Court File and Parties

COURT FILE NO.: CV-16-1717 DATE: 2018 10 01 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Nazir Azami, Plaintiff and TD Home and Auto Insurance Company, Defendant

BEFORE: Petersen, C.

COUNSEL: Jason Singer and Susan Dhaliwal, for the Plaintiff Marc Isaacs, Hilary Weise and Arie Odinocki, for the Defendant

HEARD: (in writing)

Costs Endorsement

[1] The defendant TD Home and Auto Insurance Company seeks an order for full indemnity costs in the amount of $618,101.83 (all inclusive) in connection with a three week jury trial in which it successfully defended the plaintiff’s claim for breach of contract based on the defence of arson and succeeded with a counterclaim.

[2] The plaintiff acknowledges that the defendant is entitled to its costs of the action but submits that the amount of costs sought is grossly excessive and that costs should be awarded on a partial indemnity scale.

Factors for Consideration

[3] In exercising my discretion to fix the amount of costs to be paid by the plaintiff, I have taken the following factors into consideration.

[4] The defendant was entirely successful in both its defence and counterclaim: Rule 57.01(1) of the Rules of Civil Procedure.

[5] The defendant made an offer to settle on July 24, 2015, which remained open until five minutes before the trial commenced in May 2018. The plaintiff did not accept the offer. The result at trial was more favourable to the defendant than the defendant’s offer to settle: Rules 49 and 57.01(1).

[6] The issues raised by the litigation were very important: Rule 57.01(1)(d). The plaintiff was found to have engaged in arson and to have made a false claim for indemnity. It was in the public interest for the defendant to defend the claim in order to deter such dangerous and dishonest conduct and in order to maintain lower premiums for insured persons who make valid claims.

[7] The proceeding was complex: Rule 57.01(1)(c). The defendant was required to establish the elements of a defence of arson, which necessitated calling expert evidence. A financial motive for arson was asserted by the defendant, so the production included banking records and employment history, as well as well as structural repair assessments, a contents assessment, and multiple photos taken at the fire scene. The exhibits were voluminous. The defendant was also required to defend against a claim of bad faith, which necessitated calling detailed evidence about its decision-making process. The charge to the jury was lengthy because of the factual and legal complexity of the issues.

[8] The jury found that the plaintiff committed an act of arson by deliberately setting fire to his home. He then made a false insurance claim for indemnity, received payments from the defendant for alternate living expenses, then sued the defendant when his claim was denied and had the audacity to ask for punitive damages based on bad faith. The plaintiff accused the defendant of acting in a high-handed and callous manner, when in fact the jury found that it was the plaintiff who engaged in deceitful and reprehensible conduct. Courts have held that costs should be awarded on a substantial indemnity basis in cases where unfounded allegations of misconduct seriously prejudicial to the defendant’s reputation are made by an unsuccessful plaintiff: DiBattista v. Wawanesa Mutual Insurance Co., 2005 ONSC 41985, [2005] O.J. No. 4865, at para 5. I find that this case satisfies these criteria and that costs should be awarded on a substantial indemnity scale. Full indemnity costs are to be awarded only in exceptional circumstances and they are not appropriate in this case: Man Shield (NWO) Construction Inc. v. Macdonald, 2017 ONSC 684, at para. 30.

[9] Based on all of the above, I find that the defendant is entitled to its costs on a substantial indemnity scale, but not for the number of hours docketed.

[10] Notwithstanding the importance and complexity of the case, the number of lawyers working on the file for the defendant and the number of hours docketed are disproportionate to the issues in the proceeding: Rule 57.01(1)(0.a). The defendant’s Bill of Costs confirms that the two main counsel on the case docketed a combined total of 1,210 hours for trial preparation and attendance in court. An additional four lawyers, two articling students and a law clerk docketed another 541 hours to the file. I have no concerns about the hourly rates billed; they are commensurate with the lawyers’ experience. I accept that the file was sufficiently complex to warrant co-counsel and some support by a law clerk or articling student. However, the defendant’s “full court press” involving six lawyers with over 1,750 combined docketed hours was unnecessary. It resulted in exorbitant fees that no unsuccessful party could reasonably expect to pay (Rule 57.01(1)(0.b)).

[11] I agree with the plaintiff’s submission that the number of hours docketed by the defendant’s counsel is excessive. For example, 148.6 hours were docketed for preparing the affidavit of documents, completing discoveries (which lasted a total of only four hours) and working on undertakings, in a case in which no undertaking or refusal motions were required. Similarly, one of the secondary counsel docketed 131 hours in connection with two pre-trial motions, one of which did not proceed. The plaintiff was successful in the other pre-trial motion in having evidence excluded from the trial. The high number of hours docketed for these steps in the proceeding are not justified.

[12] The plaintiff submits that a formula of five hours per day per counsel in attendance in the courtroom, plus two additional hours of preparation for each courtroom hour, should be applied to calculate a reasonable number of hours for trial preparation and attendance: Blake v. Dominion of Canada General Insurance Co. 2013 ONSC 7445 at para.15. With two counsel representing the defendant and fifteen trial dates plus one pre-trial hearing date, that formula would generate 480 hours (2 lawyers x 15 hours x 16 days). Given the complexity and importance of the issues in this case, I find that an allowance of 2.5 hours of preparation time for each hour in the courtroom would be reasonable. Based on the number of court days in this proceeding, that formula would generate 560 combined hours (2 lawyers x 17.5 hours x 16 days) for the two main counsel on the case, which could reasonably be supported by a small number of law student or law clerk hours. The defendant’s counsel have collectively docketed more than twice that amount of time, which is not reasonable.

[13] Moreover, the amount of costs to be awarded to the defendant must reflect the fact that the defendant’s conduct contributed unnecessarily to the length of the trial: Rule 57.01(1)(e). It sought to admit evidence that was clearly prejudicial to the plaintiff, which necessitated a one day pre-trial motion; it sought to call five expert witnesses, for which leave was denied after hearing submissions; it called one expert (a forensic chemist) whose testimony was long but of minimal assistance; and it refused a reasonable offer made by the plaintiff to settle the issue of damages prior to trial. Had that offer been accepted, the trial would have been shortened considerably. Despite the defendant’s ultimate success in the proceeding, the plaintiff ought not to be required to pay costs resulting from the defendant’s unnecessary prolongation of the trial.

[14] Finally, the amount of costs sought by the defendant is simply disproportionate to the amounts at stake in the litigation: Rule 57.01(1)(a). The plaintiff claimed damages at trial in the amount of $440,547.11, plus punitive damages for alleged bad faith. The defendant counterclaimed successfully for $92,119.96 in damages. These are significant amounts, but a costs award in excess of $600,000 would be grossly disproportionate.

Fees

[15] The defendant is seeking an order for full indemnity fees in the amount of $486,154.82, inclusive of HST, which would be $474,000 (inclusive of HST) on a substantial indemnity scale. In my view, an order for fees in the amount of $140,000 (inclusive of HST) is more fair and reasonable in the circumstances of this case.

Disbursements

[16] The plaintiff also takes issue with the $131,947 of disbursements claimed by the defendant. I agree that these are excessive and unjustified.

[17] An amount of $25,372.43 is billed for photocopying, printing, binding of materials, transcripts, process server, witness summons, and court filing fees. Although the cost for this type of disbursements can accumulate quickly in a case with such a voluminous record, the amount claimed is not particularized and I find it to be unreasonably high and unjustified.

[18] One of the experts (Roar Engineering) was not permitted to be called at trial, so his report ($6,090) and trial preparation time ($4,883.01) should be excluded.

[19] An amount of $53,097.21 is charged for the attendance and trial preparation of three Origin and Cause expert witnesses, in addition to another $16,304.77 for their collective reports. These amounts are not particularized and appear to be grossly excessive.

[20] Disbursements in the amounts of $1,512 and $1,740 are billed for the trial preparation and attendance of two non-expert witnesses. Those disbursements should be limited to a summons fee.

[21] An amount of $15,921.50 is billed for a replacement witness, who was called to testify about chemical testing results conducted by another expert who unable to attend trial due to illness. The replacement witness’s evidence was long, confusing and of minimal assistance. The disbursement amount in connection with his preparation and attendance is excessive.

[22] Overall, I conclude that a fair and reasonable amount of disbursements for this matter is 71,500, inclusive of any taxes.

Order

[23] The plaintiff is therefore ordered to pay the defendants’ costs in the total amount of $211,500, inclusive of fees, disbursements and HST.

Petersen J. Date: October 1, 2018