Court File and Parties

COURT FILE NO.: CV-09-0512 DATE: 2017-11-17

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

J.I.L.M. Enterprises & Investments Limited Plaintiff

C. Hacio, for the Plaintiff

- and -

INTACT Insurance (formerly called ING Insurance Company of Canada) Defendant

R. Clinker and U. Agostino, for the Defendant

HEARD: October 26, 2017, at Thunder Bay, Ontario

Mr. Justice W.D. Newton

Decision On Costs

Overview

[1] The plaintiff, J.I.L.M., owned business property that was destroyed by fire. The defendant, INTACT, insured the property.

[2] In J.I.L.M. Enterprises & Investments Limited v. INTACT Insurance, 2017 ONSC 357, I found that INTACT had breached its contract of insurance with the plaintiff by improperly delaying payment of the actual cash value of the destroyed building. I found that there was an unjustifiable delay of two years in making that payment. As a consequence, I awarded damages for lost profits of $248,397 (to January 31, 2014), punitive damages of $217,373.20 and found that the replacement cost owing under the policy, should replacement be undertaken, was increased by approximately $132,000 to $478,509.

[3] The plaintiff seeks costs of $350,000 for fees, plus HST, plus almost $124,000 for disbursements for this 15 day trial. INTACT argues that the amounts claimed are excessive and that the total award for costs, disbursements and HST should be in the range of $225,000-$250,000.

Submissions of the Parties

[4] The parties agree that there are no formal Rule 49 offers that impact on costs. Rule 49 offers submitted with the cost submissions indicate that prior to trial INTACT was prepared to pay approximately $355,000 plus interest and costs to resolve the claim. The plaintiff was seeking approximately $1 million plus costs in addition to the advances already made.

[5] What the plaintiff is seeking for costs ($350,000) is close to its full indemnity costs ($349,898 for counsel fee for Mr. Hacio and $22,819 for his clerk, Ms. Sharp – total indemnity costs $372,717). The plaintiff argues that substantial indemnity costs are warranted because INTACT alleged arson and criminality against the director and employee of J.I.L.M. and acted in bad faith in delaying payment of the claim.

[6] INTACT argues that costs should be payable on a partial indemnity scale and that INTACT’s conduct in denying the claim has already been addressed by the punitive damage award. INTACT, generally, does not dispute the rates claimed by Mr. Hacio and his clerk nor the hours docketed except for certain discrete charges. INTACT argues that, on a partial indemnity basis, the plaintiffs costs would be reduced to approximately $225,000 subject to further reduction of approximately $47,000 for secretarial time as opposed to clerk time, time spent on motions improperly claimed, and time spent on the appraisal, and other duplication.

[7] INTACT also argues that some of the disbursements claimed were unnecessary or excessive. It attacks an agency account for discoveries, a Form Architecture report and seeks a reduction in the expert fees claimed with respect to the accountant retained by J.I.L.M. to calculate the business interruption or lost profit claim.

[8] Finally, INTACT submits that the costs claimed should be further discounted by 25% to reflect the divided success at trial arguing that many of the claims advanced by J.I.L.M. were not accepted. Specifically, INTACT notes that J.I.L.M.’s claim for rebuilding costs in excess of the replacement cost endorsement and J.I.L.M.’s claim for lost profits beyond January 31, 2014 to May, 2018 were denied. These issues were associated with J.I.L.M.’s failure to mitigate – it did nothing to proceed with rebuilding despite receiving over $1 million for the actual cash value of the building from INTACT in May 2012.

The Law

[9] Rule 57.01 of the Rules of Civil Procedure provides:

57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs. R.R.O. 1990, Reg. 194, r. 57.01 (1); O. Reg. 627/98, s. 6; O. Reg. 42/05, s. 4 (1); O. Reg. 575/07, s. 1.

[10] In Boucher v. Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (Ont. C.A.), the Court of Appeal indicated that a costs award should be a “fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs of the successful litigant.” A “fair and reasonable amount" is that amount which the unsuccessful party could reasonably have expected to pay in the event of lack of success in the litigation: Lupien v. Carmichael, 2017 ONSC 2929, at para. 9.

[11] Determining the amount of costs is not simply a mechanical exercise. Costs must be proportional to the amount in issue and the outcome: Boucher v. Public Accountants Council (Ontario), supra.; Lawrence v. Lawrence, supra, at para. 64.

[12] In support of its “divided success” argument, INTACT relies upon Mayer v. 1474479 Ontario Inc., 2014 ONSC 2633, Rimmer v. Lahey, 2013 ONSC 7109 and Zander Sod Co. v. Solmar Development Corp., 2011 ONSC 3874.

[13] Mayer was a claim for damages following a car accident. While over $2 million was sought, the jury awarded approximately $120,000 after deductibles. The plaintiff sought costs including approximately $250,000 for fees and $150,000 for disbursements. No costs were awarded to the plaintiff.

[14] Rimmer was a claim for damages for alleged deficiencies in residential property purchased by the plaintiffs. The plaintiff claimed $250,000 in damages but was awarded under $20,000. Although the plaintiff claimed costs of approximately $140,000 for fees disbursements and taxes, the court fixed costs at approximately $11,000.

[15] Zander Sod was a claim for damages for an aborted real estate transaction. The damages sought were approximately $3 million but the court found that the parties had agreed to a stipulated sum of $500,000 as liquidated damages and granted judgment for that amount. Noting that the plaintiff was successful but that the defendant did have some success on the damages issue, trial judge reduced costs sought by 25%.

Analysis and Disposition

[16] This was a complex proceeding and the issues, breach of contract and bad faith, were important to both parties. I note that INTACT is a sophisticated litigant and very aware of the cost of litigation.

[17] The practical effect of my judgment is that the plaintiff became entitled to about $600,000 more than they would have been had it not proceed to trial. Interest is to be added to some of that amount. Consequently, the award falls between the offers to settle made by the parties.

[18] As to scale of costs, I agree with INTACT that punitive costs are not appropriate as I have already awarded substantial punitive damages.

[19] With respect to the clerk time, having reviewed the dockets, I am satisfied that it is appropriate to claim this time as clerk time. With respect to other reduction sought, I am satisfied that the time claimed by counsel for the plaintiff should not be reduced as the impugned work was necessary, although at times incidental, to the conduct of this action.

[20] Similarly, I accept that the disbursements claimed were appropriate except for the concession of approximately $500 made during argument. With respect to the claim that the accountant’s fees should be reduced, the accountant provided valuable assistance in calculation of the damages. It was helpful and appropriate to have the accountant listen to relevant evidence called by INTACT on the business loss claim and her modification of the scenarios based on criticism and suggestions from INTACT’s experts was necessary and helpful. As I indicated in paragraph 52 of my reasons for judgment the collaboration of the two experts provided great assistance. Accordingly, I see no basis to interfere with the claimed disbursements for the experts.

[21] With respect to divided success, although I did not award all the business interruption loss claimed, I made a substantial award for this claim. I am satisfied that most of the work by counsel and the experts on this issue was necessary to support the losses that I awarded. I find that the additional work to advance the claims which I did not allow would not have been significant. However, the claim that I should award rebuilding costs in excess of the modified replacement cost limit did not succeed. That was based on the plaintiff’s failure to mitigate and I agree with the defendant that there should be a modest reduction in fees and disbursements to reflect this divided success.

[22] Accordingly, I fix the plaintiff’s costs on a partial indemnity basis at $210,000 for fees. This includes the cost for the costs argument. HST is to be added to that amount. I fix disbursements and taxes on disbursements at a total of $115,000.

“Original signed by” ____

The Hon. Mr. Justice W.D. Newton

Released: November 17, 2017

COURT FILE NO.: CV-09-0512 DATE: 2017-11-17 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: J.I.L.M. Enterprises & Investments Limited Plaintiff - and - INTACT Insurance (formerly called ING Insurance Company of Canada) Defendant DECISION ON COSTS Newton J. Released: November 17, 2017 /sab