Court File and Parties

Court File No.: CV-14-511904 CV-14-511904-00A1 Date: 20170425 Superior Court of Justice - Ontario

Re: MICHAEL ARTHUR HAWKSHAW and KAREN E. TODD, Plaintiffs And: BACHLY INVESTMENTS INC., DAVID BACHLY, 411931 ONTARIO LTD. O/A HEIGHTS OF MOONSTONE, and THE TOWNSHIP OF ORO-MEDONTE, Defendants And: W.R. HODGSON OPERATING AS W.R. HODGSON & ASSOCIATES and AECOM CANADA LTD., Third Parties

Before: Justice Glustein

Counsel: Oscar Strawczynski and Paul Neil Feldman, for the Plaintiffs Christopher Salazar, for the Defendants Bachly Investments Inc., David Bachly, and 411931 Ontario Ltd. o/a Heights of Moonstone Meredith E. Jones, for the Defendant The Township of Oro-Medonte Ron Bohm, for the Third Party W.R. Hodgson operating as W.R. Hodgson & Associates

Heard: February 22, 2017

Costs Endorsement

[1] By reasons released March 8, 2017 (the “Reasons”), I granted the summary judgment motions by the Bachly Defendants [1] and the Township to dismiss the plaintiffs’ grading claims. I also granted the motion by Hodgson to dismiss the third party claim of the Bachly Defendants.

[2] On consent, I dismissed the plaintiffs’ claim against David and granted the motion of the Bachly Defendants to amend their pleadings. The plaintiffs only consented to the dismissal of the claim against David at the outset of the hearing.

[3] I have now reviewed the written costs submissions which were delivered to me between March 29, 2017 and April 13, 2017, pursuant to the Reasons and a subsequent telephone case conference.

[4] There are two issues before the court on costs.

[5] First, the plaintiffs acknowledge that they are required to pay costs of the successful Bachly Defendants and the Township, but submit that the costs sought by the Bachly Defendants are excessive.

[6] Second, Hodgson seeks costs of his motion as a third party equally as against (i) the Bachly Defendants (as third party plaintiffs) and (ii) Hawkshaw and Todd as the plaintiffs in the main action.

[7] On this issue, each of the Bachly Defendants and the plaintiffs submit that the other should be responsible for the costs of Hodgson.

[8] Further, both the Bachly Defendants and the plaintiffs submit that the costs sought by Hodgson are excessive.

[9] I address each of these issues below.

Issue 1: The costs sought by the successful defendants against the plaintiffs

[10] The plaintiffs accept that the costs sought by the Township of $3,640.92, inclusive of disbursements and HST, are reasonable.

[11] The Bachly Defendants seek costs of the motion of $16,859.53 against the plaintiffs on a partial indemnity scale. The plaintiffs submit that “it would be unreasonable for the Bachly Defendants’ costs to be more than double those of the Township” (i.e. approximately $7,300).

[12] I apply the settled principles to determine costs. The overarching principles are fairness and reasonableness, including a consideration of proportionality (Emmott v. Your Community Realty Inc., 2016 ONSC 7446 (“Emmott”), at paras 6-8).

[13] I also consider the factors under Rule 57.01 of the Rules of Civil Procedure and the costs an unsuccessful party would reasonably expect to pay (Boucher v. Public Accountants Council (Ontario), 2004 CarswellOnt 2521 (CA), at para. 25).

[14] On the basis of the above principles, I rely on the following factors:

i) The motion material filed by the Bachly Defendants was brief, consisting of a four-page affidavit and reference to discovery materials; ii) Although the plaintiffs consented to the dismissal of the claim against David at the outset of the hearing, David’s personal liability was only briefly addressed in the affidavit material, with no responding affidavit material addressing his conduct; iii) The case law on personal liability of directors and officers was not complex and was not contested; iv) The Bachly Defendants stated in their responding submissions to Hodgson that “the within proceedings were generally uncomplicated and the steps completed in the within proceedings were not particularly onerous”. I agree and find that the same can be said for the motion brought by the Bachly Defendants; v) The grading issues addressed on the motion were only one aspect of the plaintiffs’ claim; vi) Hodgson had already raised similar issues in his factum; and vii) There appears to be some excess time in the bill of costs. By way of example, 50 hours to prepare for a motion given the facts set out in the Reasons appears excessive, and the Bachly Defendants seek costs for 7 hours for the hearing which did not require the full court day, while also separately claiming 4 hours of travel to and from Toronto.

[15] Based on the above, the plaintiffs would not have reasonably expected to pay the quantum of costs sought by the Bachly Defendants for the motion. While I accept that the Township only provided limited material and relied on the material filed by both Hodgson and the Bachly Defendants, I would limit the costs of the Bachly Defendants to double the amount claimed by the Township.

[16] Consequently, I agree with the plaintiffs and fix costs of the Bachly Defendants for the motion at $7,300 inclusive of HST and disbursements.

Issue 2: Costs of Hodgson for the summary judgment motion

[17] There are two issues arising from the costs submissions: (i) whether either the plaintiffs or the Bachly Defendants should solely be responsible for the costs, or whether a proportionate distribution between them is appropriate, and (ii) the appropriate quantum of costs for the motion and action.

[18] I address each issue below.

(i) Which party (or whether both parties) ought to be responsible for the costs of Hodgson for the summary judgment motion

[19] Hodgson seeks costs of his successful summary judgment against the plaintiffs and the Bachly Defendants to be shared equally. The plaintiffs and the Bachly Defendants submit that the other should be responsible for those costs.

[20] In Sanofi Pasteur Ltd. v. UPS SCS, Inc., 2015 ONCA 88 (“Pasteur”), Hoy A.C.J.O. set out the principle that (Pasteur, at para. 77):

[G]enerally an unsuccessful plaintiff will not be held liable for costs incurred by third parties: the plaintiff does not sue the third party, does not want it in the action and is not responsible for it being brought into the action.

[21] However, Hoy A.C.J.O. stated that costs to third parties from a plaintiff can be warranted when the “third party proceedings followed naturally and inevitably upon the institution of the [plaintiff’s] claim” (Pasteur, at para. 77).

[22] Further, “whether an unsuccessful plaintiff should be ordered to pay a third party’s costs depends on the circumstances of the particular case and the discretion to order such costs must be exercised judicially” (Pasteur, at para. 77, citing Newbould J. in Guarantee Co. of North America v. Resource Funding Ltd. (2009), 82 CPC (6th) 258 (Ont. SCJ) (“GNA”), at para. 5).

[23] In Pasteur, the court did not interfere with the motion judge’s decision to have the plaintiff pay half of the costs of the action sought by the third party. The motion judge held that the third party claims were not “unnecessary, but neither were they imperative” (Pasteur, at para. 78).

[24] Other factors for the court to consider whether to impose costs of a third party on an unsuccessful plaintiff include (i) where the main issue litigated was between the plaintiff and the third party, (ii) where the third party was brought or kept in the matter by reason of the act or neglect of the plaintiff, (iii) where the case involves a string of contracts in substantially the same terms for the sale of goods, or (iv) where the third party proceedings follow naturally and inevitably upon the institution of the plaintiff’s action, in the sense that the defendant had no real alternative but to join the third party (as per McLachlin J. (as she then was) in Milina v. Bartsch, (1985), 1 CPC (2d) 269 (BCSC) (“Milina”), at paras. 6-9).

[25] Similarly, if a defendant is “compelled to add the third parties to protect [its] position”, costs against the plaintiff may be appropriate (Milina, at para. 10).

[26] In Emmott, Boswell J. ordered the plaintiff to pay the costs of the third parties despite a limitations defence. Boswell J. held (Emmott, at paras. 32-36):

I accept that the ruling in Milina v. Bartsch is the governing authority. In accordance with its principles, in the normal course Royal LePage would be responsible for the costs of the third parties.

Royal LePage argues, however, that this case falls squarely within one of the exceptions to the general rule identified by Justice McLachlin. In particular, they say that in this case the third party proceedings followed naturally and inevitably from the institution of the plaintiff's action, in the sense that the defendant had no real alternative but to join the third parties.

I cannot say that Royal LePage had no alternative but to join the third parties. It could have made a stand on the limitations issue, or on the characterization of the $100,000 payment as a deposit, both reasonable defences in the circumstances.

On the other hand, this case includes the peculiar feature where the plaintiff has sought relief against the third party, Fairfield, without actually naming it as a party defendant. Not only that, but the plaintiff was well aware that her $100,000 had been paid to Fairfield. Royal LePage was just the middleman. A reasonable plaintiff would have undoubtedly anticipated that Royal LePage would turn to the ultimate recipient of the funds for recovery. In my view, this is a clear case where the third party claim naturally and inevitably flowed from the institution of the main action. Indeed, I believe one would be hard pressed to find a clearer case.

In the result, I find that this is an appropriate case to depart from the normal rule and I find that the plaintiff is liable for both the defendant's costs and those of the third parties.

[27] In GNA, Newbould J. held that the court maintained a discretion to order costs of a third party action against a plaintiff even if none of the conditions in Milina were met (GNA, at paras. 6-7). The issue in GNA was whether the plaintiffs had released an indemnity by virtue of an agreement between the plaintiffs and Mr. Barton, a third party who was negotiating on behalf of RFL, the defendants. Newbould J. held that the “main issue litigated was a contest between the plaintiffs and Mr. Barton” and “the plaintiffs were well aware that their case turned on what Mr. Barton did or did not do with the plaintiffs’ representatives” (GNA, at para. 11).

[28] Newbould J. further held (GNA, at para. 12):

(i) “if Mr. Barton failed to [negotiate a release of the RFL indemnity], RFL had a claim against him for his failure to do so”; (ii) “it would not have been appropriate to try the main action and the third party action separately”; and (iii) “[i]n order to protect its interests, RFL had no real alternative but to make a third party claim against Mr. Barton” (GNA, at para. 12).

[29] Because the case turned on what the third party had done or not done with the plaintiffs’ representatives, Newbould J. held that “[i]t was inevitable that the third party claim was brought, and the plaintiffs, insurance companies in the litigation business, had to know that” (GNA, at para. 12).

[30] I rely on the above principles in the present case and conclude that the plaintiffs should bear Hodgson’s costs.

[31] The plaintiffs pleaded that they suffered damages as a result of the grading deficiencies. The plaintiffs only sued the Bachly Defendants for those deficiencies, but pleaded that Hodgson’s inspections were negligent and that the Bachly Defendants were responsible. Consequently, the third party claim followed naturally and inevitably from the institution of the plaintiffs’ action.

[32] Also, while the limitation period issue with respect to the grading claims was a separate defence available for the Bachly Defendants which would not have resulted in a third party claim, a decision to defend the claim only on the basis of the limitations period would have imposed significant risk when the plaintiffs had already pleaded that Hodgson was negligent. Consequently, as in GNA, I find that:

(i) “if [Hodgson] failed to [properly conduct the inspection], [the Bachly Defendants] had a claim against him for his failure to do so”; (ii) “it would not have been appropriate to try the main action and the third party action separately”; (iii) “in order to protect its interests, [the Bachly Defendants] had no real alternative but to make a third party claim against [Hodgson]”; and (iv) “it was inevitable that the third party claim was brought … and the plaintiffs … had to know that”.

[33] Consequently, on the facts of the case, I order the plaintiffs to pay Hodgson’s costs of his summary judgment motion.

(ii) The appropriate quantum of costs

[34] The relevant factors in relation to Hodgson’s claim for costs are as follows:

(i) Senior counsel carried the case alone at rates approximately 50% higher than the rates of the other defendants’ counsel; (ii) All of the moving parties as well as Hodgson relied on the limitation period defence and did not obtain any expert report on the negligence issue; (iii) The full indemnity costs of over $75,000 (and the corresponding partial indemnity costs claimed of $52,152.84) are disproportionate to the amount at issue with respect to the grading claims and inconsistent with the costs an unsuccessful party would unreasonably expect to pay; (iv) The offer to settle the action on a dismissal without costs basis at the outset of the action does not entitle Hodgson to a higher cost award, and the letter after examinations for discovery proposing to recommend $20,000 as partial indemnity costs (if the action was dismissed against Hodgson) is not an offer to settle; (v) Further, by that point Hodgson would have substantially developed his theory, which was straightforward in that he claimed there was no evidence of negligence or causation, and in any event, the impugned conduct was not part of his retainer. Consequently, the costs of proceeding with the summary judgment motion were largely procedural; and (vi) The case was neither factually nor legally complex.

[35] For the above reasons, I fix partial indemnity costs of the action and motion collectively at $30,000, inclusive of HST and disbursements, which I base on an assessment of $20,000 for costs of the action and $10,000 for costs of the motion (all amounts inclusive of HST and disbursements).

Order and costs

[36] I make the following orders as to costs (all amounts inclusive of HST and disbursements), all to be paid within 30 days of this order:

(i) The plaintiffs are to pay costs of $3,640.92 to the Township; (ii) The plaintiffs are to pay costs of $7,300 to the Bachly Defendants; and (iii) The plaintiffs are to pay costs of $30,000 to Hodgson

GLUSTEIN J.

Date: 20170425

[1] All defined terms are as set out in the Reasons reported at 2017 ONSC 1364.