COURT FILE NO.: 16-4097-SR
DATE: 2018/05/24
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: GARY GRAF and VALENTINA BOJIC GRAF, Plaintiffs
AND:
EASWARA PERIYATHAMBY, CHITRA SUBRAMANIAM and VIA REALTY INC., Defendants
BEFORE: D.A. Broad
COUNSEL: Steven D. Gadbois, for the Plaintiffs
Muhammad A. Khan, for the Moving Defendant Easwara Periyathamby
COSTS ENDORSEMENT
[1] The parties have been unable to settle the issue of costs and have now delivered written submissions on costs.
Positions of the Parties
[2] The moving defendant seeks costs on a substantial indemnity basis in the sum of $19,559.20 comprised of fees of $16,640, HST on fees of $2,079.20 and disbursements in the sum of $840, inclusive of HST. In the alternative, he seeks costs on a partial indemnity basis in the sum of $14,757.50 comprised of fees of $12,390, HST on fees of $1,527.50 and disbursements of $840.
[3] The moving defendant submits that he is entitled to substantial indemnity costs on the basis of his Offer to Settle served February 27, 2018 which provided for the following terms:
(a) the plaintiffs shall consent to set aside the noting in default and default judgment against him;
(b) the plaintiffs shall consent to set aside the notice of examination in aid of execution against him;
(c) the plaintiffs shall consent to deposit the garnished funds of $10,000 into court to the credit of the action;
(d) the plaintiffs shall consent to pay costs of the motion to the defendants in the sum of $7,500 or the cost of the motion to be negotiated, fixed or assessed by the court.
[4] The moving defendant submits that the plaintiffs acted unreasonably in opposing the motion to set aside the default judgment against him, in taking enforcement proceedings in respect of the judgment when they knew he intended to bring the motion, and by “harrassing” the defendants by exchanging 29 emails from December 28, 2017 to January 9, 2018.
[5] The plaintiffs submit that the moving defendant did not bring to the attention of the court the relevant case law relating to service pursuant to rule 16.03(5), which the court relied upon in deciding the motion. The various arguments raised by the moving defendant were acknowledged by his counsel in submissions to be without merit. Moreover, the motion was brought, not only on behalf of the moving defendant, but also on behalf of the defendant Chitra Subramaniam, even though there was no default judgment against Chitra Subramaniam. A significant portion of the fees incurred, as set forth in the moving defendant’s Bill of Costs, included matters not directly related to the motion to set aside the default judgment against the moving defendant, and were incurred for the benefit of all three defendants.
[6] The plaintiffs submit that if costs are awarded to the moving defendant, the partial indemnity sum claimed is excessive and should be reduced to $5,000, including disbursements of $840 and applicable taxes.
Guiding Principles
[7] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, provides that "subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the cost shall be paid."
[8] The factors to be considered by the court, in the exercise of its discretion on costs, are set forth in sub-rule 57.01(1), notably para. (0.a) the principle of indemnity and para. (0.b) the amount of costs that an unsuccessful party could reasonably expect to pay.
[9] The Court of Appeal has observed that modern costs rules are designed to foster three fundamental purposes: (1) to indemnify successful litigants for the cost of litigation; (2) to encourage settlements; and (3) to discourage and sanction inappropriate behavior by litigants (see Fong v. Chan, [1999] O.J. No. 3707 (Ont. C.A.) at para. 24).
[10] The usual rule in civil litigation is that costs follow the event and that rule should not be departed from except for very good reasons (see Gonawati v. Teitsson 2002 CanLII 41469 (ON CA), [2002] CarswellOnt 1007 (Ont. C.A.), and Macfie v. Cater, 1920 CanLII 401 (ON SC), [1920] O.J. No. 71 (Ont. H.C.) at para 28).
[11] It is well known that the overall objective in dealing with costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful party. The expectation of the parties concerning the quantum of costs is a relevant factor to consider. The court is required to consider what is "fair and reasonable" having regard to what the losing party could have expected the costs to be (see Boucher v. Public Accountants Council (Ontario), 2004 CanLII 14579 (ON CA), [2004] O.J. No. 2634 (Ont. C.A.) at para. 26 and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC, 2005 CanLII 1042 (ON CA), [2005] O.J. No. 160 (Ont. C.A.)).
[12] Importantly, the case law directs that a costs award must represent a fair and reasonable amount that should be paid, rather than an exact measure of the actual costs, must be consistent with what the unsuccessful party might reasonably have expected to have to pay, and must reflect some form of proportionality to the actual issues argued, rather than an unquestioned reliance on billable hours and documents created (see Mason v. Smissen, [2013] O.J. No. 4229 (Ont. S.C.J.) at paras. 5 and 6 and the cases therein referred to).
Disposition
[13] I would not give effect to the submission of the moving defendant that substantial indemnity costs should be awarded based upon his Offer to Settle served February 27, 2018. Rule 49.10, as adapted for application to motions, provides that where an offer is made at least 7 days before the commencement of the hearing, is not withdrawn and does not expire before the commencement of the hearing, and is not accepted by the other party, and the party making the offer obtains an order as favourable as, or more favourable than the terms of the offer to settle, he/she is entitled to partial indemnity costs to the date of the offer to settle, and substantial indemnity costs from that date, unless the court orders otherwise. The moving defendant made no attempt to distinguish between the costs incurred prior to his Offer to Settle and the costs incurred afterwards. Moreover, in my view, the terms of the Offer to Settle reflected the full relief sought by the moving defendant in the motion and did not represent a compromise position.
[14] I do not accept the position of the moving defendant that the plaintiffs acted unreasonably. Although in my Endorsement I found that the moving defendant did signify an intention to move to set aside the default judgment, he did not do so promptly and, absent any firm indication as to when the motion would be brought, the plaintiffs were justified in initiating enforcement proceedings with respect to the judgment in order to force the issue.
[15] As indicated above, the usual rule is that costs follow the event, which should not be departed from except for very good reasons. In my view there is no basis to deny the moving defendant costs in respect of his motion. However, the moving defendant did not prevail with respect to virtually any of the arguments he advanced on the motion, and the moving defendant did not bring to the attention of the court the relevant case law and guiding principles relating to service in purported reliance upon rule 16.03(5). In short the materials prepared by the moving defendant were of little use to the court in deciding the issues on the motion. The plaintiffs would not have a reasonable expectation to pay significant costs to the moving defendant in these circumstances.
[16] Applying the principle of proportionality, I find the position of the plaintiffs with respect to the appropriate quantum of the moving defendant’s costs to be reasonable. It is therefore ordered that the plaintiffs pay to the moving defendant the costs of the motion fixed in the sum of $5,000 inclusive of fees, disbursements and HST.
D.A. Broad, J.
Date: May 24, 2018