Ottawa Convention Centre Corporation v. treefort Hip Productions Inc., 2018 ONSC 6550

Court File No.: CV-15-66839 Date: 2018/11/02

Ontario Superior Court of Justice

Between:

Ottawa Convention Centre Corporation, Plaintiff (Defendant by Counterclaim) – and – treefort Hip Productions Inc., Defendant (Plaintiff by Counterclaim)

Counsel: Andrew J.F. Lenz, for the Plaintiff K. Scott McLean, for the Defendant

Heard: In writing

Decision on Costs

RYAN BELL J.

Introduction

[1] After an eight-day trial, I dismissed the counterclaim of treefort Hip Productions Inc. and granted judgment to Ottawa Convention Centre Corporation (“OCCC”) on its claim. I found that the parties’ course of dealings did not give rise to a contractual relationship of the nature asserted by treefort.

[2] The parties have been unable to agree on the issue of costs of the action.

[3] OCCC seeks its costs of the action on a substantial indemnity basis in the amount of $404,965.71, inclusive of disbursements and taxes. OCCC submits that substantial indemnity costs are appropriate based on the reasonableness of OCCC’s pre-litigation offer, treefort’s allegations of bad faith, and taking into account other factors specifically identified in Rule 57.01 of the Rules of Civil Procedure.

[4] treefort agrees that as the successful party, OCCC is entitled to its costs. treefort does not agree that OCCC is entitled to substantial indemnity costs. treefort also disputes the quantum of costs claimed by OCCC.

[5] As the Court of Appeal stated in Boucher v. Public Accountants Council for the Province of Ontario, [2004] O.J. No. 2634, in fixing costs, the objective is to fix an amount that is fair and reasonable, having regard to the range of factors in Rule 57.01 of the Rules of Civil Procedure, for the unsuccessful party to pay, rather than an amount fixed by the successful party’s actual costs.

Scale of Costs

[6] Rule 57.01 identifies the factors a court may consider when exercising its discretion to award costs. In support of its position that treefort should pay OCCC its costs on a substantial indemnity basis, OCCC relies on the following:

• treefort’s claim was substantial; treefort’s claim was dismissed in its entirety;
• OCCC’s assertion that the trial was made “enormously complex” when the terms of the license agreements were “relatively simple”;
• the importance of the issues to OCCC;
• OCCC’s assertion that the positions taken by treefort at trial, including motions at the commencement of trial and in relation to read-ins, lengthened and delayed the hearing;
• OCCC’s pre-litigation offer; and
• treefort’s allegations of bad faith against OCCC.

[7] Leaving aside consideration of OCCC’s pre-litigation offer and the allegations of bad faith, I agree with treefort that there is nothing in the conduct of the litigation itself that warrants an award of substantial indemnity costs. As the Court of Appeal confirmed in Davies v. Clarington (Municipality), 2009 ONCA 722, at para. 45: “a distinction must be made between hard-fought litigation that turns out to have been misguided, on the one hand, and malicious counter-productive conduct, on the other. The former, the thrust and parry of the adversary system, does not warrant sanction: the latter well may” (cited in Newlands Estate, 2018 ONSC 2952, at para. 28). Substantial indemnity costs are only awarded in rare and exceptional cases (St. Elizabeth Home Society v. Hamilton (City), 2010 ONCA 280, at para. 92, cited in Newlands Estate, at para. 29). The conduct of the litigation was not unreasonable.

[8] OCCC’s pre-litigation offer was presented to Ms. Culliton at the meeting on November 24, 2015. This letter was put before me as evidence at trial, as were the November 30, 2015 letter from treefort’s counsel and the December 2, 2015 response from OCCC’s counsel.

[9] treefort submits that OCCC is not entitled to rely on these letters on the basis that the November 24, 2015 letter was part of the lis between the parties.

[10] OCCC’s November 24, 2015 offer was not an offer to settle within the meaning of Rule 49 of the Rules of Civil Procedure because it was made before the action was commenced. However, this court has broad discretion to consider pre-litigation offers with respect to costs (Newlands Estate, at para. 24). The fact that the November 24, 2015 letter was part of the lis does not alter the breadth of the court’s discretion in determining costs. A pre-litigation offer is relevant as it can demonstrate whether a party was prepared to be reasonable from the outset (Newlands Estate, at para. 24).

[11] In its letter, OCCC offered to reduce treefort’s account receivable with OCCC by approximately $50,000. The original offer made by OCCC expired by November 30, 2015. In his letter of December 2, 2015, counsel extended the offer to December 7, 2015. The offer was not accepted. OCCC commenced the action and treefort counterclaimed.

[12] Manifestly, the result obtained by OCCC at trial was better than its pre-litigation offer. While OCCC’s pre-litigation offer demonstrates that it was prepared to be reasonable with treefort before the action was commenced and is a factor to be taken into account when assessing costs, I would not award costs on a substantial indemnity basis as a result. The prima facie cost consequences of the failure to accept an offer set out in Rule 49 do not apply. No Rule 49 offers were served.

[13] In its pleading and in its closing submissions, treefort alleged that OCCC had, intentionally and in bad faith, breached its alleged contractual obligations. I found that OCCC acted in good faith throughout its dealings with treefort. I found that at no point did OCCC mislead treefort. treefort asked me to infer that a report on the 2015 Festival was prepared by OCCC representatives to fabricate a justification of OCCC’s “termination” of the Festival without notice. I was not prepared to draw this inference. I rejected treefort’s submission that OCCC was engaged in an “end game” to “evict” treefort, and I specifically found that there was no such “end game” afoot. These are very serious allegations. They relate to the honesty of OCCC and its senior executives in their dealings with treefort.

[14] Proceedings where allegations of fraud, dishonesty or bad faith are made and not established are recognized as falling into the “special and rare” category of cases that may attract an award of costs on a substantial indemnity basis (Sienna v. State Farm Mutual Automobile Insurance Co., 2015 ONSC 786, at para. 20; Sagan v. Dominion of Canada General Insurance Co., 2014 ONSC 2245, at para. 3). As Lofchik J. stated in Sagan, at para. 3: “[t]he purpose of this consequence is to diminish frivolous and speculative litigation, to cause litigants to focus on the real issues, and to foster sober reflection above that of an emotional response.”

[15] Based on the allegations of bad faith made by treefort but not established, I am satisfied that an award of substantial indemnity costs is appropriate, but that it should be limited to the costs of attending at trial. It follows that costs of the interlocutory injunction (properly included in OCCC’s bill of costs) will also be on a partial indemnity basis.

Quantum of Costs

[16] treefort highlights that OCCC’s bill of costs includes time for 15 timekeepers. It submits that Mr. Moon’s time should be removed from OCCC’s bill of costs because Mr. Moon is a solicitor and “played no role in the litigation per se.”

[17] I have reviewed Mr. Moon’s docket entries. While Mr. Moon appears to have spent some time dealing with the client in relation to the litigation, I accept that Mr. Moon was involved in the early stages of the litigation and assisted litigation counsel in this regard.

[18] With respect to the number of timekeepers involved, OCCC’s bill of costs identifies five lawyers. Mr. Lenz and Mr. Hodgins were counsel at trial. Their time accounts for over 85 per cent of the lawyers’ time reflected on the bill of costs. Articling students and law clerks make up the balance of the timekeepers. Their time, collectively, was exceedingly modest – less than 100 hours.

[19] Apart from Mr. Moon’s time, there is no issue taken with trial counsel’s time or their hourly rates. There is no issue regarding disbursements (claimed at $16,830.39).

Disposition

[20] Based on all of the above, and having regard to the factors in Rule 57.01 and the principles in Boucher, I award OCCC its costs of the action in the amount of $320,000, inclusive of disbursements and taxes.

Madam Justice Robyn M. Ryan Bell Released: November 2, 2018