Court File and Parties

Court File No.: CV-16-5599 Date: 2018 11 21 Ontario Superior Court of Justice

Between: ROMAN BAEVSKIY and AZALIYA BERSENEVA, Plaintiffs Counsel: Ruslana Korytko, for the Plaintiffs

And: ALEXEI BAEVSKI (ALSO KNOWN AS ALEX) and OLGA BAEVSKAIA, Defendants Counsel: Aaron Pearl, for the Defendants

Heard: July 6, 2017, in Brampton

Before: Price J.

Costs Endorsement

Overview

[1] The parties have been unable to agree on the amount of the costs that should be awarded to the plaintiffs arising from their successful motion for a further and better affidavit of documents and for a timetable of steps required to move the action to trial. The Court has reviewed the written costs submissions and this endorsement will address the costs issue.

Background Facts

[2] The plaintiffs Roman Baevskiy, who is almost 90 years old, and Azaliya Bereseneva, who is almost 80 and has a serious heart condition, say they contributed $100,000.00 to the defendants for the purchase of a residential property at 1101 Steeles Avenue West, Unit 509, Toronto, for a total purchase price of $268,000.00, believing they would become co-owners. When they moved to the property, they discovered that they were listed on title as tenants, not owners. They commenced the present action for damages and a return of their money.

[3] Owing to the plaintiffs’ advanced age and frail health, their lawyer, Ruslana Korytko, was anxious to move the action quickly to trial. On May 11 and 15, 2017, she asked Aaron Pearl, the lawyer for one of the defendants, to provide a Supplementary Affidavit of Documents to include the mortgage/line of credit documents that were secured by the property. Mr. Pearl, on behalf of the defendants, refused to provide it.

[4] Additionally, Ms. Korytko, beginning on May 15, 2017, asked the defendants to schedule examinations for discovery the following month. She proposed several dates for this purpose, but Mr. Pearl replied that the defendants were not available “for a great deal” during the months of June and July and did not offer dates earlier than late August and September 2011.

[5] When the plaintiffs brought a motion for an Order for a new and better Affidavit of Documents and for a timetable for discoveries, Mr. Pearl stated that it would be necessary for his clients to respond to the extensive allegations in the plaintiffs’ affidavit in an affidavit of their own, which he was unable to deliver within the time required by the Rules before the scheduled return date of June 23, 2017. He therefore sought and obtained an adjournment of the motion from June 23 to July 6, 2017, as there were no intervening days that were available to all parties and the Court.

[6] The defendants did not file an affidavit responding to the plaintiffs’ allegations, which was their justification for their request for adjournment. The plaintiffs allege that the purpose of the request was, in fact, to gain a strategic advantage by delaying the action, knowing that, as a result of the plaintiffs’ age and infirmity, delay would prejudice their ability to see the action through to a judgment.

[7] The Court made an Order on July 6, 2017, granting the plaintiffs the relief they requested. It issued a handwritten endorsement at the conclusion of the hearing, ordering the defendants to serve a Supplementary Affidavit of Documents containing specified documents which the defendants had argued were irrelevant, and setting a timetable of steps leading to a trial at the January 2018 trial sittings. The Court directed that if the parties were unable to agree on the costs of the motion, they could submit written arguments and a Costs Outline. The parties filed their written costs submissions which the Court has reviewed.

Issues

[8] The defendants do not dispute the plaintiffs’ entitlement to their costs of the motion, based on their success in its outcome, but dispute the amount of costs that should be paid.

Positions of the Parties

[9] The plaintiffs seek their costs of a substantial indemnity scale in the amount of $13,770.00. They submit that the defendants should be sanctioned for delay tactics by ordering them to pay the plaintiffs’ costs on the higher scale.

[10] The defendants deny the plaintiffs’ accusation of intentional delay. They deny that they engaged in unreasonable conduct, and submit that they should not be required to pay costs on a higher than partial indemnity scale. They submit that it was unreasonable for the plaintiffs to insist on proceeding to a hearing on June 23, 2017, after waiting until 8 business days before the hearing to serve their voluminous affidavits, which went to the merits of the action and included allegations that were contested and inflammatory. They submit that the plaintiffs should pay the defendants’ costs of the unnecessary attendance at court on June 23, 2017, in the amount of $1,000.00.

[11] Additionally, the defendants argue that the costs claimed by the plaintiffs are excessive. They submit that a reasonable costs award for the motion is $1,500.00, being $2,500.00 less $1,000.00 for the June 23 attendance.

Analysis and Law

(i) Applying the legal principles to the facts of the present case

[12] The plaintiffs were successful in their motion and are presumptively entitled to their costs.

[13] Costs may be awarded on a substantial indemnity scale based on unexplained delay, calculated to avoid the party’s legal obligations. See: Guelph Storm Ltd. v. Guelph Centre Partners Inc., para. 3; McGregor v. Pitawanakwat, 2017 ONCA 77, para. 33. In the present case, having regard to the plaintiffs’ age and frail health, and the prejudice that delay would reasonably be expected to cause them, I find that the defendants’ unexplained delay is evidence of bad faith and attracts an award of costs on a substantial indemnity scale.

(ii) The amount of costs

Legislative framework

[14] Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 gives the Court guidance in the exercise of its discretion by enumerating factors that the Court may consider when assessing costs.

[15] Among the factors set out in rule 57.01(1) are the following:

(i) The complexity of the proceeding; (ii) The importance of the issues; (iii) The conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; (iv) Any offers to settle; (v) The principle of indemnity; (vi) The concept of proportionality, which includes at least two factors: (a) The amount claimed and the amount recovered in the proceeding; and, (b) The amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed; (vii) Any other matter relevant to the question of costs.

Jurisprudence

[16] Justice Perell summarized the purposes that costs orders serve in 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (Q.L.) (Sup. Ct.), at para. 10. He stated:

Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements. [Internal citations omitted.]

[17] Ultimately, in determining the costs to be awarded, the Court applies fairness and reasonableness as overriding principles. Boucher v. Public Accountants Council for the Province of Ontario, 71 O.R. (3d) 291; and Moon v. Sher, 246 D.L.R. (4th) 440. In assessing what is fair and reasonable, it does not engage in a mechanical exercise but, rather, takes a contextual approach, applying the principles and factors discussed above, and sets a figure that is fair and reasonable in all the circumstances. Gratton-Masuy Environmental Technologies Inc. (c.o.b. Ecoflow Ontario) v. Building Materials Evaluation Commission, at para. 17. Patene Building v. Niagara Home, 2010 ONSC 468 requires the Court to consider proportionality; that is, the amount of costs ordered should be proportional to the amount of money and other interests at stake in the proceeding.

[18] In reviewing a claim for costs, the Court does not undertake a line by line analysis of the hours claimed, and should not second-guess the amount claimed unless it is clearly excessive or overreaching. It considers what is reasonable in the circumstances and, taking into account all the relevant factors, awards costs in a global fashion. See the cases referenced in Fazio v. Cusumano, at para. 8.

Applying the legal principles to the facts of the present case

(iii) Importance and complexity

[19] The motion was factually complex. It was not legally complex, but involved procedural issues that, owing to the plaintiffs’ age and frail health, were important in enabling the plaintiffs to have their action tried while they were still capable of participating and could benefit from its outcome.

(iv) Conduct that tended to shorten or lengthen unnecessarily the duration of the proceeding

[20] The defendants precipitated the motion by their refusal to provide a further and better Affidavit of Documents before commencing examinations for discovery and by their refusal or failure to co-operate in creating a discovery plan or timetable to move the action to a trial.

[21] Additionally, the defendants obtained an adjournment of the motion on the ground that they needed time to deliver an affidavit to respond to the plaintiffs’ allegations which they ultimately failed to do. This failure supports an inference that the purpose of the adjournment was delay.

(v) Indemnification - The hourly rates charged

[22] The plaintiffs’ lawyer, Ms. Korytko, was called to the Bar in Ontario in 2015, and had practiced law for 2 years when the motion was argued.

[23] In determining the appropriate hourly rates to be assigned to the lawyers involved in the motion, the Court follows the approach taken by Aitkin J. in Geographic Resources Integrated Data Solutions Ltd. v. Peterson (2013), at paras. 7, 11-16. That is, the starting point is the successor of the Costs Grid, namely, the “Information for the Profession” bulletin from the Costs Sub-Committee of the Rules Committee (the “Costs Bulletin”), which can be found immediately before Rule 57 in the Carthy or Watson & McGowan edition of the Rules, which sets out maximum partial indemnity hourly rates for counsel of various levels of experience.

[24] The Costs Bulletin suggests maximum hourly rates (on a partial indemnity scale) of $225 for lawyers with less than 10 years' experience and $80 for law clerks. The upper limits in the Costs Bulletin are generally intended for the most complex and important of cases.

[25] The Costs Bulletin, published in 2005, is now dated. Aitkin J. considered adjusting the Costs Subcommittee’s hourly rates for inflation, as Smith J. did in First Capital (Canholdings) Corp. v. North American Property Group, 2012 ONSC 1359, but the unadjusted rates of the lawyers in her case were only slightly less than the actual fees they charged, so she elected to use their unadjusted rates. Normally, however, it is appropriate to adjust the hourly rates in the Costs Bulletin to account for inflation since 2005.

[26] Based on the Bank of Canada Inflation Calculator, the 2017 equivalent of the hourly rates in the Costs Bulletin are $97.86 for law clerks, and $275.00 for lawyers of under 10 years’ experience.

[27] The Court is guided by the rates in the Costs Bulletin, not the actual hourly rates charged. The actual rates charged are relevant only as a limiting factor in preventing the costs awarded from exceeding the actual fees charged. The Costs Subcommittee’s rates apply to all lawyers and all cases, so everyone of the same level of experience starts at the same rate.

[28] The Court adjusts the hourly rate, or the resulting fees, to reflect unique features of the case, including the complexity of the proceeding, the importance of the issues, and the other factors set out in Rule 57.01(1). If an excessive amount of time was spent, or too many lawyers worked on the file, the Court reduces the resulting amount of fees accordingly. As long as the resulting amount does not exceed the amount actually charged to the client, the actual fee that the client agreed to pay is irrelevant.

[29] Rule 1 of the Rules of Civil Procedure defines substantial indemnity costs as meaning "costs awarded in an amount that is 1.5 times what would otherwise be allowable in accordance with Part I of Tariff A" - i.e. 1.5 times the partial indemnity rate. Costs calculated on a substantial indemnity scale represent something less than full indemnity. Justice Power, in Hanis v. University of Western Ontario (2006), 2006 ONSC 23155, at para. 46, stated that in that case, they represent approximately 90% of the fees actually charged.

[30] Ms. Korytko’s adjusted hourly rate of $275.00 is the equivalent of $412.50 on a substantial indemnity scale. Her Law Clerk’s rate of 97.86 is the equivalent of $146.79.

[31] Ms. Korytko’s actual rate was $285.00. Her Law Clerk’s rate is $50.00. In each case, these rates are substantially lower than the maximum that could be claimed on a substantial indemnity scale. Ms. Korytko’s rate is only $10.00 per hour above her maximum on a partial indemnity scale. Her Law Clerk is half of her maximum rate on a partial indemnity scale. In Mantella v. Mantella, (2006), 27 R.F.L. (6th) 76 (S.C.J.), Corbett J. noted that an award of costs is designed to indemnify, and that the amount should therefore not exceed the amount charged to the client. The Divisional Court, in Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041, adopted Corbett J.’s analysis in Mantella, holding that it was not trumped by earlier jurisprudence from the Court of Appeal. While the hourly rates awarded should not exceed the hourly rates Ms. Korytko actually charged her clients for herself and her Law Clerk, I find those rates to be modest, especially having regard to the fact that her clients are entitled to their costs on a substantial indemnity scale.

(vi) Indemnification – Time spent

[32] I have reviewed the time spent, as set out in Ms. Korytko’s Costs Outline. The time claimed is high but not excessive for a motion of this kind, having regard to the fact that a factum and brief of authorities were employed and two court appearances were required.

[33] The waiting time of 8.5 hours (of the 9.5 claimed) on July 6, 2017, will be reduced to half, based on that fact that waiting time is normally allowed at half a lawyer’s normal hourly rate. On that basis, the fees will be reduced by $1,211.25 (8.5 x $142.5).

[34] Beyond those reductions, I am not persuaded by the defendants’ arguments in support of a greatly reduced amount of costs. The defendants did not provide a Costs Outline or their lawyer’s dockets. This court has held, on more than one occasion, that when one party attacks another’s costs as excessive, but does not put its own dockets before the court, the attack “is no more than an attack in the air.” In Risorto v. State Farm Mutual Automobile Insurance Co. (2003), 64 O.R. (3d) 135, at para. 10 (S.C.), per Winkler J., cited in Springer v. Aird & Berlins LLP (2009), 74 C.C.E.L.(3d) 243 (Ont. S.C.), at paras. 12-17, then a motion judge, stated:

The attack on the quantum of costs, insofar as the allegations of excess are concerned, in the present circumstances is no more than an attack in the air. I note that State Farm has not put the dockets of its counsel before the court in support of its submission. Although such information is not required under Rule 57 in its present form, and the rule enumerates certain factors which would have to be considered in exercising the discretion with respect to the fixing of costs in any event, it might still provide some useful context for the process if the court had before it the bills of all counsel when allegations of excess and “unwarranted over-lawyering” are made. In that regard, the court is also entitled to consider “any other matter relevant to the question of costs”. (See Rule 57.01(1)(i). In my view, the relative expenditures, at least in terms of time, by adversaries on opposite sides of a motion, while not conclusive as to the appropriate award of costs, is still, nonetheless, a relevant consideration where there is an allegation of excess in respect of a particular matter. [Emphasis added.]

(vii) Other factors - Disbursements

[35] The disbursements claimed by the defendants, in the amount of $949.87, consist, in large part, of process servers’ fees ($284.94) and photocopies ($490.50). The photocopy and scanner charges are excessive for a motion of this kind. In the absence of particulars as to why the amount is so large, I am reducing that item to $150.00.

(viii) Proportionality and the reasonable expectation of the unsuccessful parties

[36] The costs claimed are proportional to the amount at stake in the action, which involved an investment of $100,000.00.

[37] I have considered the following costs awards in similar cases, which should have informed the defendants’ expectations of the costs they would face if unsuccessful in the motion:

(a) In 1679753 Ontario Limited v. Muskoka Lakes (Township), 2010 ONSC 2040, D.A. Wilson J. awarded $17,500 plus GST of $875 plus disbursements of $834.10 for a total of $19,209.10 for a motion to compel a further and better affidavit of documents; (b) In Marotta v. Ganz, 2014 ONSC 4561, Emery J. awarded $10,913.50 for fees, plus $460.50 for disbursements and HST in a motion for a further and better affidavit of documents and for compliance with undertakings.

[38] The defendants were represented by Gregory Sidlofsky, who was called to the Bar in 2000 and therefore commands a higher hourly rate than Ms. Korytko. It can be presumed that Mr. Sidlofsky charged as much or more than the costs of $11,630.06 being awarded to the plaintiffs. In any event, I find that the costs awarded are within the range that the plaintiffs should have expected to pay if unsuccessful in the motion.

Conclusion and Order

[39] For the foregoing reasons, it is ordered that:

1. The defendants shall forthwith pay the plaintiffs’ their costs of the motion in the amount of $11,630.06, consisting of the following: (a) $9,792.00 Fees ($11,003.25 –$1,211.25) (b) $1,272.96 HST on fees (c) $500.09 Disbursements ($840.59 less $340.50) (d) $65.01 HST on disbursements

$11,630.06 TOTAL

Price J. Released: November 21, 2018