COBOURG COURT FILE NO.: CV-17-0033

DATE: 20180305

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Michael Blackhurst, Plaintiff

AND:

State Farm Fire and Casualty Company and CRCS-DKI, Defendants

BEFORE: The Honourable Mr. Justice C.F. de Sa

COUNSEL: M. Christine Roth, Counsel for the Plaintiff Ian A. Johncox, Counsel for the Defendant, CRCS-DKI No one appearing for the Defendant, State Farm Fire and Casualty Company

HEARD: January 26, 2018

ENDORSEMENT

[1] The Plaintiff’s home was burned down by a fire. The date of the fire at the Plaintiff’s home was February 8, 2012.

[2] The Defendant, CRCS-DKI, is a disaster clean-up contractor, was contacted by State Farm Fire and Casualty Company (“State Farm”) and retained by the Plaintiff to conduct disaster recovery services at the Premises.

[3] CRCS-DKI first attended the Premises on February 8, 2012.

[4] On February 8, 2012, CRCS-DKI provided an excavator to knock over the two remaining walls of the house to make it safe for the Fire Department to complete their investigation.

[5] There was a heating fuel oil tank (the “Oil Tank”) at the fire scene, which had been dislodged and partly tipped over.

[6] On February 13, 2012, CRCS-DKI retained a contractor to remove the heating fuel Oil Tank from the home.

[7] The Plaintiff claims that CRCS-DKI damaged one of the oil lines from the Oil Tank to the furnace, spilling oil, which caused contamination.

[8] In his pleadings, the Plaintiff acknowledged that he knew the oil contamination occurred on February 8, 2012. He personally witnessed the contamination on February 8, 2012 and contacted State Farm to report it.

[9] CRCS-DKI was subsequently retained to conduct oil remediation, which began around February 17, 2012.

[10] The last time CRCS-DKI or its agents were at the Premises for oil remediation services was no later than August 2012. CRCS-DKI was not retained for any work at the Premises after August 2012.

[11] The Plaintiff has formally admitted that by December 2012:

1. He chose not to have CRCS-DKI rebuild the premises and to do it himself to mitigate his losses;

2. He believed that CRCS-DKI had caused the oil contamination to the Premises;

3. He believed that CRCS-DKI had been negligent in its role in the remediation of the oil contamination to the Premises;

4. He had become frustrated with the negligent and hazardous approach of CRCS-DKI;

5. He believed that CRCS-DKI had been negligent by contaminating the Premises without remedying the error promptly.

[12] The Plaintiff’s claim was commenced over four years after the Plaintiff formed the opinion that he had a cause of action against CRCS-DKI. The action against CRCS-DKI was started on April 7, 2017. At the time, the Plaintiff’s action against CRCS-DKI was statute barred under the Ontario Limitations Act, 2002.

Steps in the Litigation

[13] As noted above, the action was started by the Plaintiff on April 7, 2017.

[14] CRCS-DKI served its Notice of Intent to Defend on April 20, 2017.

[15] CRCS-DKI served an Offer to Settle the proceeding on May 3, 2017 even before preparing its Statement of Defence which was a withdrawal with no costs. CRCS-DKI took the position that there was no merit to the proceedings given the evident limitations issue. This offer was not accepted by the Plaintiff.

[16] CRCS-DKI served a comprehensive Request to Admit with its Statement of Defence on May 8, 2017.

[17] CRCS-DKI convened a conference call between counsel on June 1, 2017 after the close of the pleadings. During that call, CRCS-DKI again raised the issue of the limitations defence. CRCS also advised that a summary judgment motion would be brought on the limitations issue. Plaintiff’s counsel advised that the Plaintiff did not want to use that procedure, but wanted to go ahead with the discovery process first.

[18] In an attempt to avoid the costly discovery process, CRCS-DKI wrote a lengthy letter to counsel for the Plaintiff on June 2, 2017, with a detailed argument on the limitations issue. That letter is a shorter version of what CRCS-DKI’s factum would have been on this motion, had a factum been ultimately required.

[19] On June 6, 2017, after having reviewed the position of CRCS-DKI, the Plaintiff offered to withdraw its claim again the Defendant CRCS-DKI, on a no costs basis. CRCS-DKI refused.

[20] Because the pleadings were closed at the time, the Plaintiff required consent or leave of the Court to file a notice of discontinuance. That consent was requested by the Plaintiff, but the consent was not given.

[21] CRCS-DKI served its motion materials on the summary judgment motion on July 17, 2017 with a view to argue the issue of costs. The matter was scheduled for September as it had been set down as a long motion. While the matter was scheduled, it did not proceed and was adjourned to January 2018. While the summary judgment materials were filed by the Defendant on the motion, the costs submissions were not.

[22] The matter came before me on January 26, 2018, strictly to deal with the issue of costs. My understanding is that the Plaintiff’s Notice of Discontinuance was accepted at some point by the Defendant. The Defendant’s costs materials were only provided to the Plaintiff at the hearing of the motion on January 26, 2018.

[23] The only issue for me to decide is the question of the appropriate costs to be awarded to the Defendant.

Position of the Parties

[24] The Defendant seeks costs on a substantial indemnity basis in the amount $30,000. CRCS-DKI submits that the only just result is for CRCS-DKI to be substantially indemnified for its costs in achieving complete success in defending a frivolous claim. If the Plaintiff had spent the time and money to investigate and research the claim properly, he might not have claimed against CRCS-DKI at all. The Defendant takes the position that proper preparation costs money, and the defendant is entitled to be indemnified for the costs incurred in the litigation.

[25] The Plaintiff, in response, claims that the amount sought is excessive. The Plaintiff advised the Defendant in early June 2017 that it had no intention of continuing the matter. The Defendant has accrued almost $8,000 in fees just to prepare its costs motion. It also filed a summary judgment motion unnecessarily. The Plaintiff takes the position that it should not compensate CRCS-DKI for costs unnecessarily incurred. According to the Plaintiff, a proper cost award should be in the amount of $12,000.

Analysis

[26] Costs awards under section 131 of the Courts of Justice Act are highly discretionary.

[27] Rule 57.01 of the Rules sets out the factors to be considered including the amount of costs an unsuccessful party would expect to pay and the complexity of the proceeding. Assessing costs is not simply a matter of arithmetic, where dockets are tabulated. The overarching principle is that the court’s assessment should be fair and reasonable in light of all the circumstances.

[28] Section 57.01 provides as follows:

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.

[29] The controlling principle for awarding costs is that the sum awarded reflect the fair and reasonable expectations of the unsuccessful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) at para. 24.

[30] In exceptional cases, costs may be awarded on a substantial indemnity scale. See Foulis v. Robinson (1978), 1978 1307 (ON CA), 21 O.R. (2d) 769 (C.A.). Costs on a substantial indemnity scale are reserved for rare and exceptional cases, where the conduct of the party against whom costs is ordered is reprehensible or where there are other special circumstances that justify costs on the higher scale. See St. Elizabeth Home Society v. Hamilton (City), 2010 ONCA 479.

[31] There is no doubt that where a plaintiff brings a frivolous action against a defendant, and forces a defendant to assume all types of unnecessary legal costs to defend against that action, there is a legitimate basis to claim costs on a substantial indemnity basis.

[32] That being said, in granting an award of costs, the award must be proportionate to the litigation. The defendant is entitled to defend the action, and is expected to incur “reasonable” costs in relation to that defence. A defendant need not defer its preparation in the hopes of resolution. Indeed, a discontinuance was obtained in this case because of the defendant’s thorough preparation. However, a party must keep in mind that an award of costs is discretionary, and the amount granted will reflect what the court assesses to be “reasonable” to indemnify costs incurred. The court need not compensate costs which go beyond what would be expected in the circumstances.

[33] In this case, the plaintiff advised of its intention to discontinue its claim against the defendant after the conference call and email in early June, 2017. In my view, the steps taken after this notice was given were largely superfluous. The defendant is not entitled to costs unnecessarily incurred.

[34] I understand the defendant’s position that certain cases have held that if a matter is “settled”, then the issue of costs will become moot. The Defendant argues that its actions were “reasonably” directed at ensuring that it maintained its claim for costs in the face of the plaintiff’s notice of discontinuance. Accordingly, the Defendant argues it is entitled to the costs associated with pursuing its costs.

[35] While I understand the defendant’s concerns, I think that the defendant’s position must be considered in light of Rule 23.01(1) which provides:

23.05 (1) If all or part of an action is discontinued, any party to the action may, within thirty days after the action is discontinued, make a motion respecting the costs of the action. O. Reg. 394/09, s. 8.

[36] Part of a settlement may include a “discontinuance” which leaves open the issue of costs. If the costs cannot be agreed upon, parties can file materials outlining the relevant facts together with their respective positions, and the matter can be determined by the court.

[37] Obviously, a court should not discourage settlement by refusing costs where all other matters have been resolved. Parties should always resolve matters as far as possible. If the only issue to be determined is costs, then Rule 23.05(1) provides the mechanism to seek those costs. The parties need only file the requisite materials for a court to make the determination.

[38] While I am sympathetic to the Defendant’s interpretation of the jurisprudence, the Plaintiff cannot be expected to pay for the unnecessary steps taken by the Defendant to secure its costs. In the circumstances here, I will order costs in the amount of $18,000. I view this as a reasonable and proportionate award in the circumstances.

[39] I thank counsel for their assistance.

Justice C.F. de Sa

Date: March 5, 2018```