CITATION: Morgan v. Morgan, 2017 ONSC 838
BRACEBRIDGE COURT FILE NO.: CV-14-023
DATE: 20170202
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Daniel Morgan and Hillfinch Properties Ltd. o/a Bracehill Joint Ventures, Plaintiffs
AND:
Raymond Morgan and 859236 Ontario Ltd., Defendants
BEFORE: THE HON. MADAM JUSTICE E.A. QUINLAN
COUNSEL: D. Winnitoy and A. McInnis, Counsel for the Plaintiffs
D. Morin, Counsel for the Defendants
HEARD: By written submissions
COSTS ENDORSEMENT
Introduction
[1] The defendants brought an unsuccessful summary judgment motion in this action for a declaration on a mortgage claim; damages for unjust enrichment, breach of fiduciary duty and unpaid loans; and an oppression remedy. The defendants unsuccessfully argued that the action was an abuse of process commenced in an effort to extort money and was out of time. The plaintiffs’ position was that this matter was convoluted and therefore unsuitable for disposition by way of a motion for summary judgment. I accepted the position put forward by the plaintiffs and dismissed the defendants’ motion.
Summary of Findings
[2] There was an almost four year delay in bringing the summary judgment motion: it was not brought promptly and thus not in compliance with rule 21.01(3)(d) of the Rules of Civil Procedure. It cannot be said that the action clearly has no merit. There was no evidence to support the allegation that the plaintiffs brought the action solely for a collateral purpose or as a "bully tactic". Contrary to the defendants’ position, the plaintiffs are not attempting to re-litigate an issue. There is a genuine issue for trial regarding whether the claims are statute-barred, both on the basis that the Real Property Limitations Act may apply and on the basis of discoverability.
[3] This is exactly the sort of case envisioned in Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438. Business dealings have gone on between the parties for over 30 years. There are voluminous exhibits which have some bearing on the witnesses’ credibility and reliability. Expert valuation evidence may be necessary. This convoluted matter is unsuitable for disposition by way of summary judgment and summary judgment would fail to "serve the goals of timeliness, affordability and proportionality articulated by the Supreme Court in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87.
Positions of the Parties
The Plaintiffs’ Position
[4] The plaintiffs seek their costs on a full indemnity basis in the amount of $67,240.65. They argue that this scale of costs is appropriate as there have been unsubstantiated allegations of dishonesty levied against the personal plaintiff. In the alternative, the plaintiffs seek costs on a substantial indemnity basis in the amount of $57,266.42 because the defendants acted unreasonably in bringing the motion. The costs sought are what an unsuccessful party could reasonably expect to pay and the defendants’ failure to provide a costs outline ought to give rise to an inference that the defendants devoted as much or more time and money to the motion. The rates charged by the two counsel were reasonable and necessary given what lay at stake. The plaintiffs’ offer to settle, made well in advance of the motion and prior to incurring any costs, was not accepted and should accordingly attract significant costs consequences.
The Defendants’ Position
[5] The defendants’ position is that it was entirely reasonable to bring the motion in a reasoned attempt to avoid the need for what will likely be a lengthy trial. Preparation for this motion was necessary for the trial in any event. Costs should be in the cause or determined by the trial judge following the trial. In the alternative, if costs are awarded, the defendants ask that their obligation to pay costs be stayed pending the outcome of the trial to allow the personal defendant to meet his everyday financial obligations, while still providing him with the financial ability to pay for access to justice. There is no basis for full indemnity costs: the court did not make determinations of fact with respect to either parties’ conduct as it found that to do so requires a credibility assessment. The mere fact that the defendants were unsuccessful does not mean the motion was unreasonably brought. There is no reprehensible conduct that would support costs on a substantial indemnity scale. The offer did not represent a compromise of the issues in the action. The plaintiffs did not provide detailed dockets to support their claim for costs. The court should not consider privileged information relayed in a pre-trial conference memorandum concerning costs incurred by the defendants. The defendants take no real issue with the hours expended, with the exception of what they argue is the unreasonable and duplicative nature of having two counsel attend, and the use of process servers. A reasonable partial indemnity award would be in the area of $30,000.
Legal Principles
[6] The award of costs is governed by s. 131 of the Courts of Justice Act, R.S.O. 1990 c. C. 43 and by Rule 57.01 of the Rules of Civil Procedure. Section 131 clothes the court with its general discretion to fix costs. Rule 57.01 provides a measure of guidance in the exercise of that discretion by enumerating certain factors that the court may consider when assessing costs: Zandersod Company Limited v. Solmar Development Corp., 2011 ONSC 3874 at para. 11.
[7] In particular, the court may consider any of the following factors:
(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
(iii) 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.
[8] Ultimately, in fixing an amount for costs, the overriding principles are fairness and reasonableness: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.); Moon v. Sher (2004), 2004 39005 (ON CA), 246 D.L.R. (4th) 440 (Ont. C.A.).
[9] Generally, the court ought not to second guess the time spent by counsel. As the court held in Basedo v. University Health Network, [2002] O.J. No. 597 (S.C.J.) at para. 7, it is not the role of the court to second-guess the time spent by counsel unless it is manifestly unreasonable in the sense that the total time spent is clearly excessive or the matter has been “over lawyered”.
[10] It is important to recognize that the assessment process is ultimately not a mechanical exercise: Gratton-Masuy Environmental Technologies Inc. (c.o.b. Ecoflow Ontario) v. Building Materials Evaluation Commission, 2003 8279 (ON SCDC), [2003] O.J. No. 1658 at para. 17. Instead, the court must take a contextual approach applying the principles and factors enumerated above, to determine a figure that is fair and reasonable in all the circumstances.
Analysis
[11] The plaintiffs were entirely successful in defending the summary judgment motion. As such, they are presumptively entitled to their costs.
[12] In Marcus v. Cochrane, 2012 CarswellOnt 4357 (Ont. S.C.J.), Warkentin J. remarked that full indemnity costs may be appropriate where there are unsubstantiated allegations of dishonesty. The defendants in the case at bar made allegations of dishonesty and levied a character attack against the personal plaintiff. The defendants’ allegations were unsupported and could not possibly be decided short of trial, given the history between the parties, although I was able on the evidence to find that the personal plaintiff's actions did not constitute "manufacturing evidence". The fact that I was unable to make credibility assessments was one of the bases for my decision that this matter needed to go to trial. Accordingly, I am not satisfied that this case falls within one of the rare cases where full indemnity costs are appropriate.
[13] Pursuant to r. 20.06 of the Rules, the court may award costs of a motion for summary judgment on a substantial indemnity basis where a party has acted unreasonably in bringing the motion. A reasoned consideration by the defendants of the chance of success would have clearly demonstrated that their motion was doomed to fail. The comments of Perell J. in One-Way Drywall Inc. v. Lomax Management Inc., 2016 CarswellOnt 5589 (Ont. S.C.J.) at para. 7, 9 and 10 are apposite. The defendants’ summary judgment motion "in its execution… was a tactical maneuver that turned out to be the opposite of the most expeditious and least expensive determination of the… action on its merits." In this case too, the summary judgment motion "…was and would have been ineffective to narrow the issues in the action…[it] was unreasonable and it was unsuccessful".
[14] As I found in deciding the motion, the need for the court to go back to the early 1980s to parse fact from fiction and to thoroughly review voluminous exhibits which have some bearing on the witnesses’ credibility and reliability made this case one that was obviously not amenable to resolution by way of summary judgment. The bringing of the motion was not a reasonable attempt to narrow issues and avoid a lengthy trial. I find that the defendants acted unreasonably in bringing the motion and for this reason costs should be awarded on a substantial indemnity basis.
[15] Given my finding that the defendants acted unreasonably in bringing the motion, I need not consider whether the plaintiffs’ offer affords a secondary basis for the court to award costs on a substantial indemnity basis.
[16] This brings me to a determination of what is fair and reasonable.
[17] One of the considerations in determining the quantum of costs is the expectation of the losing party. In that regard, courts have held that a party’s refusal to provide a costs outline, or any evidence as to their fees and disbursements, allows the court to infer that their costs on the motion matched or exceeded those of the successful party: Cvokic v. Belisario, 2008 CarswellOnt 5008 (Ont. S.C.J.) at para. 8; Frazer v. Haukioja, 2010 ONCA 249 at para. 73. I have not considered the contents of the pre-trial conference memorandum wherein the defendants addressed the costs of the summary judgment motion. However, the defendants did not provide any evidence of their costs in their costs submissions so that the losing parties’ reasonable expectation of costs could be ascertained. I accept the plaintiffs’ position that this gives rise to a negative inference against the defendants when considering this issue.
[18] The defendants take no real issue with the hours expended by the plaintiffs to respond to the motion, with the exception of having two counsel attend at the hearing. The failure of the defendants to provide proof of their own costs is also relevant when considering their allegation of excess and "unwarranted over-lawyering": Risorto v. State Farm Mutual Automobile Insurance Co., 2003 43566 (ON SC), 2003 CarswellOnt 934 (Ont. S.C.J.) at para. 10. As Winkler J. (as he then was) found, "the attack on the quantum of costs, insofar as the allegations of excess are concerned, in the present circumstances is no more than attack in the air… the relative expenditures, at least in terms of time, by adversaries on opposite sides of a motion, while not conclusive as to the appropriate award of costs, is still, nonetheless, a relevant consideration where there is an allegation of excess in respect of a particular matter".
[19] Although the amount charged by more senior counsel was reduced by the availability of less senior counsel to conduct the legal research, prepare the factum and present the law in oral argument, I am not satisfied that the full cost of having two counsel present for the entirety of the motion was reasonable. As the court held in R. & G. Draper Farms (Keswick) Ltd. v. Nature's Finest et al., 2015 ONSC 5788 at para. 6, given the nature of the dispute, the losing party could not have expected to pay for two relatively senior counsel. The impact of this, however, is tempered by the fact that the defendants have failed to provide proof of their own costs. Accordingly, I find that it is fair and reasonable that less senior counsel's hours should be reduced by 10.
[20] In their responding submissions on costs, the defendants noted that the plaintiffs had not provided detailed dockets to enable the court to fairly assess the timing or reasonableness of the costs sought. This prompted plaintiffs’ counsel to file dockets with their reply submissions. This, in turn, led defendants’ counsel to write a letter to the court requesting that the dockets not be considered on the issue of costs, or, in the alternative, that the defendants be allowed an opportunity to respond. Defendants’ counsel drew the court's attention to what appeared to be a discrepancy of $2805 between the plaintiffs' bill of costs and supporting dockets and sought that this discrepancy be taken into account in the fixing of costs.
[21] I have reviewed the dockets only to determine whether there is a discrepancy as this would be relevant in determining costs. I find a discrepancy of $540, which is the amount forwarded from an earlier bill before work on this motion began. I will remove this from the amount that I would otherwise determine to be fair and reasonable.
[22] Subject to my comments above concerning the cost of having two counsel present, the fees incurred were necessary on account of what lay at stake for the plaintiffs. The motion was somewhat legally complex and quite factually complex. A lengthy affidavit setting out the extensive history between the parties and of their transactions was required. Research was required on a number of areas of law.
[23] The rates charged by plaintiffs’ counsel were reasonable, however the disbursements for the process server were not appropriate as the documents could have been served by mail.
[24] There is no evidence before me that an award of costs against the defendants will negatively affect the personal defendant’s ability to meet his everyday financial obligations or provide him with the financial ability to pay for access to justice. There is no reason to depart from the usual rule that costs be fixed and payable within 30 days: Groves v. Sehgal, 2016 ONSC 5053 at para. 13.
[25] Having considered all of the factors, I find that a fair and reasonable costs award on a substantial indemnity basis, inclusive of HST and disbursements, is $52,500.
Conclusion
[26] Accordingly, the defendants shall pay to the plaintiffs their costs in the amount of $52,500 within 30 days.
QUINLAN J.
Date: February 2, 2017