dismissed.

[4] The plaintiff claims costs in the amount of $87,103.50. The defendant submits that this amount is “grossly disproportionate to the damages recovered by the plaintiff and inappropriate [in] a simplified procedure matter”. The defendant submits that no more than 50% of the damages awarded, or $23,140.89, should be awarded in costs.

ANALYSIS

[5] The fixing of costs is governed by s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Rule 57.01 is the primary rule governing costs. It enumerates various matters to consider when fixing costs. Rule 1.04(1.1) of the Rules of Civil Procedure, whose purpose is to promote access to justice, is also applicable. It provides that,

In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

[6] In fixing costs, the objective is to ascertain “an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding”. Although a successful party is usually indemnified for its costs by the unsuccessful party, the principle of indemnity is but one of many considerations in fixing costs. In order to promote access to justice, the reasonableness of the amount of costs claimed must also be considered: Boucher v. Public Accountants Council (Ontario) (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), at paras. 26, 37; Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, at paras. 50-52; Elbakhiet v. Palmer, 2014 ONCA 544, 121 O.R. (3d) 616, at para. 38, leave to appeal refused [2014] S.C.C.A. No. 427.

[7] I now turn to the various relevant considerations in assessing costs in this matter.

Offers to Settle

[8] The plaintiff made two offers to settle.

[9] The plaintiff’s first offer to settle was made on February 17, 2012. It offered a dismissal of the action (including the counterclaim) on the basis of the payment of $35,000 by the defendant to the plaintiff and the exchange of mutual releases. This offer was open for a period of 15 days without cost consequences. If the offer had been accepted after 15 days, then the defendant was required to pay the plaintiff’s costs on a partial indemnity basis.

[10] The plaintiff’s second offer to settle was made on April 5, 2016. It offered a dismissal of this action (including the counterclaim) on the basis of the payment of $20,000 by the defendant to the plaintiff, the payment of costs on a partial indemnity basis reduced by 20%, and the exchange of mutual releases. This offer was open until the commencement of trial.

[11] Rule 49.10(1) of the Rules of Civil Procedure states:

Where an offer to settle,

(a) is made by a plaintiff 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

(c) is not accepted by the defendant,

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

[12] The plaintiff obtained a judgment more favourable than the terms of either its offers to settle. As a result, the plaintiff is presumptively entitled to partial indemnity costs to the date of its first offer to settle, February 17, 2012, and substantial indemnity costs from that date.

Principle of Indemnity

[13] The plaintiff states that Mr. Schatzker billed at a rate between $275 and $375 per hour and that Ms. Nancy Gross, also counsel for the plaintiff, billed at a rate between $200 and $250 per hour.

[14] The defendant does not dispute that the plaintiff is entitled to costs, but takes issue with the total amount of the plaintiff’s cost claim.

[15] The defendant’s Bill of Costs does not advance a claim for disbursements.

The Amount that an Unsuccessful Party could Reasonably Expect to Pay

[16] In Smith Estate v. Rotstein, 2011 ONCA 491, 106 O.R. (3d) 161, at para. 50, leave to appeal refused [2011] S.C.C.A. No. 441, the Ontario Court of Appeal stated:

In my view, there is no requirement for the losing party, who is not seeking costs, to file a bill of costs although it is preferable that he or she does so. However, if the losing party chooses not to file a bill of costs, this is a factor that the judge, who is assessing costs, may take into account when considering the reasonable expectations of the losing party.

[17] The defendant did not submit its bill of costs and, thus, there is no concrete evidence of its reasonable expectations.

[18] Nevertheless, an unsuccessful party is entitled to expect that the amount of costs it will be required to pay will be proportional to the importance and complexity of the issues as well as the amounts involved.

The Amount Claimed and the Amount Recovered

[19] The plaintiff’s claim at trial was for about $124,000, comprised of $36,242.72 for unpaid invoices plus 2% of all gross sales made by Chive until August 31, 2014 (about $88,000). The plaintiff recovered $41,608.83. The defendant’s counterclaim of $80,000 for lost sales was dismissed.

The Complexity of the Proceeding

[20] This trial was of modest complexity. On its face, it was a debt collection action by the plaintiff and a counterclaim by the defendant for lost sales caused by breach of contract. The action turned on whether there was any basis for the defence to claim that the plaintiff had failed to deliver the website it had promised in a timely manner. The assessment of this defence involved the review of tens, if not hundreds, of emails and other documents.

The Importance of the Issues

[21] While the issues raised by this trial are of importance to the parties, they do not have significant jurisprudential importance.

The Conduct of any Party that Tended to Shorten or Lengthen Unnecessarily the Duration of the Proceeding

[22] Evoke makes the following submission:

Chive made the action complex. Steps were taken by Evoke to reduce costs. Mr. Magonet (solicitor of record) enlisted assistance of more junior counsel for preparation of pleadings, discoveries, trial preparation, and trial. There was no double billing for two counsel at trial, or use of senior counsel for discovery or document review.

[23] Chive makes the following submission, which is not disputed by Evoke:

The matter, including both trial time and documentary production, was unnecessarily prolonged by the plaintiff’s pursuit of a claim to a share of the defendant’s entire business, which claim the Court rejected.

[24] In my view, both parties engaged in conduct that unnecessarily lengthened this trial.

Whether any Step in the Proceeding was Improper, Vexatious or Unnecessary, or Taken through Negligence, Mistake or Excessive Caution

[25] Other than as described above, there is no suggestion that either party took a step in the proceeding that was “improper, vexatious or unnecessary, or taken through negligence, mistake or excessive caution”.

A Party’s Denial of or Refusal to Admit Anything that Should Have Been Admitted

[26] The plaintiff submits:

Chive did not admit liability for any of the invoices in issue and forced every single issue to be addressed at trial. (Evoke delivered a request to admit on April 20, 2016 […] nothing was ultimately admitted). [Emphasis in original.]

[27] Evoke’s position that it was entitled to be paid 2% of gross sales was wholly without merit given the evidence. Had this position not been advanced by Evoke, the trial would not have needed to hear considerable evidence regarding the discussions between the principals of the two parties.

Any Other Matter Relevant to the Question of Costs

[28] The defendant submits that this action was brought under the simplified procedure regime provided by Rule 76 of the Rules of Civil Procedure. This action is governed under the simplified procedure regime, and its costs provisions, given that no objection was made in statement of defence to the fact that the amount of the claim was greater than the amount provided by Rule 76.02(1): see Rule 76.02(5).

[29] Rule 76.13 provides that:

(3) The plaintiff shall not recover any costs unless,

(a) the action was proceeding under this Rule at the commencement of the trial; or

(b) the court is satisfied that it was reasonable for the plaintiff,

(i) to have commenced and continued the action under the ordinary procedure, or

(ii) to have allowed the action to be continued under the ordinary procedure by not abandoning claims or parts of claims that do not comply with subrule 76.02 (1), (2) or (2.1).

(4) Subrule (3) applies despite subrule 49.10 (1) (plaintiff’s offer to settle).

[30] Rule 76.13(3)(a) applies and, therefore, the plaintiff is not barred from claiming costs.

[31] Access to justice is a real impediment to both plaintiffs and defendants for claims of amounts that fall under the simplified procedure regime. In this case, the defendant chose to refuse what turned out to be two reasonable offers. While the defendant was entitled to choose to take this matter to trial, it courted the risk and consequences of an adverse result at trial.

[32] The plaintiff is presumptively entitled to its costs in accordance with Rule 49.10, given that the judgment was more favourable than its offers to settle. However, it is my view that the award of costs should be proportionate to the amounts in dispute, particularly in light of the fact that this action proceeded under Rule 76 and given the application of Rule 1.04(1.1). I agree with the views expressed by Justice Wilson in Trafalgar Industries of Canada Ltd. (c.o.b. Canadian Custom Packaging) v. Pharmax Ltd. (2003), 2003 CanLII 40313 (ON SC), 64 O.R. (3d) 288 (S.C.J.), at paras. 11-12:

When fixing costs in a simplified trial, one must bear in mind the objectives of the Simplified Procedures. In Impex v. Nasr Foods Inc., [1999] O.J. No. 3360 (Quicklaw) (S.C.J.) at para. 9, Lamek J. confirmed that one of the objectives of the simplified procedures was “to curb the crippling cost of litigating small claims”. In McLean v. 721244 Ontario Ltd. (c.o.b. Paint Shoppe Services), [2000] O.J. No. 3507 (Quicklaw) (S.C.J.), Hill J. observed at para. 2 that “an action conducted under the Simplified Procedure is meant to be cost effective. As a general rule, this straightforward and streamlined process is not intended to be as expensive as trial by ordinary procedure.”

I agree with these views expressed. It is clear that cost effectiveness is a key component to cases proceeding under the Simplified Procedures.…

Conclusions

[33] In light of the considerations described above, I find that it is fair and reasonable to award the plaintiff the sum of $50,000 in respect of its costs of this action, inclusive of disbursements and HST, payable by the defendant.

Mr. Justice M. D. Faieta

Released: March 14, 2017