241 Pizza (2006) Ltd. v. Loza

CITATION: 241 Pizza (2006) Ltd. v. Loza 2017 ONSC 4171

COURT FILE NO.: CV-13-477423

DATE: 20170705

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 241 PIZZA (2006) LTD. and 6438067 CANADA LTD., Plaintiffs (Defendants by Counterclaim)

AND:

RITA LOZA and 1587923 ONTARIO INC., Defendants (Plaintiffs by Counterclaim)

BEFORE: R.F. Goldstein J.

COUNSEL: Allan D.J. Dick, for the Plaintiffs

Daanish Samadmoten, for the Defendants

HEARD: In Writing

ENDORSEMENT

[1] On October 24, 2016 I granted summary judgment to the Plaintiffs: 241 Pizza (2006) Ltd. v. Loza, 2016 ONSC 6623. The Plaintiffs are franchisors of the 241 Pizza chain. The Defendants operate a franchise in Timmins, Ontario. The Defendants failed to make royalty and other payments. The Plaintiffs sued for non-payment of those amounts. The Defendants counter-claimed for breach of contract. On the summary judgment motion the Defendants argued that the matter should go to trial so that the claim and counterclaim could be heard together.

[2] I found that equitable set-off did not apply and that most of the equitable factors raised were without merit. I did not, however, dismiss the counter-claim.

[3] The matter of costs is now before me. As well, the Plaintiffs supplied a draft order. I will deal first with costs.

COSTS

[4] The Plaintiffs supplied a costs outline. They seek costs of $34,556.53 on a substantial indemnity basis. They seek substantial indemnity costs on the grounds that clause 15.10 of the Franchise Agreement provides for it. That clause states that the Defendants will pay costs on a solicitor-client basis where the Plaintiffs incur legal fees. The partial indemnity costs of the Plaintiffs amount to $26,012.15. The actual costs actually billed to the client as set out in the costs outline are $49,925.10.

[5] The costs outline supplied by the Defendants is lower. The partial indemnity costs outlined are $18,930.00; the substantial indemnity costs are $28,147.00; and the actual costs are $31,220.00.

[6] In Boucher v. Public Accountants Council for Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) the Court of Appeal articulated the fundamental principle that costs awards must be fair and reasonable in the circumstances. The Divisional Court in Andersen v. St. Jude Medical Inc. (2006), 2006 CanLII 85158 (ON SCDC), 264 D.L.R. (4th) 557, [2006] O.J. No. 508 (Div.Ct.) fleshed out some of the factors that are set out in Rule 57.01(1) of the Rules of Civil Procedure.

[7] I will deal with some of the factors set out in the costs outlines wile guided by Rule 57.01(1) and the principles set out in Boucher and Andersen.

[8] Complexity of the Proceeding: This motion was not complex. It was, as the Plaintiff’s counsel notes, a straightforward claim for non-payment. I do not agree that it was made more complex by the Defendants raising equitable set-off. As the Plaintiff’s counsel also pointed out, the claim of equitable set-off had little merit. That issue was not difficult to deal with.

[9] Conduct of the Parties: Neither party acted unreasonably or prolonged the proceeding.

[10] Reasonable Expectations Of The Parties: The Plaintiffs are not wrong to argue that the Franchise Agreement governs, and that the Defendants should have expected to pay substantial indemnity costs if they lost. I agree, but I bear in mind that the awarding of costs is discretionary: CIBC World Markets Inc. v. Burgesss, [2009] O.J. No. 2511 (Sup.Ct.) at para. 13 per Brown J. (as he then was).

[11] Quantum: Partial indemnity costs generally seem to be awarded on the basis of 60% to 65% of actual costs. Substantial indemnity costs seem to be awarded on the basis of 90% of actual costs: Stetson Oil & Gas Ltd. v. Stifel Nicolaus Canada Inc., 2013 ONSC 5213 at paras. 24-25.

[12] Both parties Bill of Costs seem to reflect the costs of the entire action, meaning both the claim and the counter-claim. It seems to me that the costs sought by the Plaintiffs are excessive, especially given the relatively straightforward nature of the motion. The amounts suggested by the Defendants are much more in line with a reasonably simple motion that took less than two hours to argue. Accordingly, I award the Plaintiffs $15,000.00 in costs for this motion. In my respectful view, that is fair and reasonable in the circumstances.

THE DRAFT ORDER

[13] The Plaintiffs supplied a draft order. Clause 2 of that order reads:

THIS COURT ORDERS AND ADJUDGES that the Counterclaim be and the same is hereby dismissed.

[14] In my Reasons for Judgment, there is no doubt that I expressed a negative view about the viability of the counterclaim. In my view, it would be equitable to dismiss the counter-claim. I found that it had no merit. It would be unjust to the Defendants – leaving aside the Plaintiffs – if I allowed the counterclaim to go forward. All that would happen is that they would fight a rearguard action and incur more costs. Accordingly I will sign the draft judgment dismissing the counter-claim.

POST-JUDGMENT INTEREST

[15] The draft order also orders that post-judgment interest on the sum of $178,041.04 be paid. This represents the contractual amount of 24% per annum. The Plaintiffs have actually calculated interest simply, rather than compounded the interest.

[16] Although the 24% amount seems excessive, it is the amount that was contracted for between the parties. Notwithstanding the imbalance of power between a franchisor and a franchisee, this was a clause that formed part of the standard agreement. The defendants had the benefit of legal advice when they signed the agreement. To fail to enforce this clause in the absence of exceptional circumstances would be to impose a rule that all such clauses are in the nature of a penalty. Without further evidence, I cannot do that. Furthermore, to fail to enforce this clause would be to interfere with the freedom of contract of the parties: Hav-A-Kar Leasing Ltd., 2011 ONSC 478 at para. 46; National Leasing Group Inc. v. Verbanac Law Firm Professional Corp., 2015 ONSC 145 at paras. 19-22.

[17] Accordingly, post-judgment interest at the rate of 24% per annum is granted in accordance with the draft order.

R.F. Goldstein J.

Released: July 5, 2017