Court File and Parties

COURT FILE NO.: CV-17-577930 DATE: August 22, 2018

Superior Court of Justice - Ontario

RE: Vipond Inc. v. Fortis Electric Ltd. and Bondfield Construction Company Limited;

BEFORE: MASTER C. WIEBE

COUNSEL: Irwin Ozier and Paul Hancock for Vipond Inc. (“Vipond”); Marco Drudi for Fortis Electric Ltd. (“Fortis”); Fabio M. Soccol for Bondfield Construction Company Limited (“Bondfield”).

DECISION: July 17, 2018.

Costs and Interest Decision

[1] On July 17, 2018 I issued my ruling in the motion by Vipond for summary judgment. I granted leave for the motion and eventually I granted the motion itself. I ordered the delivery of written costs submissions in light of the result. I have received and reviewed these submissions.

a) COSTS

[2] Vipond is clearly the successful party, and is, therefore, entitled to costs. Vipond also seeks costs. The following questions need to be determined:

a) Who is obligated to pay costs? b) What is a reasonable amount of costs to be paid?

a.1) Who is obligated to pay costs?

[3] As to which party should pay costs, clearly, in my view, Bondfield should pay Vipond costs. It resisted the Vipond claim and motion throughout and lost.

[4] The more difficult question is whether Fortis should also pay Vipond costs. Fortis supported the Vipond motion taking the position, which succeeded in the end, that there was more than sufficient Fortis holdback to pay Vipond in full and that this holdback should be and could be used to pay the Vipond claim. Mr. Drudi argued that, not only should it not have to pay Vipond costs, Fortis should itself therefore receive costs from Bondfield.

[5] Mr. Hancock’s response was that Fortis should pay Vipond costs as well, as it remained primarily liable under its subcontract with Vipond for the non-payment. Mr. Hancock referred me to the decision of Justice Perell in Royal Oak Railing & Stair Ltd. v. MyHaven Homes Ltd., 2016 ONSC 423 at paragraphs 7 to 12. His Honour found a contractor and owner jointly liable to pay a judgment to a subcontractor. The contractor had not opposed the claim, asserting that the owner should have paid it all along from the holdback, which exceeded the claim. This position succeeded. The contractor submitted that it should not have to pay costs and that it indeed should receive costs from the owners. His Honour rejected that argument stating the contractor caused the claim in the first place by not paying the subcontractor. He stated that the contractor had the option of paying the subcontractor and taking an assignment of the subcontractor’s lien as the contractor knew all along it had no defence to the claim. The contractor chose not to do so, and instead forced the subcontractor to incur the costs of making and pursuing its claim. His Honour ruled that the contractor was jointly liable with the owners to pay the subcontractor costs.

[6] I find this logic persuasive in the case before me. Fortis had the option all along of paying the Vipond claim and taking an assignment of that claim in order to avoid having Vipond incur the costs and inconvenience of pursuing the claim. Fortis knew all along it had no defence to the claim. Indeed, it paid 1/3 of the Vipond claim at one point. There was no evidence before the court that Fortis lacked the wherewithal to pay the remainder of the Vipond claim. It just wanted the holdback to pay the remainder of the claim. There has to be cost associated with this strategic decision.

[7] I find as a result that Fortis must be found jointly liable with Bondfield to pay some of Vipond costs. The proportion that Fortis must pay will be determined in light of the overall conduct of the parties. One of the factors that I will consider in this regard is the fact that Fortis did paid 1/3 of the Vipond original claim a year ago. Fortis should be given some credit for having done this.

a.2) What is the reasonable amount of costs to be paid?

[8] The quantum of the costs award in Vipond’s favour is the second question. There is an issue of offers to settle. On February 6, 2018, Vipond made a written offer to settle. It was in effect two offers. One of the offers was time limited, and is therefore irrelevant under Rule 49. The other offer was for payment by Fortis and Bondfield to Vipond of the eventual judgment, $61,245, plus prejudgment interest at 26.8% running from August 1, 2017, plus partial indemnity costs. It remained open for acceptance until trial. I will discuss the interest issue in greater depth later. Suffice it to say here that I agree with Mr. Soccol that there was no evidence on the motion justifying the 26.8% prejudgment interest rate. Therefore, I am driven to the conclusion that the relevant Vipond offer of February 6, 2018 exceeded the eventual judgment in favour of Vipond, and is not relevant to my determination on costs.

[9] What is the reasonable expectation of the losing parties? The Vipond Bill of Costs concerns its costs for the entire action, not just this motion. The filed costs outlines of Fortis and Bondfield concern only the costs of this motion. Therefore, the two are not comparable. However, Mr. Hancock in his Reply submission broke out the motion costs portion of the Vipond Bill of Costs. This breakout shows a figure of $5,154.60 for partial indemnity costs, and $7,544.55 for substantial indemnity. The Vipond partial indemnity figure compares favorably with the $3,661.20 partial indemnity figure in Bondfield’s costs outline and the $4,601.36 partial indemnity figure in Fortis’ costs outline. The 12 hours shown for Mr. Ozier on the motion are comparable to the 10.8 hours shown for Mr. Soccol. One also has to bear in mind that Vipond filed a factum and book of authorities, and that the other parties did not. Mr. Soccol complained about the time shown by Vipond for preparing a factum and for the several notices of motion. I do not find the submission about the factum persuasive, as the Vipond factum was helpful and the motion was very important to Vipond given the high onus on the motion. The multiple notices of motion, on the other hand, were unnecessary, and this will be considered. On the whole, with the minor exception noted above, I find that the Vipond motion costs figures are within the reasonable contemplation of what the unsuccessful parties would have to pay in the event of a loss on a motion of this import.

[10] The non-motion costs in the Vipond Bill of Costs all appear generally not unreasonable. They concern the preservation and perfection of the Vipond claim for lien, the preparation and pursuit of the section 39(1) information demand, and the attendance at the first trial management conference. These are all normal costs to be expected. Mr. Soccol complained about the 1.6 hours shown for the review of the City’s deficiency list. I agree that this should be discounted. Some of the shown time in the Vipond Bill of Costs also seems somewhat excessive, such as the time concerning the pleadings. I will take this all into consideration.

[11] Mr. Soccol argued that Bondfield should not be responsible for the Vipond costs of preserving and perfecting its claim for lien, as Bondfield’s legal obligation throughout was only “retention” of holdback. Normally, I would be sympathetic to this argument, but not in this case, as Bondfield was in breach of its section 39(1) obligations from mid-June, 2017 to mid-December, 2017. Had the Bondfield section 39(1) response been received in a timely way, there is a chance that the resolution of this claim could have been significantly accelerated.

[12] There was argument over the scale of the costs. I agree that Fortis and Bondfield should not be made liable for substantial indemnity costs for the non-motion events. Fortis paid part of the claim, as I stated above, and looked understandably to the holdback for the payment of the rest. Bondfield had reason to wait for evidence from the owner as to deficiencies.

[13] The motion is a different matter, however. Bondfield did not act at all reasonably in continuing to withhold holdback it had been paid once it knew or should have known there was absolutely no issue with Vipond. I find as a result that Bondfield was solely responsible for this motion, and quite unreasonably so, as it had no justification to withhold the money. Its evidence on the motion is wholly inadequate. Furthermore, when Vipond served its 10 day offer to settle on February 6, 2018, an offer which did not contain recovery for costs and interest, Bondfield should have accepted it without hesitation, as Fortis was prepared to do. Bondfield did not do so. It should bear the consequence for not doing so. Bondfield should pay the costs of the motion solely and on a substantial indemnity basis.

[14] Considering all of these factors, I have concluded that Fortis and Bondfield must jointly pay Vipond partial indemnity costs of $4,000 for the non-motion costs of Vipond, and that Bondfield must solely pay Vipond an additional $6,000 in substantial indemnity costs for the costs of the motion. These must be paid in 30 days from the date of this order.

b) INTEREST

[15] Concerning prejudgment interest, Vipond seeks a prejudgment interest rate of 26.8% which it says is contained in its subcontract with Fortis. As stated above, there was no evidence in the motion in support of this position. Vipond filed no copy of the subcontract. There was no admission from Fortis that this was the agreed upon rate. I, therefore, deny this claim.

[16] Vipond also claims interest at the rate specified in the subcontract between Fortis and Bondfield, arguing that according to that subcontract the terms thereof apply to all Fortis subtrades, including Vipond. There was no evidence in the motion as to what is contained in the Fortis/Bondfield subcontract. I, therefore, deny this claim.

[17] Vipond also claims interest in accordance with the federal Interest Act, R.S. C. 1985, c. I-5, which Mr. Hancock submits is 5%. In fact, the statute specifies that this 5% rate applies where there is no interest specified in the contract, which apparently is not the case here. Furthermore, the statute specifies that the rate cannot exceed 5% where the contractual rate is specified for a period of less than a year. As stated earlier, the Vipond/Fortis sub-subcontract was not included in the motion material, and, therefore, I do not know whether this provision applies. In any event, it only provides a limit to the interest that can be charged. It does not provide for the rate to be applied. I do not find that the Interest Act specifies the 5% rate for this liability.

[18] This leaves only the prejudgment interest rate specified by the Courts of Justice Act, R.S.O. 1990, c. C.43, section 128, which no one disputes to be 0.8%. This rate must run from the date after the registration of the Vipond claim for lien, June 1, 2017, to July 17, 2018, the date of my ruling. The total for this interest is $601.87.

[19] I find that both Fortis and Bondfield are liable for this interest. There is an argument that, as Bondfield’s liability is anchored in holdback, which is a “retention” obligation, it should not be liable for interest. This might be a successful argument in another case, but not in this one. I find that Bondfield’s failure to deliver a section 39(1) respond as required undermined what would have a chance to resolve the Vipond claim in a timely way. Furthermore, Bondfield’s conduct on this motion, as discussed above, exposed it to interest liability.

[20] As to post-judgment interest, it is undisputed that the Courts of Justice Act section 129 specifies a rate of 3%. This is what must apply to my judgment both on the principal amount and on the costs.

DATE: August 22, 2018

MASTER C. WIEBE