Court File and Parties

COURT FILE NO.: 12-53886 & 53886A1 DATE: 2018/11/13 COURT OF ONTARIO SUPERIOR COURT OF JUSTICE

RE: Carmen Scaffidi-Argentina, et. al., Plaintiffs AND: Tega Homes Developments Inc., et.al., Defendants

BEFORE: Mr. Justice Calum MacLeod

COUNSEL: Stephanie Drisdelle, for the defendant Tega and third party Dufresne Elizabeth Ackman, for the defendants Goodeve Manhire J. Stephen Cavanagh, for the defendant Paterson Group

HEARD: Costs submissions in writing

COSTS DECISION

[1] On July 9th, 2018 I released reasons reported at 2018 ONSC 4274. The issue was whether or not the defendants Goodeve Manhire and Patersons Group should be permitted to proceed with detailed defences to the cross-claims of the defendant Tega. They had originally relied upon the deemed defence to a cross-claim under Rule 28.05 (2) of the Rules of Civil Procedure.

[2] As set out in the written reasons, I found that it was reasonable to amend the defences to the cross-claims given the changed litigation landscape. I have now received written submissions on costs.

[3] Despite having been unsuccessful on the motion, Tega seeks costs of the motion and costs “thrown away” preparing for trial. There are several basis for this submission. Firstly, Tega asserts that the amendments were made without consent and without leave therefore necessitating the motion to strike. Secondly, Tega argues that the co-defendants are now pleading facts that have been within their knowledge for at least the past two years but delayed in amending their pleadings. Thirdly, Tega argues that Goodeve is attempting to relitigate the question of insurance coverage previously determined by Justice Roger.

[4] This position is untenable. The amendments to the defences to cross-claim took place against the context set out in the reasons. Specifically, the action was bifurcated by order of Justice Aston and somewhat unusually the damages trial took place before the trial on liability. The purpose of the damages trial was to fix the amount of the damages suffered by the plaintiffs in this action as the result of their commercial property becoming uninhabitable. The trial took place in January of 2016 and reasons were released in August of that year. (See 2016 ONSC 5448).

[5] Subsequently, there were settlements or partial settlements with the plaintiffs in this action and with the plaintiffs in other related proceedings. In this action, Tega has now paid the plaintiff or at least has made an agreement with the plaintiff which has resulted in the plaintiff going out of the action. The only remaining issue to be tried is the liability issue between Tega and the other defendants. Tega cross-claims for contribution and indemnity.

[6] In October of 2016, Goodeve Manhire brought an application against Encon Group Inc. and Temple Insurance Company seeking a declaration that it was entitled to be defended by Tega’s insurer under the project wrap-up insurance policy. Justice Roger released his decision on November 14th, 2016 dismissing the application. (See 2016 ONSC 7005). While Goodeve and the insurer, who were the parties to the application, are bound by that decision, it is a determination as to whether or not the claim as pleaded entitled the insurer to deny coverage under the professional services exclusion. It does not eliminate the possibility that the findings made at the liability trial might be different than the facts assumed by Justice Roger based on the pleadings. If that is the case, it remains theoretically possible that any damages awarded will be within the scope of coverage of the Encon / Temple insurance policy.

[7] As Tega is very well aware, the wish of the co-defendants to amend their pleadings to assert more robust defences to cross-claim were the subject of discussion at case conferences. The question as to whether or not leave would be required and Rule 26.01 of the Rules of Civil Procedure should apply was discussed but not resolved. As such, I directed that the co-defendants could attempt to file their amended defences and if they were successful, Tega could move to strike. If they were unsuccessful they would have to move to amend. As it happens, the counter accepted the documents and it was Tega’s motion. At the motion, however, I held as follows:

“Ultimately the question is the same. Is it unfair and prejudicial to allow a pleading amendment at this stage in the litigation? Though I am of the view that Rule 26.01 should govern (meaning the parties seeking the amendment require leave and have the onus to justify it) I have not had to decide the question based on onus. In my view on the facts of this case, there is no prejudice that cannot be addressed in costs. To the contrary, given the changed landscape of the litigation, it is entirely appropriate to permit amendments for what is now essentially an insurance dispute.”

[8] It is entirely incorrect to suggest that the responding parties acted improperly in seeking to file the amended defences. They were acting in accordance with a case management direction. It is entirely incorrect to suggest they gained any advantage in doing so. At the motion, the court treated the matter as if it was a motion under Rule 26.01 of the Rules of Civil Procedure.

[9] The arguments about delay, attempt to re-litigate, and other questions of prejudice were properly addressed at the argument of the motion. These are arguments against the granting of the amendments or for imposition of terms. They are not arguments for costs. Tega was not successful in resisting the amendments.

[10] It is true that when an amendment is granted, Rule 26.01 of the Rules of Civil Procedure suggests that compensable prejudice should be dealt with in costs. Pleading amendments which require a “do over” of any part of the litigation frequently attract costs to compensate the other party. In this case, there is insufficient evidence of trial preparation “thrown away” as a consequence of the pleading amendments.

[11] The liability trial had been scheduled for January of 2018 for 10 days. In December of 2017 I began case managing this action and it was apparent the matter would not be ready for trial in January. This was because of the partial resolution with the plaintiff (which had just occurred), the roll up of other court proceedings with the liability trial and the inability of counsel to agree on the issues to be tried. The parties did not have lists of witnesses to be called.

[12] One of the reasons the parties could not agree on the scope of the trial is the fact that they could not agree on what was encompassed in Tega’s cross-claim. Tega has insisted that its cross-claim which relies upon contribution and indemnity and the Negligence Act, is broad enough to support general claims for damages for negligence. The need to amend the defences to cross-claim was based in part on this discussion and in part on the changed landscape arising from the settlements. The trial was adjourned by the court because it was evident it was not going to be completed within the 10 days that had been scheduled. It was not specifically adjourned as a result of the pleading amendments.

[13] By January 24th of 2018 the co-defendants had served their amended defences to cross-claim and Tega indicated it would oppose those amendments. This motion then followed. Tega claims to have invested $67,080.92 in wasted trial preparation but it is hard to see how this can justifiably be visited on the responding parties as a consequence of the pleading amendments and Tega has not demonstrated that all of its preparation time has been “thrown away”. I agree with Goodeve’s submission that this is not a [Kingsgate situation (see (1994) 17 O.R. (3d) 841 (C.A.))](Kingsgate (1994) 17 O.R. (3d) 841 (C.A.)).

[14] The need to deliver a reply is not prejudice to be remedied in costs. The reply would have been necessary if the amended pleading had been served in the first instance and as there was no reply to the deemed defence to cross-claim, there are no wasted costs. If Tega is ultimately successful at trial, the trial judge may take all of the costs incurred by each party into account in fixing the costs of the trial. This will include costs of pleading, costs of discovery and perhaps the cost of getting ready for trial more than once.

[15] In conclusion, I am not persuaded there are wasted or duplicate costs resulting from the amendments. Tega resisted the amendments and was unsuccessful in doing so. The ordinary costs rule should apply and the responding parties are entitled to costs on a partial indemnity scale. I am satisfied that those costs should be fixed and payable pursuant to Rule 57.03 (1) of the Rules of Civil Procedure.

[16] The bills of costs put forward by both Goodeve and Paterson are significant. Goodeve apparently spent $35,523.88 in responding to the motion to strike. Paterson apparently spent $12,852.30. The discrepancy is partially explained by the fact that Goodeve did the lion’s share of the preparation and argument. Tega only allocated $5,862.85 to its own claim for substantial indemnity costs of the motion (90% of its actual costs according to the costs outline) but of course it was seeking $67,080.92 for costs thrown away on trial preparation.

[17] In fixing costs, the court is not engaged in a detailed fact finding exercise but rather in applying the factors set out in Rule 57.01 of the Rules of Civil Procedure in a summary manner. While all of those factors are important, the principles of indemnity, reasonableness and proportionality are normally key to the balancing exercise. The overarching objective in fixing costs is to determine an amount that is fair and reasonable for an unsuccessful party to pay (Boucher v. Wal-Mart Canada Corp., 71 O.R. (3d) 291 (C.A.)).

[18] I do not accept Tega’s submission that nominal costs of $2,500 are appropriate but I am not prepared to award costs in the amount sought by the responding parties ($27,484.73 for Goodeve and $8,832.45 for Paterson). I fix Goodeve’s costs at $12,600.00 and those of Paterson at $5,400.00.

Mr. Justice Calum MacLeod Date: November 13, 2018