Court File and Parties

COURT FILE NO.: CV-10-409984

DATE: 20180620

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1043 Bloor Street Inc., Plaintiff

and

Fernando Vilhena, Defendant

BEFORE: Schreck J.

COUNSEL: D. Singer, for the Plaintiff

M.A. Ross and J. Lum-Danson, for the Defendant

HEARD: In writing.

COSTS ENDORSEMENT

[1] This action was dismissed following a five-day trial: 1043 Bloor Street Inc. v. Vilhena, 2018 ONSC 3326. At the end of my reasons for judgment, I encouraged the parties to agree on costs. I did so because I believed that the parties would take reasonable positions and thereby come to an agreement. I was mistaken.

[2] The defendant submits that he is entitled to costs in the amount of $112,626.70 on a substantial indemnity basis for two reasons: (1) the plaintiff made allegations of improper conduct that were not pursued at trial; and (2) the defendant made a Rule 49 offer to settle on terms that were less favourable to him than the result following the trial.

[3] The first submission is based on the plaintiff’s pleadings in which it alleged fraudulent misrepresentation and alleged that the defendant intentionally withheld critical information from the plaintiff, in particular what was referred to in the trial as the “1987 agreement”. Ultimately, the plaintiff’s position at trial was that there had been negligent, not fraudulent misrepresentation.

[4] The defendant is correct that unfounded allegations of misconduct short of fraud can justify substantial indemnity costs: 1175777 Ontario Ltd. v. Magna International Inc. (2007), 61 R.P.R. (4^th) 68 (Ont. S.C.), at para. 32. However, in my view substantial indemnity costs are not appropriate in this case on that basis. I reach this conclusion for two reasons. First, while I found that the tort of negligent misrepresentation had not been made out, I did not find that the defendant’s conduct was faultless. In para. 30 of my Reasons for Judgment, I stated:

In my view, Mr. Vilhena was clearly negligent in asserting that the incident with the chain was the only time the owners of 1045 had attempted to stop him using the driveway. As outlined earlier, the correspondence in 2005 was a clear attempt to do so. Given the relative recency of the correspondence, I conclude that Mr. Vilhena’s failure to mention this was part of a deliberate attempt to downplay the potential difficulties respecting the parking situation in an attempt to ensure that the deal closed. I do not accept Mr. Vilhena’s evidence that he made the file containing this correspondence available to Mr. Schillaci and Ms. Stamp.

[5] Second, in the earlier action by the plaintiff in which the defendant had been a witness, his evidence respecting the 1987 agreement and the reason it had been created had been rejected by the trial judge, a finding that was affirmed on appeal.[^1] In Gillese J.A.’s judgment in the Court of Appeal, she stated (at paras 54-55):

It will be recalled that the trial judge rejected Mr. Vilhena’s evidence that the 1987 incident was due to the prompting of his architect because he needed to obtain a building permit. As the trial judge observed, the building permit had been issued in the fall of 1986, well prior to the 1987 incident, and the municipal parking requirements had been satisfied by means of the lease of parking spaces from the church to the east of 1043. To this I would add that the architect’s evidence made it clear that it had not asked Mr. Vilhena to do any such thing.

As the trial judge found, the 1987 incident occurred because Mr. Vilhena knew that he did not have the right to use the lane and he needed the Sochaniwskyjs’ permission to do so.

Given these findings, it cannot be said that there was no basis for the allegations made by the plaintiff in its pleadings. As the case proceeded, the plaintiff properly abandoned its allegations and the issue at trial was whether there had been negligent misrepresentation.

[6] However, in its written costs submissions, the plaintiff has for some reason chosen to revive its allegations of fraudulent conduct. Counsel for the plaintiff now alleges that the defendant “committed perjury, twice, which is proven or undisputed”. I made no such findings, nor did Conway J. in the earlier trial. The rejection of a witness’s evidence is not the same as a finding that the witness committed perjury: R. v. Hibbert, 2002 SCC 39, at para. 58; R. v. Ghorvei (1999), 1999 CanLII 19941 (ON CA), 46 O.R. (3d) 63 (C.A.), at para. 30. I note, as well, that I also made an adverse credibility finding with respect to one of the plaintiff’s principals (at para. 34). The plaintiff’s allegation of perjury was ill-advised. It should not have been made.

[7] Ironically, the plaintiff’s costs submissions provide the strongest support for the defendant’s argument that unfounded allegations of impropriety justify an increased costs award. However, in my view the focus should be on the plaintiff’s conduct prior to and during the trial. At those stages of the proceedings, the plaintiff’s conduct did not warrant substantial indemnity costs.

[8] The second basis upon which the defendant seeks substantial indemnity costs is that he made a Rule 49 offer to settle but obtained a more favourable outcome following the trial. Rule 49.10(1) of the Rules of Civil Procedure provides that if a plaintiff makes an offer to settle and obtains a judgment as or more favourable than the terms of the offer, then the plaintiff is entitled to substantial indemnity costs from the date of the offer onward. Rule 49.10(2) describes the costs consequences when a defendant makes an offer to settle and the plaintiff obtains a judgment as or less favourable than the offer. However, Rule 49 does not cover the situation in this case, that is, where the defendant makes an offer to settle and the plaintiff’s action is dismissed.

[9] While it may seem fair that a defendant who “beats” an offer to settle at trial should receive the same treatment as a plaintiff who does so, that is not the law. This was recently explained in Wickens. v. Chambers Insurance Professionals Inc., 2018 ONSC 2412, at paras. 22-24:

This court is sympathetic to the argument of the defendant that because it achieved a result better than its offer that it should receive substantial indemnity costs from that date forward.

Regrettably, that is not the law under Rule 49: [Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66] at para. 48:

...trial judges have expressed the view that denying elevated costs to defendants who submit an offer to settle, which is later revealed to be more favourable than the result at trial, acts as a disincentive to defendants to make reasonable offers to settle. This view, while understandable, is contrary to the wording, spirit and intent of Rule 49. Rules cannot be incrementally changed through jurisprudence. Any change in the rules to take into account the position of defendants who legitimately try to curtail what turns out to be unnecessary litigation is a matter for the Rules Committee.

I am bound by the Davies decision unless I find that the plaintiff’s conduct during the litigation is such that it warrants the court's disapproval and therefore elevated costs. I have found as a fact that there was no conduct by either party of which the court could disapprove.

See also French v. Stachejczuk, 2018 ONSC 999, at paras. 15-21. I have similarly found that the plaintiff’s conduct did not warrant elevated costs.

[10] Based on the foregoing, I conclude that the defendant is entitled to his costs on a partial indemnity basis. This leaves the issue of quantum.

[11] The costs claimed by the defendant on a full indemnity basis would be $137,664.11. The defendant submits that this amount is within the reasonable expectation of the plaintiff given the fees it paid to its counsel in the earlier action ($107,063.50) and the partial indemnity costs awarded against it in that action ($84,000.00). I note, however, that the trial in the earlier action was one day longer than this trial and the plaintiff’s lawyer in that case had been practicing for 32 years at the time of the trial. In this trial, the bulk of the work in the defendant’s costs outline was performed by two lawyers who have been practicing for 13 and five years, respectively. In my view, a comparison with the earlier action is of little assistance in determining what is fair and reasonable in this case.

[12] A costs award should reflect what is fair and reasonable rather the actual costs to the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), at para. 23; Galsan Holdings Inc. v. Davalnat Holdings Inc., 2018 ONSC 3600, at para. 40. Rule 57.01(1) of the Rules of Civil Procedure sets out a number of factors that a court may consider. I have considered those factors. This was not a complex trial and it was conducted efficiently by counsel for both parties. While the defendant’s offer to settle does not entitle him to substantial indemnity costs, it is a factor to consider.

[13] I have reviewed the defendant’s costs outline. Some of it lacks sufficient detail to allow for any meaningful assessment of reasonableness. For example, counsel for the defendant spent 19.3 hours on “legal research re various issues in advance of trial”. As noted earlier, the issues in this case were not legally complex and it is difficult to understand why this amount of legal research was required. I note, as well, that the defendant was represented by two lawyers during most of the trial. I see no reason why this was necessary. While the plaintiff was also represented by two lawyers, they were working on block fee. As well, I agree with the plaintiff that the written costs submissions and outline should not have taken three lawyers seven hours to prepare. Put simply, the defendant’s counsel could have competently and adequately represented him at far less expense. The overall amount being claimed is, in my view, grossly excessive.

[14] Having considered all of the relevant factors, I fix costs in the amount of $40,000.00, inclusive of disbursements and HST, payable by the plaintiff to the defendant within 30 days of the date of this order.

Schreck J.

Date: June 20, 2018.

[^1]: 1043 Bloor Inc. v. 1714104 Ontario Inc., 2013 ONCA 91, 114 O.R. (3d) 241, aff’g 2011 ONSC 2779, 335 D.L.R. (4^th) 755.