COURT FILE NO.: CV-16-548865

DATE: 20180309

ONTARIO

SUPERIOR COURT OF JUSTICE

RE: RESCON FINANCIAL CORPORATION, Plaintiff

AND: NEW ERA DEVELOPMENT (2011) INC., Defendant

AND: NEW ERA DEVELOPMENT (2011) INC., Plaintiff by Counterclaim

AND: RESCON FINANCIAL CORPORATION and EBRAHIM BULBULIA, Defendants by Counterclaim

BEFORE: Mr. Justice M. D. Faieta

COUNSEL: Scott A. Crocco, for the Plaintiff and Defendants by Counterclaim

David Alderson, for the Defendant and Plaintiffs by Counterclaim

C O S T S E N D O R S E M E N T

BACKGROUND

[1] For reasons dated January 10, 2018, I granted Rescon’s claim $400,000.00 plus interest and costs and dismissed New Era’s $4 million counterclaim. See 2018 ONSC 259.

[2] The parties were unable to settle the issue of costs. Written costs submissions were delivered by the parties. Rescon and Bulbulia claim costs of this action in the amount of $171,888.04. This amount includes partial indemnity costs until the delivery of an offer to settle on August 25, 2016 and substantial indemnity costs thereafter.

[3] New Era submits that costs of this action should be assessed. It also submits that:

• The costs claimed by Rescon are disproportionate and inconsistent with the principle of indemnity;

• The costs claimed by Rescon are beyond New Era’s reasonable expectations;

• New Era’s conduct was proper and did not lengthen the duration of the proceeding;

• Rescon’s conduct was improper; and

• Costs should not be awarded on a substantial indemnity basis.

[4] For reason described below, I order that New Era pay costs of $150,000.00 to Rescon and Bulbulia, forthwith.

ANALYSIS

[5] The fixing of costs is governed by s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Rule 57.01 is the primary rule governing costs. It enumerates various factors to consider when exercising discretion to award costs. Rule 1.04(1.1), the purpose of which is to promote access to justice, is also applicable. It provides that,

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.

[6] In fixing costs, the objective is to ascertain “an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant”: Boucher v. Public Accountants Council (Ontario) (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), at paras. 26, 37; Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, at paras. 50-52; Elbakhiet v. Palmer, 2014 ONCA 544, 121 O.R. (3d) 616, at para. 38, leave to appeal refused [2014] S.C.C.A. No. 427. Although a successful party is usually indemnified for its costs by the unsuccessful party, the principle of indemnity is but one of many considerations in fixing the amount of costs: Boucher, at para. 38.

[7] I now turn to the various relevant considerations in assessing costs in this matter.

Principle of Indemnity

[8] New Era submits that the costs award should reflect Rescon’s failure to delegate most work to a lower-billing lawyer. This submission is without merit. First, Mr. Crocco was called to the Bar in 2007 and is much more junior than Mr. Alderson. Second, the Cost Outline shows that Mr. Crocco did delegate a significant amount of work to a junior lawyer and to an administrative assistant.

[9] New Era submits that the partial indemnity rates and substantial indemnity rates claimed by Rescon are overstated. Given that Mr. Crocco’s actual rate is $350 per hour and Mr. Smiley’s actual rate is $260 per hour, their partial indemnity rates should be 60% of their actual rates ($210 and $156, respectively) rather than $225 and $160 per hour as claimed in the Costs Outline. Similarly, their substantial indemnity rates should be 90% of their actual rates ($315 and $234 per hour, for Mr. Crocco and Mr. Smiley, respectively) rather than $335 and $240 per hour, respectively.

[10] Amounts calculated at 55%-60% of a reasonable actual rate are an appropriate reflection of partial indemnity rates: Inter-Leasing, Inc. v. Ontario (Revenue), 2014 ONCA 683, para. 5.

[11] Given that I find that the actual hourly rates claimed for Mr. Crocco and Mr. Smiley are reasonable, I find that their partial indemnity rates are $210 and $156, respectively.

The Amount that an Unsuccessful Party could Reasonably Expect to Pay

[12] In Smith Estate v. Rotstein, 2011 ONCA 491, at para. 50, the Ontario Court of Appeal stated:

In my view, there is no requirement for the losing party, who is not seeking costs, to file a bill of costs although it is preferable that he or she does so. However, if the losing party chooses not to file a bill of costs, this is a factor that the judge, who is assessing costs, may take into account when considering the reasonable expectations of the losing party.

[13] New Era filed an unsigned Costs Outline solely in respect of its preparation for, and attendance at, the motion for summary judgment hearing. Its Costs Outline shows actual costs of $102,334.43, substantial indemnity costs of $91,999.95 and partial indemnity costs of $60,969.83.

[14] Rescon submits that New Era had a reasonable expectation that the parties were incurring elevated costs as a result of its litigation strategy. It also submits that from the date that New Era retained Mr. Alderson, it had one senior partner and up to two associates staffed on the file at all times. By contrast, Rescon’s file was staffed by a single, junior partner up until just prior to the hearing of the motion for summary judgment at which time another associate was brought on.

[15] In my view, the costs claimed were within the reasonable expectations of New Era.

The Amount Claimed and the Amount Recovered

[16] Rescon successfully recovered the full amount of its claim. New Era’s counterclaim was dismissed.

The Complexity of the Proceeding

[17] Rescon submits that New Era attempted to complicate and delay the action by:

1. Bringing four interlocutory motions including a refusals motions and a motion seeking leave to deliver further evidence after cross-examinations had concluded;

2. Making belated amendments to its Statement of Defence which significantly broadened the scope of the issues, including adding a “spurious” Counterclaim of professional negligence against Mr. Bulbulia personally;

3. Requiring a re-examination of Mr. Bulbulia;

4. Requiring the cross-examination of two third party witnesses.

[18] New Era acknowledges the complexity of this proceeding but denies that its actions were designed to delay the hearing of the motion for summary judgment.

The Importance of the Issues

[19] Rescon submits that the unpaid commission in this case is of high import to its two principals. Further, the allegations of professional negligence were of the utmost importance to Rescon and Mr. Bulbulia as they publicly called into question their professional competence, integrity and reputation. These assertions are not disputed by New Era.

The Conduct of any Party that Tended to Shorten or Lengthen Unnecessarily the Duration of the Proceeding

[20] Rescon submits that New Era engaged in a deliberate effort to complicate and delay the action, in the hope that the Rescon would be ultimately left with a claim against an impecunious defendant. New Era’s conduct substantially escalated costs for all concerned. In particular, New Era’s belated amendments and multiple motions during January 2017 delayed the hearing of the motion for summary judgment by nine months.

[21] New Era submits that: (1) there is no evidence before the Court that New Era is impecunious; (2) Rescon has filed a Writ of Execution in respect of the Judgment.

Offer to Settle

[22] Rescon served a Rule 49 Offer to Settle on August 25, 2016. It offered to settle the action for the sum of $365,000 in damages plus $40,000.00 in costs. The offer remained open until one minute after the commencement of the hearing of the motion for summary judgment. Rescon seeks its partial indemnity costs to August 25, 2016 and its substantial indemnity costs after that date.

[23] New Era submits that Rescon’s offer to settle did not represent an element of compromise and thus the court should decline to grant substantial indemnity costs: Walker Estate v. York Finch General Hospital (1999), 1999 2158 (ON CA), 43 O.R. (3rd) 461, paras. 73-81. In Walker, the Ontario Court of Appeal stated that there should only be a departure from the presumption of substantial indemnity costs were “… after giving proper weight to the policy of the general rule, and the importance of reasonable predictability and the even application of the rule, the interests of justice require a departure.”

[24] New Era submits that Rescon offered to settle for $405,000 on a $400,000 claim. However, according to Rescon’s Costs Outline, it appears that Rescon had incurred costs of about $28,840 (based on 82.4 hours spent at $350 per hour), or $18,540.00 on a partial indemnity basis, as of the date that it made this offer to settle. While this offer to settle represented about a minor compromise of its claim as of the date of settlement (approximately $13,000), the attractiveness of this offer only increased with time as this litigation proceeded and further costs were incurred. In the circumstances, the interests of justice do not require a departure from the presumption that substantial indemnity costs should be awarded from the date of the offer to settle.

Should Costs Be Assessed?

[25] New Era’s final submission is that costs should be directed for assessment under Rule 57.01(3.1) of the Rules of Civil Procedure because “… the Court cannot appropriately deal with costs based on three page costs submission given the significant problems referred to above”. I dismiss this request. Read together, Rules 57.01(3) and (7) require a Court to fix costs using the simplest, least expensive and most expeditious process for doing so. Rule 57.01(3.1) permits a Court to refer costs for assessment under Rule 58 in exceptional circumstances. I find that New Era has not demonstrated that this is an exceptional case that requires an assessment.

Conclusions

[26] In light of the considerations described above, including proportionality, I find that it is fair and reasonable to award Rescon and Bulbulia the sum of $150,000 in respect of their costs of this action, inclusive of disbursements and HST, payable by New Era, forthwith.

Mr. Justice M. D. Faieta

Released: March 9, 2018