Court File and Parties

Court File No.: 05-CV-03091 Date: 2017/06/06 Ontario Superior Court of Justice

Between: Kaymar Rehabilitation Inc., Plaintiff – and – Champlain Community Care Access Center, Defendant

Counsel: Scott McLean and Monica Song, for the Plaintiff Joel Richler, Nancy Brooks and Dustin Kenall, for the Defendant

Heard: In Writing

Costs Endorsement

Parfett J.

[1] The parties in this matter have been unable to reach an agreement on costs and have submitted the matter to me for determination.

Background

[2] This litigation spanned twelve years and involved an allegation by the Plaintiff that the bidding process in which they participated with the Defendant was fundamentally unfair and essentially geared to ensure that the Plaintiff was not awarded any portion of the contract.

[3] The case was dismissed in its entirety.

Positions of the Parties

[4] The Defendant claims costs on a substantial indemnity basis of $2,834,880.91. This amount includes disbursements and HST. The Defendant also claims further costs of $20,000 for the preparation of its submissions on costs.

[5] In support of its claim for costs on a substantial indemnity basis, the Defendant argues that in her costs decision in relation to a summary judgment motion brought in relation to 2 co-defendants, the motion judge sanctioned the Plaintiff for its unfounded allegations of dishonesty and collusion against two of the original parties. Consequently, the Defendant suggests that the same principle should apply to it, given allegations of dishonesty and collusion were also levelled against its employees.

[6] Moreover, the Defendant points to the fact that the OLRB suggested in its decision that the Plaintiff’s case was unfounded. [1] In that decision, the OLRB concluded as follows:

In summary, I find that OPSEU and Kaymar have not made out their allegations that the competition for therapy services in 2003 was a sham, nor do I conclude that the ultimate awarding of the therapy contact to VON Ottawa-Carleton and COTA was a sham transaction. The OCCAC was required by the MOHLTC to divest itself of staff who provided direct patient care services, and the OCCAC followed that directive, albeit reluctantly. The extensive evidence led by the OCCAC establishes that it followed the policies and template it was required to use by MOHLTC, and that it has explained why it made the choices it did. At the end of the day, the OCCAC made a determination to award the therapy contracts to VON Ottawa-Carleton and COTA for reasons that do not disclose an improper purpose. In particular, I find there is no basis for the allegations that the OCCAC was seeking to rid itself of Kaymar and the collective agreement obligations owed to OPSEU and its members. [2]

[7] In the same vein, the Defendant points to findings made by this court in the summary judgment motion dismissing the case against two of the Defendant’s co-defendants. In that decision, the court made two key findings: first that the Defendant’s goal of establishing a comprehensive basket of services was not a secret and in any event, was shelved prior to the 2003 RFP, and second, that despite the wording of one of the sections of the RFP, experience equivalents were legitimately included in the 2003 Therapies RFP. [3]

[8] The Defendant also claims that in assessing the costs, the court should look to the Plaintiff’s pleadings, not the actual issues disputed in the final written submissions at trial.

[9] Finally, the Defendant notes that it made three offers to settle that would have allowed the Plaintiff to consent to a dismissal with reduced costs exposure. The first of these offers was on May 27, 2014 and it asks that the court at a minimum award substantial indemnity costs after that date.

[10] The Plaintiff argues that the Defendant is not entitled to anything more than costs on a partial indemnity basis. It notes that it is the ‘rare and exceptional’ case that would warrant costs on this basis.

[11] The Plaintiff contends that its behaviour in pursuing this litigation should not result in a substantial indemnity costs award. It indicates that this court did not make any negative findings in relation to its conduct of the trial. It also notes that there is a difference between hard fought litigation and ‘malicious counter-productive conduct’. [4]

[12] The Plaintiff also disputes the calculation of the Defendant’s costs and contends that the actual costs on a partial indemnity basis are $1,547,313.00. Furthermore, it compares the time spent by one of the two former defendants and this Defendant and observes that for the same part of the proceedings, this Defendant spent more than four times the time spent by the former defendant.

[13] The Plaintiff points out that the failure to accept an offer to settle does not necessarily result in costs on a substantial indemnity basis and argues that it should not occur in this case. [5]

[14] The Plaintiff also underlines that the overriding principle in determining a costs award is what is fair and reasonable to the losing party.

Legal Principles

[15] The general principles set out in Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, (the “Rules”) [6] govern how costs should be awarded. That rule states:

57.01 (1) In exercising its discretion under s. 131 of the Courts of Justice Act, R.S.O. 1990, C. C.43 (“CJA”) to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

any other matter relevant to the question of costs.

[16] In addition, the overriding principle in fixing costs is fairness and reasonableness that reflects the reasonable expectation of the parties. [7] Two cases deal with this factor. In Zesta Engineering Ltd. v. Cloutier, (2002) [8] the court noted that,

In our view, 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. [9]

[17] Later, the Court of Appeal again dealt with this issue in Gratton-Massey Environmental Technologies Inc. (c.o.b. Ecoflo Ontario) v. Building Materials Evaluation Commission. [10] In that decision, the court stated,

The Zesta decision is not simply one of the factors to be considered along with a combination of factors. It is more than that. The case stands for the proposition that the award must reflect ‘more what the court view 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’. This is a fundamental concept in fixing or assessing costs.

The amount at which costs are to be fixed is not simply an arithmetic function dependent on the number of hours worked and the hourly rates employed but, rather, the party paying the costs should be subjected to an order which is fair and predictable. In other words, the party required to pay costs must not be faced with an award that does not reasonably reflect the amount of time and effort that was warranted by the proceedings. [11]

[18] As noted earlier, the Defendant is claiming costs on a substantial indemnity basis given the allegations of dishonestly and collusion made by the Plaintiff in this case. The caselaw suggests that such an award is certainly possible. In Manning v. Epp, the court indicated that,

Costs on a higher scale can be awarded as a form of chastisement and as a mark of the court’s disapproval of a litigant’s conduct. This is intended to punish as well as to deter others from reengaging in similar conduct. [12]

[19] However, in the costs decision in relation to the summary judgment motion involving these same parties, this court stated,

While unproved allegations of breach of trust, conspiracy, misrepresentation, breach of fiduciary duty and the like may attract an award of costs on a substantial indemnity scale, the making of such allegations does not lead automatically to the conclusion that the unsuccessful party should be held liable for substantial indemnity costs. The courts have recognized that a party, believing itself to be wronged, has a right to litigate vigorously, even if ultimately unsuccessfully, so long as its behaviour does not rise to the reprehensible, scandalous or outrageous threshold. [13]

[20] In relation to the issue of the offers to settle it is important to note that Rule 49 applies solely to offers to settle made by a Plaintiff, not a Defendant. Furthermore, where an offer to settle made by a Defendant was held to justify costs on a substantial indemnity basis, there was something more in the conduct of the litigation that led to such an award. As noted in Davies v. Clarington commenting on the decision of S & A Strasser Ltd. V. Richmond Hill (Town) [14], the Strasser case was ‘a case where the trial judge implicitly found such egregious behaviour’ on the part of the plaintiff that the award of costs on a substantial indemnity basis was warranted. [15]

Analysis

Costs claimed

[21] The Plaintiff contends that the costs claimed by the Defendant are excessive. It notes in particular that,

• In its ‘holistic’ bill of costs, the Defendant’s total is almost $400,000 higher than its detailed bill of costs; [16]
• The time spent by the Defendant’s lawyers on certain matters was almost four times that of one of the former co-defendants; and
• Travel costs for the out of town counsel should not be included.

[22] In my view, it is not appropriate to second guess the time spent by counsel on a given file. In this case, the litigation endured for twelve years and the Defendant had little choice in the circumstances other than to defend the action.

[23] However, I do agree with the Plaintiff that the ‘holistic’ bill of costs is higher than the regular bill of costs and I will use the latter as my starting point for any analysis. Furthermore, I also agree that travel costs should not be included in any assessment of costs in the particular circumstances of this case. No explanation was offered by the Defendant for its decision to retain out of town counsel or why Ottawa counsel would not suffice.

[24] Finally, I agree that some of the costs appear excessive, in particular the amount billed for ‘e-discovery’ and I will reduce the amount of the Defendant’s disbursements accordingly.

Substantial vs Partial Indemnity Costs

[25] In my view, this is a case where substantial indemnity costs should be awarded from the date of the Offer to Settle in May 2014.

[26] As noted earlier, the Plaintiff received strong hints in previous decisions in relation to this matter that its case was weak. The OLRB in its decision rejected many of the claims that the Plaintiff would later press at trial. In the summary judgment motion, the motions judge again suggested that some of the Plaintiff’s claims lacked any evidentiary foundation – in particular the claims in relation to basket of services and experience equivalents. Despite these statements, the Plaintiff persisted in litigating these claims at trial.

[27] Much of the language in these decisions reflects the language of my trial decision. It is a matter of concern that these warnings were not taken seriously by the Plaintiff and that it decided to go forward with its claims despite the clear indication that its case was weak, if not unfounded. In my view, there has to be a consequence to such actions and the appropriate consequence in this case is the imposition of costs on a substantial indemnity basis from the time the Offer to Settle was rejected.

A fair and reasonable award for the losing party to pay

[28] I have used the detailed Bill of Costs provided by the Defendant at tab C of its written submissions and removed the travel costs and disbursements in relation to e-discovery. Given the litigation lasted twelve years, the trial took place intermittently over the course of fifteen months, the remaining costs are not unreasonable.

[29] The factors to be considered and the principles to be applied in a costs determination have been set out above. I note that the issues to be determined in this litigation were both numerous and at times, complex. The materials filed by both counsel were voluminous. The matter was of considerable importance to both parties.

[30] In particular, in determining costs I am mindful of the factors referred to in Rule 57.01(1), and the case law cited above that directs a court to ascertain an amount that is a fair and reasonable sum to be paid by the unsuccessful litigant rather than any exact measure of the actual costs to the successful litigant.

[31] Consequently, the Plaintiff is ordered to pay $1,864,000 inclusive of disbursements and HST.

Justice Julianne Parfett Released: June 6, 2017