CITATION: Frankovich v. CBI Limited, 2017 ONSC 546
COURT FILE NO.: 14-59775
DATE: 20170123
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: RENATA FRANKOVICH, Plaintiff
-and-
CBI LIMITED, Defendant
BEFORE: Mr. Justice Robert N. Beaudoin
COUNSEL: Janice B. Payne, for the Plaintiff Adrian Miedema, for the Defendant
HEARD: By Written Submissions
COSTS ENDORSEMENT
[1] This action was settled shortly before trial, save and except for the issue of costs. Counsel agreed to provide written submissions to the Court so that I could decide that issue.
Background
[2] The Plaintiff, Renata Frankovich, ("Frankovich") is a sports medicine doctor who began working for CBI Health Group and its predecessor in 1999. On July 23, 2013, the Defendant, CBI Limited, ("CBI") terminated its working relationship with the Plaintiff. No severance package was offered to the Plaintiff other than to reimburse her for some modest amounts for computer expenses.
[3] Frankovich claimed that she was an employee of CBI or, alternatively, that her contractual relationship with CBI was that of a dependent contractor. CBI took the position that it owed the Frankovich nothing because she was an independent contractor and it had always treated her as such for tax purposes.
[4] CBI's principal defence was that Frankovich had failed to mitigate her damages. CBI claimed that Frankovich had a number of sources of income after her termination from CBI and that independently of that relationship, she also worked as a surgical assistant at the Ottawa Hospital and as a teacher at University of Ottawa's faculty of medicine and that at no time was she unemployed. CBI maintains that Frankovich continued to have income from her other work after the termination of her relationship with CBI.
[5] CBI maintains that the main issue in this action was whether Frankovich took reasonable steps to mitigate her damages in that she had failed to move her practice to another clinic, despite numerous, appropriate and available options to do so. CBI maintains that Frankovich's productions revealed that a number of clinics in Ottawa, unsolicited, offered her an opportunity to move her practice. CBI maintains that it also offered to support Frankovich in relocating her practice in another clinic.
[6] Frankovich replies that approximately 75-80% of her income was from CBI and that CBI coordinated and administered all of her other income sources. She also argues that her employment status remained a live issue for trial and the options to transfer her practice as argued by CBI were not reasonable in the context of her specialized practice,
The Litigation
[7] Frankovich retained counsel and her attempts to negotiate the issue of her compensation were not successful. Frankovich commenced an action for wrongful dismissal on January 28, 2014. She claimed 12 months' notice period based on 14 years of service, her 53 years of age, and status as a professional. She also sought mitigation expenses, aggravated damages of $100,000, costs, and interest.
[8] CBI filed its defence on March 14, 2014. The parties proceeded to mediation which failed to resolve the litigation. Frankovich then served her offer, on July 4, 2014 of $135,000, plus interest, pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43. This amount reflected a twelve month notice including a deduction for mitigation income earned during those 12 months. According to Frankovich, this offer was meant to serve as a bottom-line offer to provide protection on costs because there was little chance that she would not beat that offer at trial. The offer provided for costs to be calculated on the following basis:
The defendant shall also pay costs, as fixed by the trial judge or assessed by an assessment officer or as agreed upon by the parties, on a partial indemnity scale up to the date of this offer and on a substantial indemnity scale after the date of this offer until the date of acceptance of payment, together with HST on these costs.
[9] CBI maintains that the fact that Frankovich never withdrew that offer demonstrates that she always believed that her case was worth only that amount.
Steps After the Offer to Settle
[10] Following the offer, there was documentary discovery; Frankovich produced six volumes of documents to support her claim that she mitigated her damages. Other issues arose in the course of litigation that were dealt with between counsel before or during the course of litigation. According to Frankovich, CBI had not produced all relevant documents and she alleges that CBI made scheduling examinations for discovery difficult, cancelled original dates for examinations and required her and her counsel to travel to Toronto to examine CBI's witnesses.
[11] There were two days of discovery followed by substantial list of undertakings from both sides. A representative for CBI was examined on October 29, 2014 and Frankovich was examined on December 3, 2000.
[12] According to Frankovich, she promptly complied with her undertakings and obligations but CBI did not. There was an exchange of correspondence with respect to the undertakings and eventually, Frankovich brought an Undertakings and Refusals motion scheduled for November 19, 2015. On November 17, 2015, CBI provided most of its answers to undertakings and the parties were able to resolve the refusals issue with a consent order that required CBI to answer certain refusals by December 18, 2015. The order did not speak to costs of the motion.
[13] CBI maintains that this was not a complicated case and that most of Frankovich's productions were irrelevant and not referred to at discovery. CBI maintains that it behaved reasonably throughout and that discoveries were only delayed by two weeks from the scheduled date and Frankovich was late in delivering her productions. This delay had no effect on costs. CBI adds that the delay on answering undertakings was minor having regard to the fact that CBI's two key witnesses were no longer employed by CBI.
[14] CBI also noted that the place of discoveries had been agreed to and Frankovich was not always timely with her productions. She produced an additional 133 pages of additional productions less than two months before the date set for the commencement of the trial.
[15] According to Frankovich, the documents she produced were all relevant as these detailed her efforts to mitigate her losses. On March 9, 2016, Frankovich set the matter down for trial. She sought to amend her Statement of Claim, updated her undertakings based on seeking a longer notice period, and prepared for and attended at a pre-trial conference on October 5, 2016. By this time, Frankovich's claim had risen to $640,236.84 (including $242,550.00 for pay in lieu of notice and $238,247.84 for mitigation expenses).
[16] The trial was scheduled to commence on November 28, 2016. Frankovich believed that there were little prospects that the matter would settle, and accordingly, her counsel prepared witnesses, a supplementary affidavit of documents, a chronological list of all documents for a Request to Admit and/or Joint Books of Documents for the hearing. Her counsel reviewed and organized Books of Documents and Discovery Transcripts and researched and updated case law in preparation for trial.
[17] On November 7, 2016, CBI made its first Offer to Settle the matter of $150,000 inclusive of costs. This was rejected by Frankovich. On November 11, 2016, two weeks before the start of trial and after Frankovich had done preparation; CBI unconditionally accepted the offer which had been open for acceptance since the end of the mediation.
[18] CBI's acceptance reads as follows:
The Defendant, CBI Health Group, hereby accepts the Plaintiff's Offer to Settle dated July 4, 2014, with costs to be fixed by a judge or as agreed upon by the parties.
The Positions of the Parties
[19] Frankovich submits that the amount of costs of the action should be paid as set out in the offer; partial indemnity costs up until the date of the offer and substantial indemnity thereafter. She seeks costs in the amount of $132,769.09
[20] The Plaintiff relies on case law that concludes that the purpose of an Offer to Settle is meant to encourage resolution of disputes. This requires the opposite party to give serious consideration to whether to settle by accepting the offer or continue with litigation and risking cost consequences.[^1] Frankovich also cites case law where it has been recognized that it is particularly important to give way to all Offers to Settle in wrongful dismissal cases.[^2]
[21] Frankovich maintains that CBI took this risk and, as such, should pay the costs as set out in her Bill of Costs. CBI had over two years to accept that offer and required her to go through a full discovery, preparation for a motion, a pre-trial and a substantial amount of preparation for trial before finally accepting to offer to settle. Frankovich maintains that there is no justifiable reason to discount her costs and that her offer was considerably less than the full value of her claim and contained a significant element of compromise.
[22] CBI admits and accepts its obligation in the accepted Offer to Settle to pay costs, but submits that the quantum of costs claimed is excessive and disproportionate. CBI maintains that it acted reasonably throughout and that its position that Frankovich failed to take reasonable steps to mitigate her damages was reasonable.
[23] CBI's primary position relies on the fact that there was no trial; and for that reason, I cannot determine whether or not Frankovich's Offer to Settle represented a "compromise" since I do not have an evidentiary record that would permit me to make such a finding. CBI submits that in the case of an accepted Offer to Settle, Frankovich should be taken as having concluded that the Offer to Settle represented a reasonable approximation of the damages that she would be expected to obtain after trial.
[24] CBI relies on the fact that there was no trial; only two days of discoveries, one mediation and one pre-trial. It maintains that this was not a complicated case and relies on case law where courts have refused to award a premium on costs for uncomplicated cases which settle for a modest amount.[^3]
[25] Finally, CBI takes the position that the amount claimed for costs is disproportionate. It cites and relies on rule 1.04(1.) of the Rules of Civil Procedure, R.R.O. 1990. Reg. 194. It points out that Frankovich is now claiming costs in the amount of $132,769.09 including disbursements and HST which amount to approximately 98% of the amount recovered by her in a matter which did not even proceed to trial. CBI maintains that Frankovich's costs are too high and defeat the principle of proportionality as set out in the Rules.
[26] CBI refers to Frankovich's claim for costs of $33,788.50 for the discovery plan and examinations for discovery when there were only two days of discovery. It also notes that Frankovich claims costs of $19,500.90 for pre-trial preparation and attendance. CBI submits that $35,000 is the appropriate amount for costs.
[27] In reply, Frankovich notes that CBI has not provided specific examples of why her costs were unreasonable other than for the two items referred to in its submissions. Frankovich says that CBI is simply asserting that her costs are unreasonable in the abstract. Moreover, Frankovich notes CBI's failure to put forth its own Bill of Costs and asks me to assume that CBI spent as much or more time to contest this action.[^4]
[28] Frankovich adds that CBI confuses the purpose of a Rule 49 offer when it suggests that it is an estimate of what Frankovich expected to recover rather than the bottom line number she was willing to accept to protect her legal fees and avoid the expense of litigation. While CBI focuses on proportionality, Frankovich underlines the equally important rule 1.04(1) which require "the rules to be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits."
[29] Frankovich concludes that it would be an absurd result for CBI to sit on an offer until the eve of trial, drag a former employee through almost the entire litigation process, and then argue at the end of it that it ought not pay her costs when it could have put the matter to rest two years earlier.
Analysis and Conclusion
[30] CBI accepted an Offer to Settle that required it to pay costs "on a partial indemnity scale up to the date of this offer and on a substantial indemnity scale after the date of this offer until the date of acceptance." While there were options as to how those costs would be determined, there was no uncertainty as to the scale of costs payable. The only real issue is the quantum of those costs.
[31] As such, case law that deals with an offer's compliance with the provisions of rule 49.07, or that examines a trial outcome against an offer to determine if the offer contained an element of compromise, is not helpful.
[32] On its face, this was not a routine wrongful dismissal case. Frankovich's status as an employee or dependent/independent contractor was an arguable issue. Given that Frankovich was an experienced medical doctor with a specialized practice, the mitigation arguments were legitimate and more complex. In the final amendment to her claim, Frankovich was seeking $238,247.84 for those mitigation expenses alone.
[33] Having said that, Frankovich made a Rule 49 offer early in the proceedings having regard to the costs consequences available through rule 49.10. I accept that this was a bottom-line position to avoid the costs, delays and uncertainties of litigation. That is the purpose of the Rule, and the service of well-considered offers should be encouraged and rewarded.
[34] While it was reasonable for CBI to take some time to assess the evidence and to re-evaluate its position with respect to the Frankovich's claims, CBI nevertheless accepted that early offer and agreed to compensate Frankovich for her costs on its terms. CBI might have improved its earlier offer and or quantified what it was willing to pay for costs, but it did not.
[35] While the amount claimed is high, CBI has failed to provide its own Bill of Costs and this makes the task of assessing Frankovich's Bill of Costs more difficult. It also leads me to infer that CBI devoted comparable time in an attempt to contest these claims. As for proportionality, rule 1.04(1.) provides :
Proportionality
In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.
[36] The "amount involved" is the last of three factors in assessing proportionality. Courts can, and do award costs that exceed the amount claimed or recovered at trial.[^5] Moreover, CBI focuses on the settlement amount and not the $640, 236.84 that would be claimed at trial.
[37] Given the lack of any comparable information from CBI, I am left with my own review of Frankovich's Bill of Costs and the information provided to me in the written submissions. Ms. Payne's initial hourly rate was $475 per hour and later increased by increments to $575 per hour. It appears that associates billed hourly rates from $200 per hour to $300 per hour. Student time is billed at $135 per hour and law clerks at $145, $150 and $165 per hour.
[38] The partial indemnity rate is calculated at 66% and the substantial indemnity rate at 90%. Total disbursements inclusive of HST are $9,146.32 and appear reasonable and no complaint has been made with respect to this amount.
[39] I note that Ms. Payne has docketed over 40 hours for discovery preparation, but this would appear to include travel time. I agree with CBI that this seems high for two days of discovery, but then again, I do not know how much time CBI devoted to this task. The discovery issues were more challenging. Frankovich was earning income from other sources and she had to document the costs of relocating her practice.
[40] Ms. Payne has docketed 9 hours of time to review transcripts and undertakings when at least 4 other individuals are devoting time at a much lesser rates; a total of 62.65 hours of time has been allocated to this task. This is the kind of work that might be assigned to law clerks and junior counsel, and the amount of time appears excessive.
[41] As for the pre-trial, it appears that a junior counsel has docketed 31.3 hours in addition to the nearly 16 hours docketed for Ms. Payne. 77.30 hours for all staff have been docketed; more than double the time spent in preparation for mediation although some of this time appears to be spent in trial preparation as well. This too seems excessive.
[42] I have no issue with the amount or the time claimed for trial preparation but I note that more time (almost 48 hours) was docketed for cancelling the trial and scheduling the costs arrangements and preparing cost submissions. I would discount the amount claimed as well.
[43] I would allow a total amount claimed for fees on a partial indemnity basis inclusive of HST in the amount of $19,577.13. I allow the amount of $80,000 on substantial indemnity basis for fees incurred between the date of the offer and its acceptance, and for cost submissions to which sum the amount of $10,400 for HST must be added. This results in a total of $109, 977.13 for fees and $9,146.32 for disbursements for Total Fees and Disbursements with HST in the amount $119, 123.45.
Mr. Jusitce Robert N. Beaudoin
Date: January 23, 2017
CITATION: Frankovitch v. CBI Limited, 2017 ONSC 546
COURT FILE NO.: 14-59775
DATE: 20170123
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: RENATA FRANKOVICH v. CBI LIMITED, Plaintiff
-and-
CBI LIMITED, Defendant
BEFORE: Mr. Justice Robert N. Beaudoin
COUNSEL: Janice Payne, for the Plaintiff Adrian Miedema, for the Defendant
COSTS ENDORSEMENT
Beaudoin J.
Released: January 23, 2017
[^1]: Puri Consulting Limited v. Kim Orr Barristers PC, 2015 ONCA 727, 128 O.R. (3d) 14 at para. 28
[^2]: Chandran v. National Bank of Canada, 2011 ONSC 4369 at para. 27, Moldovanyi v. Canac Kitchens Ltd. (Kohler Ltd.), 2009 9369 (ON SC) at para.14
[^3]: Huff v. Dailey, 2006 7025 (ON SC) at para. 26; Mullin v. Lagace, 2015 ONSC 4267, 78 C.P.C. (7th) 165, at paras. 3 and 29
[^4]: United States v. Yemec, (2007) 2007 65619 (ON SCDC), 85 O.R. (3d) 751 (Div. Ct.) at para. 54
[^5]: See Webster v. B.C.R. Construction Incorporated, 2014 ONSC 5657, 47 R.P.R. (5th) 56, (Div. Ct.)