COURT FILE NO.: 14-50358
DATE: 2018-03-09
SUPERIOR COURT OF JUSTICE (ONTARIO)
RE: Global Financial Management Inc. (Plaintiff)
- and –
Dagmara Zawadzki (Defendant)
BEFORE: A. J. Goodman J.
COUNSEL: Don Morris, for the Plaintiff
Eric Turkienicz, for the Defendant
DATE: In chambers
C O S T S E N D O R S E M E N T
On December 19, 2017 in denying the plaintiff’s summary judgment motion, I granted costs in favour of the defendant in the amount of $16,000.00. On February 15, 2018, the plaintiff’s motions to preserve funds held in trust by a solicitor under Rule 45.02 was dismissed. The defendant was successful on this motion.
The defendant seeks costs on a substantial indemnity basis, in accordance with the Bill of Costs and Offer to Settle of December 5, 2017. The amount sought is $14,769.81 on a substantial indemnity basis or $11,269.64 on a partial indemnity basis.
The plaintiff seeks set off costs for its undertakings motion that was resolved prior to the hearing of the Rule 45.02 motion.
Positions of the Parties:
The plaintiff submits that the defendant’s request for substantial indemnity costs is unreasonable and not fair or just. Further, the actual time spent by plaintiff’s counsel is excessive.
The plaintiff submits that given the substantial indemnity costs awarded against them to this point and the serious questions arising out of the related party transactions, and the fact that Dagmara received $116,583.74 on the closing of Netherby, no costs ought to awarded, or that costs be reserved to the trial judge.
After the December 19, 2017 hearing, the contents of Dagmara’s file in Mr. McLeod’s office had not been produced. A second Undertakings motion was served. The requested documents were received by Global on January 25, 2018. Without the motion the file would not have been produced at all and certainly not before January 30, 2018. Because the issue came up “on the spur of the moment” no costs should be awarded for that portion of Dagmara’s claim for costs on the preservation motion.
The plaintiff could not have anticipated costs in this amount given the history of this action and related motions. Alternatively, the plaintiff submits that if Dagmara is awarded any costs for the preservation motion they should be reduced by 50% which would result in a costs award of $3,351.50, on a partial indemnity scale. Partial indemnity is appropriate because there are no extraordinary circumstances that would justify awarding substantial indemnity costs and no offer to settle was delivered on this motion by the respondent. Any offer predates the delivery of the Rule 45.02 motion. It is submitted that two hours preparation and an allocation of half of the Court attendance fee on a partial indemnity scale would be sufficient should this Court see fit to award costs at all or at this time.
The defendant submits that on January 12, 2018, counsel for the plaintiffs served two motion records, one for answers to undertakings and the other for an order under Rule 45.02 preserving the escrow funds pending trial. Both of these motions were returnable four business days later, contrary to the Rules. Plaintiff’s counsel had not canvassed dates for the motions with defendant’s counsel in advance. They were not a part of the timetable endorsed by the Court at the end of the summary judgment motion. The plaintiffs did not serve a factum in support of their Rule 45.02 motion until January 26, 2018, contrary to the Rules. Accordingly, defendant’s counsel conducted necessary research and prepared a responding factum on an expedited basis for service on January 29, 2018.
The defendant says that the appearance itself on January 30, 2018 was primarily concerned with addressing the Rule 45.02 motion. Written submissions on a discrete jurisdictional issue were directed by the Court. The Rule 45.02 Motion turned what ought to have been a quick motion releasing the funds into a lengthy and complicated proceeding
General Principles:
As a general principle, costs are in the absolute discretion of the court. The fixing of costs is not simply a mechanical exercise. The overall objective is “to fix 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.
The Court of Appeal, in Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579, (2004) 71 O.R. (3d) 291, articulated the principles that govern costs assessments. In that case, Armstrong J.A. noted that Rule 57.01(3) provides: “When the court awards costs, it shall fix them in accordance with subrule (1) and the tariffs.” He continued: “…Subrule (1) lists a broad range of factors that the court may consider in exercising its discretion to award costs under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43.
The defendant was entirely successful. It is a well-settled principle that the successful party should have its costs and there is no good reason in the present circumstances to depart from this legal principle.
The court must, first and foremost, be fair and reasonable when exercising its discretion to award costs. Proportionality is of fundamental import.
Factors to be considered in Fixing Costs:
- Rule 57.01(1) contains what amounts to a non-exhaustive checklist of factors that should guide the court in its reasoning when awarding costs in the exercise of its discretion under section 131 of the Courts of Justice Act. Rule 57.01(1) provides, in part:
In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider…
(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;
(c) the complexity of the proceeding;
(d) the importance of the issue;
(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
(i) any other matter relevant to the question of costs.
- The amount of costs on a motion varies widely depending on the circumstances, including the complexity of the issue, of facts, and the witnesses from whom evidence is required.
Discussion:
Awards of substantial indemnity costs are the exception, not the rule. An award of costs on a substantial indemnity basis has traditionally been reserved for cases in which the court wishes to display its express disapproval of a parties’ conduct. One of the principal factors that underlies this determination is that the successful party ought not to be put to any expense for having to litigate an unmeritorious, or vexatious issue. Another factor warranting enhanced costs is the application of Rule 49.10.
On December 5, 2017, the defendant delivered a Rule 49 Offer to settle the release the escrow funds on a without costs basis if the funds would be immediately released to Dagmara. This offer was reiterated by way of letter on December 28, 2017.
In this case, I accept that a formal Offer to settle was in effect and complied with the Rules. I find that the defendant is entitled to an award of costs on a substantial indemnity basis for this motion.
That said, I do not accept the defendant’s characterization of this motion. The defendant submits that Rule 45 motions are complex legal proceedings. They involve a high standard of proof to satisfy their requirements and are subject to a rigorous, multi-part test which has been the subject of copious amounts of jurisprudence. It is submitted that this proceeding was also factually complex, requiring navigation of a tangled history of financial dealings between the parties dating back more than ten years and which involved highly technical financial transactions. While the litigation in this and the related actions may be complex and highly technical, this particular motion was not.
I observe that the pattern of short service of materials by the plaintiff required quick responses from counsel to ensure her interests were adequately protected. However, I note that the defendant’s motion materials for this motion were nearly identical to her responding materials in the summary judgment motion.
As the motion brought by Global was unsuccessful, there is no reason that costs of an issue which is not referred to in the pleadings be reserved for the judge at trial.
With respect to the submissions that Global is entitled to costs or a set-off arising out of their undertakings motion, I agree with the defendant that there was never an undertakings motion argued or pursued before me. However, it is not lost on me that the matter of the outstanding undertaking was only resolved due to the plaintiff bringing the motion. In this regard, I reject the claim for set off however, have factored this consideration in my overall decision on the quantum of costs due and owing to the defendant.
Bill of Costs
It is widely accepted that the appropriate quantum of costs is not determined by multiplying hours by rates. Rather, “the objective is to fix 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.
There must be practical and reasonable limits to the amounts awarded for costs and those amounts should bear some reasonable connection to the amount that should reasonably have been contemplated. I note that it is not necessary for me to have to go through the hours, or disbursements, line by line, in order to determine what the appropriate costs are. Nor is the court to second-guess the amount of time claimed unless it is clearly excessive or overreaching. I must consider what is reasonable in the circumstances, and all the relevant factors.
However, when appropriate and necessary, a court ought to analyze the Bill of Costs in order to satisfy itself as to the reasonableness of the fees and expenses submitted for consideration. That presupposes that a party has filed a detailed Bill of Costs to be analyzed.
Bill of Costs
The defendant’s bill of costs for this motion reflect an amount of $12,390.00 for fees, based on 47 hours of preparation for this motion. The plaintiff submits that, at most, the defendant could only expect costs of the motion to be less given no new substantive issues were raised and part of the motion was dealt with in writing without the cost of multiple appearances for oral argument.
The plaintiff submits the most just and reasonable costs award and one which could have reasonable foreseen, is costs on a partial indemnity scale of the reasonable time spent, with a deduction for the costs incurred on the undertaking motion. I deny that request for the reasons expressed by Mr. Turkienicz in his factum.
Much of the material and preparation were already subsumed in the summary judgment motion. Indeed, the defendant acknowledges that she has already received a cost awards on a substantial indemnity scale for the underlying motion. To an extent, the costs of the preparation of the defendant’s materials for this motion have already been dealt with.
The plaintiff argues that counsel seeks over 30 hours of time spent on writing and researching the law for the factum for the Rule 45.02 issue, which is excessive given the nature and scope of the motion.
I tend to agree with Mr. Morris in that the time spent by counsel is manifestly unreasonable and the plaintiff’s Bill of Costs should be scrutinized by the Court. While there was some degree of complexity, in view of the costs award already granted, in my opinion, the hours expended here are wholly excessive for this motion. At the same there was some limited success enjoyed by the plaintiff in respect of their request for answers to undertakings.
I observe that the Rule 45.02 motion had a modest degree of complexity. It had the potential for significant impact on the entire proceedings. Defendant’s counsel is competent with many years of experience. That said, the hours spent on preparation and research for this motion when combined with the effort already expended on the summary judgment motion are excessive. To that extent, it requires some significant adjustment. I have reduced the hours expended and related fees incurred by 50%.
Conclusion:
- The costs award should be fair, proportionate and tailored to the circumstances of the case. In the exercise of my discretion under Rule 57.01 and the relevant authorities, it is ordered that the plaintiff pay costs in favour of the defendant on a substantial indemnity basis fixed at $6,200.00 for fees, $500.00 for disbursements; (plus applicable HST on fees and disbursements), payable within 30 days.
Justice A. J. Goodman
Date: March 9, 2018