Court File and Parties

COURT FILE NO.: CV-11-1288 DATE: 20180925 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: V.P.M. Marketing and Media Consulting Inc. and Patricia Mitchell, Plaintiffs AND: Stephen Jenne, Barbara Jenne and BAMS Marketing Inc., Defendants

BEFORE: THE HON. MR. JUSTICE G.M. MULLIGAN

COUNSEL: E. Bisceglia and A. Di Biase, Counsel for the Plaintiffs S.R. Fairley, Counsel for the Defendants

HEARD: By written submissions

Costs Endorsement

[1] This matter proceeded by way of a 19-day trial. The plaintiffs were successful in obtaining judgment against the defendants for reasons set out in my judgment dated July 31, 2018. Judgment was granted in favour of the plaintiffs for $614,624 for claim together with judgment for $30,000 for punitive damages against the defendants. The defendants’ counterclaim was dismissed in its entirety. In my endorsement, I indicated that if the parties could not reach an agreement on costs, written submissions could be submitted. I have now received those submissions from counsel for the plaintiffs and the defendants.

[2] The plaintiffs claim costs on a combination of partial indemnity costs and substantial indemnity costs, totalling $531,272.25. The plaintiffs’ claim for costs can be broken down as follows:

Item	Partial Indemnity Costs (up to Sep 21, 2017)	Substantial Indemnity (after Sep 21, 2017)	Sub-Totals
Fees	$127,771.00	$300,827.75	$428,598.75
Taxes on Fees			$ 55,717.84
Disbursements (Non-Expert)			$ 19,596.13
Disbursements (Expert)			$ 27,359.53
TOTAL:			$531,272.25

[3] The plaintiffs submit that they are entitled to substantial indemnity costs for costs incurred after a Rule 49 offer to settle, dated September 21, 2017.

[4] The defendants acknowledge that the plaintiffs achieved a damages award exceeding the offer to settle, but submit that the costs are excessive and exceed the amount an unsuccessful party could reasonably expect to pay. In addition, the defendants take issue with some of the disbursements incurred by the plaintiffs. The defendants submit that if costs are allowed on a substantial indemnity basis, costs ought to be in the range of $215,000 plus disbursements, but then further reduced by fifty percent based on various factors, reducing the costs to $107,500 plus disbursements.

Position of the Plaintiffs

[5] It is not disputed that there were various offers to settle submitted by the plaintiffs prior to trial. Settlement discussions continued during the trial. The plaintiffs made a formal Rule 47 offer to settle on September 21, 2017. That offer provided in part:

1. The Defendants, Stephen Jenne, Barbara Jenne and BAMS Marketing Inc. (collectively the “Defendants”) shall collectively pay to the Plaintiffs the sum of THREE HUNDRED THOUSAND DOLLARS ($300,000) plus interest and costs, as noted below;
2. In addition to the payment in paragraph 1 above, the Defendants shall pay to the Plaintiffs their costs of this action on a partial indemnity basis to the date of acceptance of this Offer, as assessed or as agreed.

[6] The plaintiffs’ claim on a partial indemnity basis up to the Rule 49 offer is $127,771. This included fees and disbursements in connection with three motions, which were resolved on consent.

[7] The remaining fees sought on a substantial indemnity basis are $300,827.75. This amount is broken down into the following categories, on a substantial indemnity basis: (i) Trial preparation - $68,476; (ii) Trial attendance and ongoing preparation - $153,110.50; (iii) Preparation of plaintiffs’ Closing Submissions - $72,968.25; (iv) Preparation for Costs Submissions - $6,273.

[8] The plaintiffs were represented by two counsel at trial, Emilio Bisceglia, who indicated his actual hourly rate was $450, and Adriana Di Biase, whose actual hourly rate was $400. In addition, other lawyers not appearing at trial, docketed time according to the dockets filed.

[9] The plaintiffs submit that they were completely successful in this action. In addition to the dismissal of the counterclaim against them, they received a damage award exceeding their Rule 49 offer and they received a punitive damages award based on the circumstances of the relationship between the parties.

Position of the Defendants

[10] The defendants acknowledged that the plaintiffs achieved an award in excess of the plaintiffs’ Rule 49 offer, and therefore, the plaintiffs are entitled to costs. However, the defendants submit that the costs sought are excessive. By way of comparison, the defendants’ counsel submit that their own costs billed to their client was for $253,045.17, inclusive of HST for fees and $6,046.86 for non-expert disbursements. There were three motions brought before trial, for which the plaintiffs are seeking costs. The defendants submit that no costs should be awarded given the consents entered into.

[11] The first motion resulted in the consent order of Justice P.A. Douglas on December 12, 2014. That order granted the plaintiffs leave to amend the Statement of Claim and further required the plaintiffs and the defendants to provide certain answers. Costs were reserved to the trial judge. The defendants submit that the costs sought by the plaintiffs for examination for discovery and this motion are $42,823.81, and ought not to be included because the result was a consent order.

[12] The next motion resulted in the consent order of Vallee J. on October 28, 2016. The defendants were ordered to comply with the order of Justice Douglas by providing certain documents. Costs were once again reserved to the trial judge. The defendants submit that the plaintiffs’ costs sought for this motion, $16,737, ought not to be awarded because it was settled by way of consent.

[13] The third motion resulted in the consent order of Vallee J. on October 28, 2016. The defendants brought a motion for security for costs. On consent, Justice Vallee ordered that the plaintiff, Patricia Mitchell, undertake to pay any costs ordered in favour of the defendants. Once again, costs were reserved to the trial judge. The defence submits that the plaintiffs’ costs sought for this motion, $11,322.50, ought not to be awarded. The consent order favoured the defendant.

[14] The defendants take issue with the amounts claimed by the plaintiffs for trial scheduling court, $6,314.

[15] The defendants also take issue with the amount claimed on the substantial indemnity basis, after the Rule 49 offer to settle. Among the points made by the defendant are the following:

• The plaintiffs are requesting fees of $221,586.50 for preparation and attendance at trial which amounts to almost $12,000 per day, and approaches the entire amount charged to the defendants for the whole case, start to finish.
• The plaintiffs are claiming fees in the amount of $72,960.25 based on a total of 218.8 hours for written submissions…the defendants submit that they should not be responsible for excessive spent on closing submissions.
• With respect to preparing for and attending pre-trial, counsel for the plaintiffs have recorded almost $9,000, which is excessive.

Analysis

[16] It is well settled that the Courts of Justice Act, s. 131, provides considerable judicial discretion on the issue of fixing costs. Rule 57.01 of the Rules of Civil Procedure sets out various factors which the court can consider in exercising this discretion, including the principle of indemnity, the amount of costs an unsuccessful party could expect to pay, the complexity of the proceedings and the importance of the issues. These principles were highlighted in the Court of Appeal decision Boucher v. Public Accountants Council for the Province of Ontario , [2004] O.J. No. 2634. At para. 6, Armstrong J.A. stated:

Overall, as this court has said, the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in a particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.

[17] Modern costs rules are designed to foster three fundamental purposes: (a) to partially indemnify successful litigants for the costs of litigation; (b) to encourage settlement; and (c) to discourage and sanction improper behaviour by litigants: Serra v. Serra, 2009 ONCA 395 , [2009] O.J. No. 1905 at para. 8 .

[18] Reasonableness plays a role in assessing the costs of the successful party. In Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722 , [2009] O.J. No. 4236, Epstein J.A. reviewed the leading authorities with respect to the reasonableness principle and stated at para. 52:

As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of costs awards, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party, rather than any exact measure of the actual cost of the successful litigant.

[19] Over-preparation is a consideration that the Ontario Court of Appeal called attention to in Moon v. Shier , [2004] O.J. No. 4651. As Borins J.A. stated at para. 33:

If a lawyer wants to spend four weeks in preparation for a motion when one week would be reasonable, this may be an issue between a client and his or her lawyer. However, the client in whose favour a costs award is made, should not expect that the court fixing costs to require the losing party to pay for over-preparation, nor should the losing party reasonably expect to have to do so.

[20] The expectation of the losing party is a principle that was discussed in Ward-Price v. Mariner’s Haven Inc., [2004] O.J. No. 5528 . As Justice Nordheimer stated at para. 13:

…it would appear that the expectation of the parties will fall to be determined in one of two ways. It may be determined by the unsuccessful party showing what his/her/its costs were on the same matter, as some measure of what was to be expected.

[21] In Davies v. Clarington (Municipality), 2009 ONCA 722 , [2009] O.J. No. 4236, G.J. Epstein J.A. reviewed the issue of awarding of costs on an elevated scale. As she stated at para. 28:

This court, following the principle established by the Supreme Court, has repeatedly said that elevated costs are awarded only in two circumstances. The first involves the operation of an offer to settle under Rule 49.10, where substantial indemnity costs are explicitly authorized. The second is where the losing party has engaged in behaviour worthy of sanction.

Conclusion on Partial Indemnity Costs

[22] I have considered the submissions as to reasonableness and what an unsuccessful party might expect to pay. That assists the court in determining whether over-preparation is a factor here. With respect to the partial indemnity costs sought with respect to the three consent motions, I am satisfied that there ought to be a substantial reduction. Matters resolved on consent, although involving considerable amounts of preparation by both sides, ought to be viewed favourably when costs are assessed. The necessity of argument and a judicial determination as eliminated, compromises are often arrived at so that both parties can move ahead with the litigation. I am satisfied that that was the case here. I therefore reduce the partial indemnity costs to $75,000 plus HST.

Conclusion on Substantial Indemnity Costs

[23] I am satisfied that the plaintiffs are entitled to substantial indemnity costs following their successful Rule 49 offer. The award of punitive damages against the defendants further supports this conclusion. However, I find that the quantum ought to be reduced. I agree with the defendants’ submissions that there was a substantial amount of over-preparation for which the defendants ought not to be responsible. I am satisfied that an award of costs of $200,000 plus HST on a substantial indemnity basis is fair and reasonable when these factors are considered.

Disbursements

[24] The plaintiffs’ claim $19,596 for non-expert disbursements. The defendants take issue with the following:

• the photocopying costs at $6,373.50, and $1,137.10 for unidentified searches,
• $4,941 for unexplained process server fees, and
• $2,647.85 for the plaintiffs’ costs of having its law clerk summarize transcripts.

[25] Having considered these points, I award the plaintiffs $15,000, all inclusive, for non-expert disbursements.

Expert Disbursements

[26] The plaintiffs’ claim $27,359.53 for the cost of its experts. Both parties retained experts to analyze statements and financial documents with respect to this litigation. Both parties called experts to give evidence at trial. Although the defendants submitted their fees and non-expert disbursements for comparison purposes, they did not submit their disbursement for their own expert, either in preparation for trial or in testifying at trial.

[27] I am satisfied that the plaintiffs’ disbursements for their expert, $27,359.53, was both appropriate and necessary to assist the court in assessing the evidence at trial.

[28] I therefore award costs in favour of the plaintiffs, payable by the defendants as follows:

Item	Amount
Fees on a partial indemnity basis	$ 75,000.00
Fees on a substantial indemnity basis	$200,000.00
HST on both	$ 35,750.00
Non-expert disbursements, including HST	$ 15,000.00
Expert disbursements, including HST	$ 27,359.53
Total	$353,109.53

[29] Costs are payable by the defendants to the plaintiffs in the amount of $353,109.53 within 30 days of the release of this endorsement.

MULLIGAN J. Date: September 25, 2018