Court File and Parties

Citation: Danilova v. Nikityuk, 2017 ONSC 6434 Barrie Court File No.: CV-13-1101-00 Date: 2017-10-30 Superior Court of Justice - Ontario

Re: Svetlana Danilova and Pavel Danilov, Plaintiffs And: Alla Nikityuk, Valentin Nikityuk, Yana Skybin, Young Men’s Christian Association operating as YMCA Simcoe/Muskoka, Defendants

Before: The Hon. Mr. Justice G.M. Mulligan

Counsel: A. Chapman, Counsel for the Plaintiffs L. Loader, E. Bornmann, and M. Phan, Counsel for the Defendants Alla Nikityuk and Valentin Nikityuk A. Mae and W. Thomson, Counsel for the Defendants Young Men’s Christian Association operating as YMCA Simcoe/Muskoka

Heard: By written submissions

Costs Endorsement

[1] This matter proceeded by way of a 20-day non-jury trial. In this action, there are two groups of defendants: the Nikityuk defendants (Alla Nikityuk and Valentin Nikityuk) and the YMCA defendants (Yana Skybin and Young Men’s Christian Association o/a YMCA Simcoe/Muskoka). For Reasons released June 28, 2017, the plaintiffs’ claims against both defendant groups were dismissed. The Nikityuks’ counterclaim against the Danilovs was granted. In their counterclaim, the Nikityuks were awarded damages in the amount of $277,318 together with punitive damages of $25,000 and interest.

[2] In accordance with the Reasons for Decision the parties were invited to make submissions as to costs. Both the Nikityuk defendants and the YMCA defendants made submissions as to their respective costs. The Danilov plaintiffs made submissions in reply.

History of the Proceedings

[3] As noted in the YMCA defendants’ costs submissions, the plaintiffs brought two separate actions. Those actions were consolidated. There were numerous motions brought in preceding years. The YMCA defendants brought a motion for partial summary judgment before Corkery J. Justice Corkery dismissed certain claims by the Danilovs against the YMCA defendants, but reserved certain claims for trial. Those remaining claims were therefore dealt with as part of this trial.

[4] With respect to costs, Justice Corkery noted, “[The YMCA defendants] have been partially successful on this motion. I am prepared to receive brief written submissions as to costs within 14 days.” No such submissions were made to Justice Corkery. The issue of whether or not the costs were reserved to the trial judge is disputed. As the Danilov plaintiffs state in their Costs Submissions at para. 2, “The YMCA defendants have stated that the costs of the summary judgment motion were not dealt with and were agreed to between the parties that they would be a trial issue. This is incorrect.” In response to that, the YMCA defendants made further costs submissions. A copy was forwarded to counsel for the Danilovs in the event that further submissions would assist the court. No further submissions were received. In their Reply Submissions, the YMCA defendants made reference to e-mail correspondence between counsel for the parties.

[5] On July 17, 2015, counsel for the YMCA defendants wrote, “I can confirm that I have instructions from my client to formally offer that we leave the costs of the motion to be determined by the trial judge.” On the same day, counsel for the Danilov plaintiffs replied, “Please be advised that the plaintiffs are in agreement with the proposal of having the costs determined by the trial judge.”

[6] I am therefore satisfied that the parties had agreed that the costs of the summary judgment motion are to be dealt with as part of the YMCA defendants’ costs submissions.

Offers to Settle

[7] I pause to note that the parties made offers to settle prior to this trial. The plaintiffs’ first offer to settle indicated that they would settle the action upon receipt of the sum of $250,000. The Danilov plaintiffs subsequently withdrew that offer and increased their settlement offer to $350,000.

[8] As a result of the trial, the plaintiffs received no judgment against neither of the two defendant groups.

[9] The two defendant groups made an offer to settle the action for $40,000, payable to the plaintiffs. They subsequently revised that offer, indicating that the matter would be settled upon the payment by them of $60,000 to the plaintiffs.

[10] Both the defendant groups were successful at trial and in my view, are entitled to costs. The issue to be determined is the quantum of costs and whether or not costs on an elevated scale are warranted in this case. I will examine the costs claims of each group of defendants separately.

The Nikityuk Defendants

[11] The Nikityuk defendants were represented by staff lawyers from the Community Legal Clinic – Simcoe, Haliburton, Kawartha Lakes (the Clinic). The amount claimed can be summarized as follows:

(i) Substantial indemnity fees $108,472.50 (ii) Disbursements including HST $ 17,012.52 Total $125,485.02

Or partial indemnity to March 3, 2016, and substantial indemnity thereafter:

(i) Fees at 66.6% to March 3, 2016 $17,328.30 (ii) Fees at 90% after March 3, 2016 $84,843.00 (iii) Disbursements (including HST) $17,012.52 Total $119,183.82

[12] The largest portion of the Nikityuk defendants’ disbursements related to translation services from Russian to English. I am satisfied that these expenses are fair and reasonable under the circumstances and were within the reasonable expectation of the Danilovs. The Danilovs sponsored the Nikityuks’ immigration to Canada. They spoke no English upon their arrival. The translation of documents was no doubt important so they could understand the claims against them and properly instruct counsel.

Analysis

[13] It is well-settled that s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 provides considerable judicial discretion on the issue of fixing costs. The principles set out in Rule 57.01 of the Rules of Civil Procedure also give guidance to the court. In Serra v. Serra, 2009 ONCA 395, [2009] O.J. No. 1905, the Ontario Court of Appeal provided the following guidance on costs principles at para. 8:

Modern costs rules are designed to foster three fundamental purposes:

(i) to partially indemnify successful litigants for the costs of litigation; (ii) to encourage settlement; and (iii) to discourage and sanction improper behaviour by the litigants.

[14] It is clear that the awarding of costs on a substantial indemnity basis is only rarely granted. As Fedak J. stated in Dyre v. Mekindassnyder Partnership Inc., 1998 14847 (ON SC), [1998] O.J. No. 2204, at para. 4:

That it is only in the rare and exceptional case that costs are awarded on the solicitor and client scale, rather than a party and party scale…Only conduct of a reprehensible nature has been held to give rise to an award of solicitor and client costs.

[15] In Davies v. Clarington (Municipality), 2009 ONCA 722, [2009] O.J. No. 4236, Epstein J.A. for the Court of Appeal of Ontario, reviewed the issue of awarding of costs on an elevated scale. As she stated at para. 28:

This Court, following the principle established by the Supreme Court, has repeatedly said that elevated costs are warranted only in two circumstances. The first involves the operation of an offer to settle under Rule 49.10, where substantial indemnity costs are explicitly authorized. The second is where the losing party has engaged in behaviour worthy of sanction.

[16] As set out in detail in my Reasons for Decision, the Danilovs were wholly unsuccessful in their damages claim against the Nikityuk defendants. On the other hand, the Nikityuk defendants were wholly successful in their counterclaim against the Danilovs. The Danilovs were found to be in breach of contract, in breach of their fiduciary duties, and they were unsuccessful in their claim for fraudulent misrepresentation against the Nikityuks. In addition, the Nikityuks were successful in achieving an award of $25,000 for punitive damages against the Danilovs. As noted in my Reasons for Decision at para 206:

The Nikityuks were vulnerable people when they arrived in Canada. They spoke no English and they trusted the Danilovs. Clearly, this was a case of elder abuse.

[17] I am satisfied that this is one of those rare and exceptional cases where substantial indemnity costs ought to be awarded as claimed by the Nikityuk defendants. I therefore award costs on a substantial indemnity basis for fees, disbursements and HST of $125,485.02, payable by the plaintiffs to the Nikityuk defendants forthwith.

Claims of the YMCA Defendants

[18] The YMCA Defendants as successful defendants at trial, and with respect to their partial success at the summary judgment motion, claim total costs broken down as follows:

Substantial indemnity basis 90% of costs $268,941.44 Plus HST $ 34,962.39 Plus Disbursements (including HST) $ 7,583.03 Total $311,486.86

Or alternatively:

Partial indemnity based at 66% of costs $197,223.72 Plus HST $ 25,639.08 Plus Disbursements (including HST) $ 7,583.03 Total $230,445.83

Position of the Plaintiffs

[19] The plaintiffs do not dispute the YMCA defendants’ entitlement to costs, but did dispute the issue of costs flowing from the summary judgment motion. As previously indicated in these reasons, I am satisfied that these defendants are entitled to have their costs assessed on the summary judgment motion, as well as the trial itself. The plaintiffs dispute some disbursement costs claimed by these defendants and hourly rates with respect to lawyers and law clerks.

[20] In its costs submissions, the YMCA defendants highlighted two of the costs issues that courts ought to consider pursuant to Rule 57.01.

[21] With respect to 57.01(d), the importance of the issues, the YMCA defendants submit:

For these defendants, the importance of this claim came in multiple parts; these defendants are a recognized community service provider and the claim arose out of the provision of such services. Had any part or parts of the claim been successful against them, it stood the chance of damaging their reputation significantly; the amounts of any award from a public policy perspective, a decision against these defendants in respect of any of the heads of claim, would have resulted in a disincentive to all service providers from assisting parties in need arising from similar or indeed, different circumstances of abuse.

[22] Subparagraph 57.01(e) and (f) require the court to consider the conduct of the party and whether any step in the proceeding is improper, vexatious or unnecessary.

[23] As the YMCA defendants state in their submissions:

Generally speaking, it is submitted that, particularly give the outcome of the trial, that the entirety of the plaintiffs’ claim was vexatious and was nothing more or less than an attempt at a “pre-emptive strike” in order to stave off any claim brought by the Nikityuks arising from the abuse they suffered at the hands of the plaintiffs.

[24] As the YMCA defendants submit, the Danilov plaintiffs have not submitted their own costs for comparison purposes. In determining the expectation of the parties, it is always helpful to the court if the losing party shows what its costs were with respect to the same matter: Ward Price v. Mariner’s Haven Inc., [2004] O.J. No. 5528.

[25] The YMCA defendants further submit that their actual billable time was discounted internally to take into account the duplicity of costs arising from the handover of the file from one solicitor to another within the firm.

[26] In the summary judgment motion, Justice Corkery dismissed some claims against the defendant, Yana Skybin, or the defendant, YMCA, and noted that these defendants had achieved partial success of the summary judgment motion. The balance of the remaining claims against Yana Skybin or the YMCA defendants were dismissed. The claims remaining against these defendants and unsuccessfully pursued at trial can be listed as follows:

• The plaintiffs’ claim and negligence against Ms. Skybin • Claims against the YMCA and negligence for vicarious liability • Conspiracy • Inducing breach of contract • Defamation

[27] I have already reviewed the principles concerning substantial indemnity rates with respect to the claims against the Nikityuk defendants. In my view, those principles do not have the same application as against the Danilov plaintiffs. I am guided by the summary judgment decision of Corkery J., disallowing certain claims against the YMCA defendants, but allowing other claims to be advanced. Clearly, he had a substantial record before him and gave thoughtful reasons as to why certain claims ought to go to trial. There was no suggestion at that stage that the claims were vexatious or an abuse of process. I am satisfied that the usual rule, partial indemnity costs, ought to apply here.

[28] In assessing costs, I am mindful of the principles of reasonableness and proportionality. In Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722, [2009] O.J. No. 4236, Eptstein J.A. stated at para. 52:

As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engaging in a purely mathematical exercise, the judge awarding costs should reflect on what the Court views as a reasonable amount that should be paid by the unsuccessful party, rather than the exact measure of the actual costs of the successful litigant.

[29] Proportionality is also a factor to be considered by the court. Rule 1.04(1.1) provides, “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.” After reviewing the submissions from both parties and considering the guiding factors with respect to partial indemnity costs, I am satisfied that an award of $200,000 for fees, disbursements and HST is appropriate and reasonable under the circumstances. These costs are payable by the plaintiffs to the YMCA defendants forthwith.

Summary

[30] I therefore award costs on a substantial indemnity basis for fees, disbursements and HST of $125,485.02, payable by the plaintiffs to the Nikityuk defendants forthwith. I also award costs in the amount of $200,000 for fees, disbursements and HST, payable by the plaintiffs to the YMCA defendants forthwith.

MULLIGAN J.

Date: October 30, 2017