Saramia Crescent General Partner Ltd. v Delco Wire and Cable Ltd. et al., 2017 ONSC 3507

Court File No.: CV-14-497838 Date: 2017-06-06 Superior Court of Justice - Ontario

Re: Saramia Crescent General Partner Ltd. And: Delco Wire and Cable Limited and IEWC Canada Corp.

Before: Madam Justice J.T. Akbarali

Counsel: Luisa J. Ritacca and Fredrick Schumann for the Plaintiff Patrick Duffy and Khrystina McMillan for the Defendants

Heard: Submissions in writing

Endorsement

Overview

[1] On May 2, 2017 I released reasons for decision in the trial of this action seeking damages for breach of lease: 2017 ONSC 961. Liability was admitted. The question was how to calculate damages in circumstances where the plaintiff and landlord, Saramia Crescent General Partner Ltd., sold the property after the defendant, IEWC Canada Corp., repudiated its lease.

[2] The defendants argued that Saramia sold at fair market value and as a result, was made whole by the sale such that its losses were zero. I rejected this argument, accepting instead Saramia’s argument that its damages should be quantified using a discounted cash flow analysis. Saramia’s expert accountant put forward four different loss calculations that varied depending on which assumptions I accepted. These loss figures ranged from a low of about $470,000 to a high of about $1,440,000.

[3] Based on the findings I made and the assumptions I accepted, the parties agree that I have found Saramia’s damages to be $1,277,000. The parties agree that based on my findings, pre-judgment interest amounts to $229,029.

[4] Saramia seeks its costs of $248,142.30, plus disbursements of $133,450.21 and HST, for a total of $431,132.20. This figure represents partial indemnity costs up to November 8, 2016 – the date of the first of two offers to settle that it made and beat – and substantial indemnity costs thereafter.

[5] These reasons deal with costs of the action.

Analysis

General Principles

[6] Costs generally follow the event. The objective of a costs award is to “fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding”: Boucher v. Public Accountants Council (Ontario), 2004 CarswellOnt 2521 at para. 26 (C.A.).

[7] Costs of and incidental to a proceeding are in the discretion of the court: s. 131 Courts of Justice Act, R.S.O. 1990, c. C.48. Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, sets out the factors to consider in exercising that discretion, including the principle of indemnity, the reasonable expectations of the unsuccessful party, the amount claimed and the amount recovered in the proceeding, the complexity of the proceeding and the importance of the issues.

[8] In this case, the defendants argue that they could not have reasonably expected to pay costs in the amount claimed, because they are excessive in view of what was at stake in the litigation. They make this argument having regard to the lowest estimate of loss put forth by Saramia’s expert, or about $470,000. However, the range of losses the expert calculated climbed as high as $1,440,000, and Saramia was awarded $1,277,000 before interest or costs. Apart from one line item for communications (which I address below), the defendants have failed to point to any particular costs they say are excessive. Given the range of damages supported by Saramia’s expert, the award made, and the complexity of the issues raised at trial, I do not accept that Saramia’s costs were excessive.

[9] I also note that the defendants have failed to adduce any evidence of their own costs. A party who seeks to argue that it did not reasonably expect costs in the amount claimed should disclose its own costs. Like Saramia, the defendants had two counsel present at trial. Like Saramia, the defendants did significant work on the challenging issues raised in this trial. In the circumstances, I draw the adverse inference that the defendants are being charged costs equal to or greater than the amount Saramia claims: Cvokic v. Belisario at para. 8, Frazer v. Haukioja, 2010 ONCA 249 at para. 73.

[10] The defendants also argue that the issues raised were novel, and justify significantly reducing or denying costs to Saramia.

[11] An issue is novel when a party is “proceeding along a path which is not encumbered by a precedent which would warn him not to proceed further”: Baldwin v. Daubney, 2006 CarswellOnt 5899 at paras. 18-20 (ON SC), C.U.P.E. Local 43 v. Metropolitan Toronto (Municipality), 1988 CarswellOnt 941 at para. 20 (Ont. Div. Ct.). The defendants argue this is such a case. They also argue, somewhat inconsistently, that the jurisprudence appeared to support their position in the action.

[12] It is correct that there was very little case law dealing with the quantification of damages for breach of a lease in circumstances where the property was sold. None of the cases that did exist involved a sale that was forced by the tenant’s actions. The novelty in this case required the application of high-level principles to a new fact situation.

[13] However, at its heart, this was commercial litigation between sophisticated parties. The controlling jurisprudence was well-established. Only the situation to which it applied was new. In my view, this novelty is not good reason to relieve the defendants from the normal operation of the costs rule.

[14] In support of Saramia’s claim for costs, I note that it was successful in the action and recovered a significant sum. The issues raised in the action were complex, and were important to the parties. The amounts claimed were substantial. Saramia is entitled to indemnification for its costs.

[15] Another matter relevant to Saramia’s costs is the existence of two offers to settle, to which I now turn.

Offers to Settle

[16] Offers to settle are relevant to the scale of costs awarded. Rule 49.10 sets out elevated costs consequences to a defendant for failing to accept an offer to settle made under certain conditions where that offer is beaten at trial. Rule 49.13 allows a court to consider offers to settle that do not meet the criteria laid out in r. 49.10 when determining costs.

[17] In this case, Saramia made a first offer to settle on November 8, 2016, for $660,000. At the time the offer was delivered, it met the conditions of a r. 49.10 offer.

[18] Saramia delivered a second offer to settle on November 17, 2016 in the amount of $400,000 plus $90,000 in disbursements and $85,000 in costs. This offer was a rule 49.10 offer. The second offer having been made, the first offer was off the table for purposes of r. 49.10, however, it is open to the court to consider it for costs purposes under r. 49.13: Thomas (Committee of) v. Bell Helmets Inc., [1999] O.J. No. 4293 (ONCA) at paras. 76-77.

[19] Saramia’s second offer to settle was lower than its first. It beat both offers at trial. In these circumstances, it is appropriate to award Saramia substantial indemnity costs as of the date of the first offer to settle. From that date forward, had the defendants accepted the then-current outstanding offer, they would have done better than they did at trial.

[20] Accordingly, Saramia is entitled to its costs on a partial indemnity scale up to November 8, 2016 and on a substantial indemnity scale thereafter.

Communications and Correspondence

[21] The defendants argue that Saramia’s costs for communications and correspondence – 41.4 hours or $13,633.50 – are excessive and justify a reduction in costs. These communications include communications with opposing counsel, internal communications, communications with the client and communications with the court. As I have noted, the defendants did not lead any evidence of their own costs. However, I agree that this amount is excessive and should be reduced. I allow $10,000 for costs for communications and correspondence.

Mediation Costs

[22] The defendants argue that Saramia’s claim for costs should be reduced to remove the amounts in connection with a mediation the parties attended. They rely on Naneff v. Con-Crete Holdings Ltd., (1993), 43 A.C.W.S. (3d) 1066 at para. 19 (Ont. Gen. Div.). However, in Naneff, the court was dealing with a voluntary mediation. Where a mediation is mandatory, such as the one in this case, it is a necessary step in the litigation. There is no reason to deny Saramia its costs of the mediation: Benner & Associates Ltd. v. Northern Lights Distributing Inc., 1996 CarswellOnt 3787 (Ont. Gen. Div.) at para. 7.

Conclusion

[23] Saramia is entitled to its costs on a partial indemnity scale to November 8, 2016 and on a substantial indemnity scale thereafter. With the reduction I have made for communications and correspondence, it is entitled to $427,498.70 inclusive of HST and disbursements. In my view, this amount is fair and reasonable having regard to the amounts at stake, the complexity of the issues, and the offers to settle put forward by Saramia. Moreover, the failure of the defendants to adduce evidence of their own costs has led me to infer that they have been charged equal or greater costs, such that they would have reasonably expected to pay Saramia’s costs in this amount.

Madam Justice J. T. Akbarali Date: June 06, 2017