Court File and Parties

SUPERIOR COURT OF JUSTICE - ONTARIO

Re: FSA Science and Art Ltd. v. 1004964 Ontario Inc. doing business as t.e.s.t. and Edward Slapsys

2018 ONSC 6767

Court File No.: CV-09-384460

Before: Master R.A. Muir

Counsel: Jason Squire for the plaintiff Renata Kis for the defendants

Heard: 2018 11 13

REASONS FOR DECISION

[1] There are two motions before the court.

[2] The plaintiff brings a motion seeking summary judgment dismissing the counterclaim of the defendant 1004964 Ontario Inc. (“100”).

[3] The defendants bring a motion pursuant to Rule 23.05 of the Rules of Civil Procedure, RRO 1990, Reg. 194 (the “Rules”) for an order requiring the plaintiff to pay the defendants’ costs of this now discontinued action.

[4] The parties agreed that these motions would be heard by me as opposed motions in writing.

[5] As a preliminary matter, there was some concern expressed with respect to the disclosure of offers to settle as part of the Rule 23.05 motion. That concern related to the issue of whether it was proper for the offers to settle to be disclosed before the court had ruled on the summary judgment motion. For this reason, I have not considered the offers to settle in determining the issues on the summary judgment motion. To the extent that it is necessary, I hereby order that compliance with Rule 49.06 is dispensed with pursuant to Rule 2.03 as being in the interest of justice to do so.

BACKGROUND

[6] The plaintiff entered into an agreement with 100 to provide replacement software for the plaintiff’s business. The plaintiff apparently paid $454,000.00 for the software. It claims that the software was not functional and it was apparently never used by the plaintiff. The plaintiff then started this action in 2009 seeking significant damages for breach of contract, negligent misrepresentation, negligence and unjust enrichment. The defendants deny the plaintiff’s allegations.

SUMMARY JUDGMENT

[7] The defendant 100 has advanced a counterclaim in the amount of $4,121.25. The counterclaim seek payment from the plaintiff for an invoice delivered by 100 in respect of certain assistance services. An employee of the defendant 100 apparently spent a couple of hours at the plaintiff’s offices re-installing the subject software. The defendant 100 then rendered an invoice for the time spent by its employee which has not been paid.

[8] I am satisfied on the evidence that there exists no genuine issue requiring a trial in respect of the counterclaim. The initial agreement between the parties provided that 100 would provide 20 hours of software transition assistance to the plaintiff without further charge. The defendant 100 admitted that the invoice in question was in respect of only a few hours of assistance at most and that the plaintiff had not been otherwise provided with 20 hours of assistance. The defendant 100 stated on discovery that the invoice was simply rendered to deter the plaintiff from asking for more assistance and was effectively a penalty.

[9] The only response to this allegation from 100 is a reference to the examination for discovery of the plaintiff where the plaintiff’s representative appears to state that his only concern with the invoice was quantum. However, the plaintiff’s position regarding the transition services is set out in greater detail in the affidavit filed in support of its summary judgment motion. The defendant 100 has not responded to those details, specifically the plaintiff’s evidence with respect to the 20 hours of assistance being included as part of the agreement. I also note that the plaintiff’s evidence comes from the president of the plaintiff while the evidence of the defendant 100 comes from a law clerk employed in the office of the defendants’ lawyer. I therefore prefer the evidence of the plaintiff. The counterclaim is therefore dismissed.

COSTS OF THE DISCONTINUED ACTION

[10] When dealing with costs, the overall objective for the court is to fix an amount that is fair and reasonable for the unsuccessful party who generally must pay the costs of the successful party. See Zesta Engineering Ltd. v. Cloutier, [2002] OJ No. 4495 (CA) at paragraph 4 and Boucher v. Public Accountants Council for the Province of Ontario, [2004] OJ No. 2634 (CA) at paragraph 26. In Davies v. Clarington (Municipality), 2009 ONCA 722 the Court of Appeal stated as follows at paragraph 52:

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 costs of the successful litigant.

[11] Apart from the operation of Rule 49.10 (offers to settle), elevated costs should only be awarded on the basis of a clear finding of reprehensible conduct. See Davies at paragraph 40.

[12] I am satisfied that the defendants are entitled to a portion of the costs they are requesting. However, I am not prepared to make an order for the payment of costs on an elevated scale. The offers to settle the defendants rely on do not comply with Rule 49.10. There is no evidence of reprehensible conduct on the part of the plaintiff that would otherwise attract an elevated costs order.

[13] The plaintiff has chosen to discontinue this action. There will be no determination of the matters in issue on the merits. This is a relatively complex action. It is impossible to determine on this in-writing costs motion whether or not the plaintiff would have been ultimately successful at trial.

[14] When a party commences a legal proceeding, it assumes a risk that it will not succeed in the end and will have to pay a defendant’s costs. A lack of success may arise because of an adverse finding with respect to the merits of the claim but it may also result from the simple economics of the litigation. At some point, a plaintiff may have to abandon a claim before trial because it may not be economical to continue to pursue the claim or because it may never collect on any judgment. Regardless of how an action turns out, a plaintiff always runs the risk of having to pay the costs of any defendant it chooses to sue.

[15] The defendants did not ask to be part of this litigation. They were brought into this action by the plaintiff. The plaintiff has not been successful. It has discontinued its action before trial and after the defendants have incurred legal costs defending themselves. I see nothing in the conduct of the defendants that would justify denying them their costs of this discontinued action. I accept that the defendants may have been uncooperative at times and perhaps not as engaged as they should have been. However, I see nothing in their conduct that would justify a punitive costs order or an order denying the successful defendants their costs. In my view, the defendants as the successful parties are entitled to their partial indemnity costs, in accordance with the court’s usual practice.

[16] However, I agree with the plaintiff that the costs the defendants are seeking are excessive in the circumstances of this action. The defendants ask for partial indemnity costs of $52,000.00 inclusive of HST and disbursements. In particular, I view the costs attributed to preparation for the pre-trials ($13,000.00 on a partial indemnity scale) and “general items” ($9,000.00 on a partial indemnity scale) as excessive. I note that one of the pre-trial conferences was not as productive as it could have been because Mr. Slapsys did not attend in person. There also appears to be some duplication of effort given the number of timekeepers involved on behalf of the defendants as well as some time attributable to motions where the costs have already been determined. The plaintiff was also successful on the counterclaim.

[17] The disbursements requested by the defendants appear fair and reasonable. The bulk of the disbursements relate to out of pocket expenses for transcripts and mediator fees.

[18] Taking these factors into account, I have concluded that it is fair and reasonable for the plaintiff to pay 50% of the defendants’ partial indemnity costs of this action.

ORDER

[19] I therefore order as follows:

(a) the counterclaim of the defendant 100 is dismissed;

(b) the plaintiff shall pay the defendants’ costs of this action in the amount of $26,000.00, inclusive of HST and disbursements;

(c) these costs shall be paid by December 13, 2018; and,

(d) the plaintiff may set off against this amount any unpaid costs orders in its favour.

COSTS OF THESE MOTIONS

[20] In view of the divided success on these motions, it would appear fair and reasonable that there be no order for the costs of these motions. However, if either side wishes to seek costs they shall provide the court with brief submissions in writing by December 13, 2018. These submissions may be sent directly to me by email.

Master R.A. Muir

DATE: 2018 11 13