Huang v. Fraser Hillary’s Limited, 2017 ONSC 5313

CITATION: Huang v. Fraser Hillary’s Limited, 2017 ONSC 5313

COURT FILE NO.: 07-CV-39359

DATE: 2017/09/11

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

EDDY HUANG

Plaintiff

– and –

FRASER HILLARY’S LIMITED and DAVID HILLARY

Defendants

Michael S. Hebert and Cheryl Gerhardt McLuckie, for the Plaintiff

Jonathan O’Hara, for the Defendant, Fraser Hillary’s Limited

Paul Muirhead and Jeremy Rubenstein, for the Defendant, David Hillary

HEARD: In writing

ENDORSEMENT ON COSTS

P.E. Roger J.

Overview

Overview

1In this action, the plaintiff sued for damages arising from the contamination of the soils and groundwater of his commercial properties by dry cleaning products. The plaintiff’s amended statement of claim sought damages exceeding $17 million. At trial, the plaintiff sought damages of $4.5 million, plus declaratory relief and a mandatory order. This matter was tried over eight days and closing submissions were made in writing.

2The plaintiff was successful against the defendant, Fraser Hillary’s Limited (“FHL”), and was not successful against the defendant, David Hillary. Ultimately, I awarded damages totaling $1,834,226.71, plus applicable prejudgment and post judgement interest against FHL (see Huang v. Fraser Hillary’s Limited, 2017 ONSC 1500).

3The plaintiff and the defendant, David Hillary, have settled the issue of costs between them on the basis of an all-inclusive $50,000 payment to Mr. Hillary by the plaintiff. The plaintiff and the defendant, FHL, have not been able to resolve the issue of costs, which is the issue before this Court.

Positions of the parties

Positions of the parties

4The plaintiff claims costs on a substantial indemnity basis arguing that the conduct of FHL throughout this litigation has been sufficiently egregious to justify an award of costs on an elevated scale. The plaintiff’s costs total $275,871.31 on a partial indemnity basis and $382,655.15 on a substantial indemnity basis.

5The defendant, FHL, argues that:

− costs should be on a partial indemnity basis;

− costs should be reduced for the portion attributable to David Hillary;

− costs should be reduced to reflect the extent of divided success; and

− costs should be reduced to a more appropriate percentage for partial indemnity costs.

Analysis

Analysis

6Courts are given the task and discretion to determine the issue of costs (see section 131 of the Courts of Justice Act). Rule 57 of the Rules of Civil Procedure provides guidance and factors to consider when exercising this discretion, including: the result in the proceeding, any offer to settle, the principle of indemnity, the amount that an unsuccessful party could reasonably have expected to pay, the amount claimed and the amount recovered, the complexity of the proceeding, the importance of the issues, the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding, any unreasonable conduct or step that was improper, vexatious or unnecessary, a party’s denial or refusal to admit anything that should have been admitted, the time spent, and the principle of a proportionality.

The appropriate scale of costs

The appropriate scale of costs

7Substantial indemnity costs are generally limited to circumstances where either an offer to settle under rule 49.10 is applicable or where a party has engaged in behaviour worthy of sanction (usually involving reprehensible, scandalous or outrageous conduct – see Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66).

8In this case, the plaintiff’s offer to settle exceeded the amount awarded such that rule 49.10 does not apply. The plaintiff, however, alleges that the defendant’s refusal to admit liability while calling no witnesses and insistence that experts attend to testify lengthened and complicated the trial. The plaintiff also alleges that the defendant’s refusal to effectively deal with the contamination is additionally worthy of sanction.

9I find that the appropriate scale of costs is costs on a partial indemnity basis because the conduct of the defendant was not egregious. One cannot fault the defendant for defending the issues of liability and damages. These issues were highly contested and the damages awarded were ultimately less than the amounts sought by the plaintiff. Even if this was a hard fought battle, it was fought with courtesy, respect, and professionalism. This is not the kind of case that could attract costs on a higher scale because of the conduct of the defendant.

Costs attributable to David Hillary

Costs attributable to David Hillary

10FHL does not argue that too much time was spent by the plaintiff or that the fees or disbursements claimed by the plaintiff are out of proportion. Rather it argues that partial indemnity costs should be calculated in the range of 55% to 60% and not the 65% calculated by the plaintiff. It also argues that costs should be reduced to reflect the divided success and that it should not pay costs for the plaintiff’s case against David Hillary.

11I am not surprised by the amounts that are sought by the plaintiff for the costs of this action. Subject to the arguments made by FHL and subject to my findings on those arguments, I find the costs claimed by the plaintiff reasonable for a trial of this duration and complexity. Although this was not an overly long trial (eight days of trial plus written submissions) it raised a number of complex factual and legal issues such that the time spent is fair and reasonable.

12FHL has suggested a 50% reduction of the partial indemnity fees of the plaintiff for the time worked on this matter after David Hillary was added as a party in March 2011 (see Schedule A of FHL’s costs submissions). However, a 50% reduction exaggerates the impact of adding Mr. Hillary to this action. Mr. Hillary played a rather minimal role in this action and most of the plaintiff’s fees and disbursements would have been required irrespective of his involvement.

13$66,854.73 in partial indemnity fees was incurred before the addition of Mr. Hillary. According to FHL, $3,636.44 in partial indemnity fees is attributable specifically to Mr. Hillary and should not be included. $122,372.45 in partial indemnity fees is attributable to both FHL and Mr. Hillary for the period of time after Mr. Hillary was added as a party. FHL applies a 50% discount to the amount of $122,372.45, on the basis that Mr. Hillary doubled the time spent, to arrive at $61,186.23, and then adds the amount for the time prior to his addition as a party of $66,854.73 to arrive at a total amount for partial indemnity fees of $128,040.96. This applies too significant a reduction for the addition of Mr. Hillary, who did not cause a 50% increase to the work of the plaintiff’s lawyers.

14In my opinion, Mr. Hillary’s presence in this action did not increase the plaintiff’s actual fees by much more than 10%. Indeed, applying 10% to the actual fees incurred by the plaintiff after the addition of Mr. Hillary would allow roughly about $20,000 for his presence (10% of the total of $3,636.44 divided by .65 plus $122,372.45 divided by .65 = $19,385). This seems more than sufficient in the circumstances of this action, considering the limited additional discovery and limited additional evidence and submissions at trial, to account fairly and reasonably for the addition of Mr. Hillary on the plaintiff’s costs.

15The fact that Mr. Hillary settled the issue of costs with the plaintiff for an all-inclusive payment of $50,000 is irrelevant to my assessment of how Mr. Hillary’s presence increased the costs of the plaintiff. This amount relates to the costs of Mr. Hillary to defend this action and not to the costs of the plaintiff resulting from the presence of Mr. Hillary.

16I calculate the plaintiff’s partial indemnity fees excluding David Hillary as follows:

• Partial indemnity fees prior to the addition of Mr. Hillary: $66,854.73;

• I do not include the partial indemnity fees specifically attributable to Mr. Hillary as calculated by FHL ($3,636.44);

• 90% (10% reduction) of the partial indemnity fees attributable to both FHL and Mr. Hillary after the addition of Mr. Hillary: $110,135.21 (90% of $122,372.45); and

• Total of $176,989.94 in partial indemnity fees ($66,854.73 plus $110,135.21).

17FHL suggests a reduction to the disbursements for the addition of Mr. Hillary that is circular (because it is based on FHL’s reasoning regarding fees) and arbitrary. From my review of the disbursements, they are reasonable, proportionate, and within the reasonable expectation of a losing party. Moreover, the addition of Mr. Hillary had a minimal impact on the disbursements. I will therefore allow only a small reduction in the amount of $1,000 to the disbursements for the presence of Mr. Hillary (subject to 13% HST).

Success and amount claimed and recovered

Success and amount claimed and recovered

18FHL suggests that costs be reduced by two thirds to reflect both a 25% discount for limited financial success and a 33% discount for divided success on the issues.

19The plaintiff was primarily successful; I awarded over $1.8 million in damages to the plaintiff.

20Although I dismissed the declaratory relief that was sought by the plaintiff, this was not the primary relief sought by the plaintiff; monetary compensation was clearly the crux of this matter. In fact, very little trial time was devoted to these other claims made in the statement of claim and I had to request additional submissions to briefly deal with these issues.

21On the issue of damages, the plaintiff sought significantly more in damages in his amended statement of claim ($17.5 million) than the amount awarded by this Court. However, to be fair, it should have been clear to all defendants that the evidence of the plaintiff’s experts limited damages to an upper range of about $4.5 million. Moreover, on the other side of this debate, FHL denied any liability and argued, in the alternative, for damages that would have been a fraction of what I ultimately found appropriate.

22Consequently, on this point, a smaller reduction would therefore be fair and reasonable in the circumstances of this case. I will accordingly reduce the fee portion of the partial indemnity costs by 15% to account for the limited financial success and for the divided success on the issues. I will not further reduce the disbursements, as these are reasonable, irrespective of the limited financial success and divided success on the issues.

23Applying a 15% reduction for the limited financial success and for the divided success on the issues, brings the total partial indemnity fees to $150,441.45 ($176,989.94 multiplied by 85%).

Appropriate percentage for partial indemnity costs

Appropriate percentage for partial indemnity costs

24A reasonable percentage to calculate partial indemnity fees varies generally between 55% and 60% of actual fees (see Inter-Leasing Inc. v. Ontario (Minister of Revenue), 2014 ONCA 683 at para. 5).

25The actual rates indicated by the plaintiff in his bill of costs are generally reasonable and 60% of those amounts seems appropriate to calculate partial indemnity fees. I will therefore reduce the partial indemnity fees by 92.3% (60% divided by 65% – to bring them to 60%), which brings the total partial indemnity fees indicated above to $138,857.46 ($150,441.45 multiplied by 92.3%).

26This seems a fair and reasonable amount for the partial indemnity fees of this action considering the principle of indemnity and proportionality, and considering the reasonable expectations of the losing party.

Complexity and importance

Complexity and importance

27The factual and legal issues raised by this action were complicated. They were also extremely important to the parties.

Unreasonable conduct of any party

Unreasonable conduct of any party

28As indicated above, I did not find this factor to have had any material impact. As frustrating as the conduct of the defendants on the substantive issues might have been to the plaintiff, it did not in the circumstances of this action constitute conduct that should impact costs.

Conclusion

Conclusion

29The plaintiff is entitled to his costs of this action on a partial indemnity basis fixed in the amount of $138,857.46 for the fee portion, plus applicable taxes. In addition, the plaintiff is entitled to his disbursements of this action fixed in the amount of $54,737.53, plus applicable taxes.

30The GST/HST rate varied between 5% and 13% during this proceeding. FHL calculated that taxes represented 11% of fees and disbursements on the plaintiff’s bill of costs. I agree with this calculation and agree with FHL’s reasoning on this point; for simplicity’s sake, 11% should be recoverable and added to the above amounts. This would result in total costs for fees, disbursement and taxes payable by FHL to the plaintiff in the amount of $214,890.44 ($193,594.99 plus 11% blended rate for applicable taxes).

31This is an amount that is fair, proportionate and within the reasonable expectation of the losing party, FHL.