COURT FILE NO.: 13-63704
DATE: 2018/12/28
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Scott Andrew D’Ascenzo, 1702620 Ontario Inc. and 1686977 Ontario Inc.
Plaintiffs
– and –
Carl Albert Nichols
Defendant
J. F. Laberge and M.D.Smith, for the Plaintiffs
M. Diegel, for the Defendant
Heard: In Writing (at Ottawa)
COST decision
KANE J.
[1] The plaintiffs seek costs against the defendant excluding the time and costs incurred regarding the summary judgment motion and the appeal and cross appeal thereof for which cost awards were already granted, as follows:.
(a) $73,147 including disbursements and applicable H.S.T., of which $58,839 is for legal fees on a substantial indemnity scale due to the misconduct and delay herein caused by the defendant,;
(b) alternatively, $63,670, consisting of $50,452 for legal fees calculated on a partial indemnity scale until the plaintiffs’ December 15, 2015 R. 49 written offer and on a substantial indemnity scale thereafter, plus disbursements and H.S.T.; and
(c) in the further alternatively, $59,092, consisting of $46,401 for legal fees calculated on a partial indemnity scale until the plaintiffs May 17, 2018 R. 49 written offer and on a substantial indemnity scale thereafter, plus disbursements and H.S.T.
Background
[2] In their February 2014 Statement of Claim, the plaintiffs sought:
(a) specific performance to obtain a conveyance of the Petting Zoo Land, or alternatively a return of the $168,727 they paid for the conveyance of that property, plus $100,000 damages for breach of that contract to sell that property to the plaintiffs;
(b) specific performance of the purchase agreement to obtain a conveyance of the 511 Land to the plaintiffs or alternatively, repayment of the amounts the plaintiffs paid towards such purchase, plus $25,000 damages for breach of that contract; and
(c) $10,000 damages for amounts paid by the plaintiffs for municipal taxes and signage replacement.
[3] The plaintiffs by summary judgment motion in October 2016 sought:
(a) a declaration voiding the Petting Zoo Land purchase agreement and reimbursement of the $168,727 they paid towards that purchase. The court granted judgment for $122,246 plus prejudgment interest;
(b) specific performance as to the 511 Land purchased by the plaintiffs in consideration of the plaintiffs’ payment to the defendant of the remaining purchase balance of $27,636. The court was unable to grant specific performance due to an outstanding application for severance needed to permit such transfer;
(c) $1,955 of damages to the plaintiffs for their payment of municipal taxes on the Petting Zoo Land. This amount was awarded on the cross-appeal of the summary judgment decision;
(d) $1,995 damage reimbursement for the survey cost of the 511 Land. This amount was awarded on summary judgment; and
(e) $5,000 damages to replace signage. This issue required a trial and was not awarded on summary judgment.
[4] Trial of the undecided issues was schedule to proceed on September 6, 2018. On the eve thereof and at the commencement of trial, the parties agreed to the following terms of judgment:
(a) that the defendant pay the plaintiffs $1,000 to replace signage wrongfully removed;
(b) that the plaintiffs pay the defendant $27,636 in consideration for the conveyance to them of title to the 511 Land;
(c) deletion of specified instruments registered against title of the 511 Land including the certificate of pending litigation registered against the Petting Zoo Land;
(d) that the above judgment is to be served on Irene Nichols who shall have 20 days to serve notice of any objection thereto; and
(e) costs against the defendant to be determined by the court, which shall be payable forthwith.
[5] The court on September 6, 2018 ordered production of the plaintiffs’ counsel’s time dockets in support of the Bill of Costs claimed and permitted the parties to respond thereto in writing.
Analysis
General Principles
[6] Section 131 one of the Courts of Justice Act grants a broad discretion in the determination of costs.
[7] That broad discretion does not detract from the requirement that determination of costs must be made on a principled basis which requires due consideration of the factors in rule 57.01(1) in order to achieve a just and reasonable determination: Geographic Resources Integrated Data Solution Ltd. v. Peterson 2013 ONSC 1041 (Div. Crt). para 15.
[8] The responsibility of the court generally is to fix an amount of costs that is fair and reasonable for the unsuccessful party to pay rather than an amount fixed by the actual cost incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario et al 2004 CanLII 14579 (ON CA), 2004, 71 O.R. (3d) 291 (C.A.) at p. 299.
Onus
[9] A party claiming the benefit of a R. 49.10 offer must prove that the judgment is as favourable as the terms of the offer to settle, or more or less favourable as the case may be: R. 49.10 (3).
Rule 57.01 Factors
Result In Proceeding Including Amount Claimed and Recovered
[10] The plaintiffs were materially successful in this proceeding independent of the results they obtained on their motion for summary judgment and should therefore be entitled to costs as contemplated in the opening words of R. 57.01(1).
[11] The defendant does not dispute a cost award to the plaintiffs. The issue is the scale and quantum of costs to be awarded.
Rule 49.10 Offers To Settle
[12] The plaintiffs rely upon two of their three written offers of settlement and the provisions of R. 49.10 in seeking costs on a substantial indemnity scale, in addition to the $23,000 cost awarded to them on their motion for summary judgment on a partial indemnity scale and the $3,000 cost awards on the appeal and cross-appeal.
First Offer
[13] The plaintiffs’ first offer of settlement dated December 15, 2015 provides that:
(a) the defendant would pay the plaintiffs $140,000 in settlement of all damage claims;
(b) the defendant would convey title of the 511 Land to the plaintiffs;
(c) the defendant would pay the plaintiffs $10,000 in full satisfaction of their costs and interest;
(d) the parties shall enter into a mutual, full and final release with respect to all matters raised or which could have been raised in this litigation; and
(e) such offer would remain open for acceptance until commencement of trial unless withdrawn earlier in writing (“First Offer”).
[14] The plaintiffs submit they are entitled to costs on a substantial indemnity scale as:
(a) they recovered damages totaling $150,196;
(b) that such recovery level exceeds their First Offer, after which date costs at that scale should be awarded; or
(c) in the alternative, that recovery level exceeds their Offer to Settle dated May 17, 2018 (“Third Offer”).
[15] The plaintiffs in reply acknowledged the $150,000 offered in their First Offer, consisting of $140,000 for damages and $10,000 for costs, excludes the requirement that the plaintiffs pay the defendant $27,636 being the balance of the 511 Land purchase price, resulting in a net recovery of $122,364. The plaintiffs submit however that even if this Court should now only award partial indemnity costs of $29,000, that amount plus the $122,364 of damages awarded on summary judgment totals $151,364, which exceeds the $150,000 amount of the First Offer, which thereby entitles them to costs on a substantial indemnity scale.
[16] An anticipated cost award at the end of trial is not relevant in determining whether the R. 49.10 offeror has obtained a judgment equal to or exceeding the terms of an earlier offer, being the First Offer in this case.
[17] The plaintiffs seek costs on a substantial indemnity scale from the commencement of the proceeding in February 2014 until their December 15, 2015 First Offer. That offer, pursuant to R. 49.10, does not operate retroactively and attract higher cost consequences for services done prior to the date thereof.
[18] The relevant date for considering the cost consequences of an offer to settle in addition, is the date of service of the offer to settle, not the date of judgment: Mathur v. Commercial Union Assurance Co. of Canada (1988) 86 A.C.W.S.(3d) 302 (Ont. Div. Crt.) and Orkin, Law of Costs, p. 2-175.
[19] The proper test is to compare the amount of the offer to the amount recovered plus interest and costs up to the date of the offer: Merrill Lynch Canada Inc. v. Cassina, [1992] O.J. No. 2230 (p.1) (Ontario Court of Justice - General Division).
[20] It is agreed that the total amount of judgment obtained by the plaintiffs is $150,196 which includes the $122,246 obtained in summary judgment as to which costs were limited to partial indemnity.
[21] I agree with the defendant that the plaintiffs’ recovery in this analysis must then be reduced by the $27,636 they were required to pay in consideration for the conveyance of title to the 511 Land.
[22] Although now acknowledging the liability, the plaintiffs failed to acknowledge this $27,636 liability in their First Offer and simply sought the transfer of the 511 Land by way of specific performance in their First Offer. The plaintiffs accordingly failed to obtain judgment as to this element equivalent to that term in the First Offer.
[23] Even if one omits consideration of the above failure to meet or exceed a term of the First Offer and continues with the plaintiffs’ monetary analysis; prejudgment interest at 3% per year over 22 months on $122,560 ($150,196 $ - $27,636) equates to $6,741, for a total of $129,301 ($122,560 + $6,741).
[24] Pursuant to the plaintiffs’ Bill of Costs, their costs on a partial indemnity scale from the start of this proceeding until the date of their First Offer is $18,051. The Court has used a monthly average for the $7,208 claimed for the period of May 2015 until January 2016, thereby adjusting the partial indemnity costs claimed to December 15, 2015 to $6,307 in arriving at the above $18,051 amount.
[25] The total monetary value of the plaintiffs’ judgment recovery is $147,352, including prejudgment interest and costs to the date of the First Offer ($122,560 + $6741 +$18,051), which is less than the $150,000 including costs contained in that offer. This is a second reason why the results obtained by the plaintiffs do not meet or exceed the terms of their First Offer.
[26] The terms of the final judgment as agreed upon do not include the requirement that the parties enter into a mutual full and final release with respect to all matters raised or which could have been raised in this proceeding. The plaintiffs inserted that requirement as a term of settlement in their First Offer. That requirement has not been met in the judgment. This is a third reason why the First Offer does not meet the requirements of R. 49.10.
[27] That release requirement in the First Offer in addition constitutes an uncertain future event which the offeree cannot control in its analysis as to the acceptability of the other terms in the offer. Specifically the offer contemplates future negotiation of the release terms and the acceptance thereof as a condition of the other substantive terms in the offer.
[28] There is contradictory case law as to the enforceability of a settlement where as a term thereof a release is not agreed upon. The present issue is not the enforceability of an otherwise settlement. The following cases under R. 49.09 dealing with releases not agreed upon as part of a settlement, are informative as to the issue but do not diminish the need for certainty whether an offer attracts the higher scale of costs in R. 49.10.
[29] The court in 1648290 Ontario Ltd. v. Bhabha, 2018 ONSC 1044 (S.C.J.), enforced a settlement which included the requirement for a release with a confidentiality clause even though the parties were unable to agree as to the terms thereof on the basis that the release was not an essential term of the settlement agreement.
[30] The court in Mildren v. Mildren, 2016 ONSC 8076 (S.C.J.) refused to enforce a settlement that contemplated a release being signed where the parties could not agree as to the scope thereof, on the basis that the parties were never ad idem.
[31] The court refused to enforce a settlement where an essential term had not been agreed to: Bank of Montréal v. Ismail, 2012 ONCA 129.
[32] The failure to accept the release documents will not negate a settlement where the parties have agreed upon the essential terms thereof: Ferron v. Avotus Corp., 2007 ONCA 73.
[33] The court refused a party’s motion to enforce an alleged settlement where there was no meeting of minds with respect to the scope of the release: Canadian Tourism Human Resources Counsel v. Meadow Water Communications Group Inc. (1998), 19C.P.C. (4th) 124 (Gen. Div.).
[34] The court refused to enforce a settlement agreement which amounted to “an agreement to agree”: Scherer v. Gates (1999), 29 C.P.C. (4th) 87.
[35] The court in Cellular Rental Systems Inc. v. Bell Mobility Cellular Inc. (1995, 6W.D.C.P. (2nd) 169 (Ont. Gen. Div.); affirmed Doc. CA C 21473 (Ont. C. A.), enforced a settlement where the parties had agreed to a settlement “subject to finalizing mutually acceptable settlement documentation” but failed to reach agreement on the form of that documentation. The court held that settlement implies a promise to furnish a release, but no party is bound to execute a complex or unusual form of release.
[36] The issue at this time is whether the terms of the First Offer entitle the plaintiffs to an elevated scale of substantial indemnity cost and not the enforceability of the other terms of the offer if they had been accepted and the parties’ subsequent inability to agree upon the terms of the release.
[37] The plaintiffs cannot successfully argue that the requirement that the defendant sign a release in form acceptable to them for all claims in the action, or which could have been claimed in the action, is not an essential term to their offer of settlement, after inserting that term as a condition in each of their three offers
[38] The insertion of the requirement for a release to be negotiated and agreed upon in the future as a term of a written settlement offer introduces a future unknown beyond the control of the offeree. The plaintiffs could have avoided that uncertainty by inserting the release wording in the offers.
[39] Suggesting that the offeree is entitled to subsequently litigate whether the offeror’s requirement of a release in form to be negotiated and acceptable to it, is or is not an essential term of the offer, is not an acceptable response to the offeror’s failure to provide clarity in the terms of the offer presented upon which they now seek costs at an elevated scale.
[40] For these reasons, I conclude that the release condition prevents the First Offer qualifying as a R .49.10 offer.
Second Offer
[41] Although not relied upon, the plaintiffs’ Second Offer dated April 27, 2018 provides that:
(a) the defendant would consent to a vesting order conveying title of the 511 Land to the plaintiffs in consideration for which the plaintiffs would pay the defendant $27,636 consideration;
(b) the defendant would pay $1,500 to the plaintiffs to replace property signage which was payable within two weeks;
(c) the defendant would pay the plaintiffs’ cost of the proceeding beyond those already ordered on a partial indemnity basis to the date of the offer and on a substantial indemnity basis thereafter, payable within three weeks;
(d) the parties shall consent to an order dismissing this action and the plaintiffs shall sign a full and final release to be agreed upon by counsel with respect to all matters raised or which could have been raised in the proceeding; and
(e) such offer would remain open for acceptance until commencement of trial unless otherwise revoked.
Third Offer
[42] The plaintiffs’ Third Offer dated May 17, 2018 provides that:
(a) the defendant would consent to a vesting order conveying title of the 511 Land to the plaintiffs in consideration for which the plaintiffs would pay the defendant $27,636 consideration;
(b) the defendant would pay $1,000 to the plaintiffs to replace property signage, which was payable within two weeks;
(c) the defendant would pay the plaintiffs cost of the proceeding beyond those already ordered on a partial indemnity basis to April 27, 2018 and on a substantial indemnity basis thereafter, payable within three weeks;
(d) the parties shall consent to an order dismissing this action and the plaintiffs shall sign a full and final release to be agreed upon by counsel with respect to all matters raised or which could have been raised in the proceeding; and
(e) such offer would remain open for acceptance until commencement of trial, unless otherwise revoked (“Third Offer”).
[43] The cost to the defendant and the benefit to the plaintiffs materially decrease in that compensation for the plaintiffs’ damage claims decreases from $140,000 in the First Offer to $1,500 in the Second Offer, following summary judgment of $122,246.
[44] The settlement proposal as to costs in the Second Offer given all of the legal steps taken between December 2015 and April 2018, involved materially increased legal costs above the $10,000 cost proposal in the First Offer, independent of the motion for summary judgment and appeal.
[45] The plaintiffs’ Second Offer with decreased damage amounts required to settle, notwithstanding its silence as to the First Offer, by implication constituted a withdrawal of the First Offer: Diefenbacher v. Young (1995), 1995 CanLII 2481 (ON CA), 123 D.L.R. (4th) 641(Ont. Gen. Div.); Fatal v. Burton (1995), 1995 CanLII 7067 (ON SC), 24 O.R. (3d) 234 (Gen. Div.); and M. Orkin, The Law of Costs, p. 2-176.1.
[46] The Third Offer contains a decrease in the amount of damages claimed as to signage and similarly by implication constitutes a withdrawal of the Second Offer based upon the above authorities.
[47] I repeat the above consideration and conclusion as to the condition and requirement for a release from the defendant only on terms to be negotiated and settled as contained in the Third Offer.
[48] The Third Offer states that the defendant within three weeks of the agreement being reached shall pay the costs of the proceeding, excluding costs already awarded, on a partial indemnity basis up until April 27, 2018, being the date of the prior Second Offer and thereafter on a substantial indemnity scale, namely 90% of fees and disbursements, less one dollar.
[49] As determined, the Second Offer was effectively withdrawn by the Third Offer, is not currently relied upon by the plaintiffs and places in question the basis for the elevated scale of substantial indemnity from the date of that earlier Second Offer.
[50] The above provision also introduces prohibited uncertainty regarding the substantial indemnity cost requirements thereof between April 27 and May 17, 2018 and thereafter to the date of any acceptance of the offer.
[51] The unknown cost to settle on a substantial indemnity scale will steadily increase in an unknown amount beyond the date of the offer dependent upon the level of work being performed by counsel for the plaintiffs.
[52] This has been held to be a basic defect in the plaintiffs’ Third Offer, namely that the amount thereof was not fixed in place until trial and results in a different offer amount each time plaintiffs’ counsel performs work on the proceeding after the date of the offer: Rooney (Litigation guardian of) v. Graham 2001 CanLII 24064 (ON CA), [2001], O.J. No 1055, paras 23 to 29. (C.A.)
[53] In conclusion, the Third Offer does not qualify as a R. 49 offer attracting the higher scale of substantial indemnity.
Experience, Rates Charged and Hours Expended – R. 57.01(1)(O.a)
[54] The time dockets produced by the plaintiff as ordered:
(a) are incomplete as several pages of the identified three or four page documents are not produced and do not in include totals of the time and charges docketed nor the totals charged to the client, disbursement charges and any discounts; and
(b) include docketed time related to the summary judgment motion for which costs have already been determined, the appeal and cross-appeal of that decision and matters unrelated to this proceeding such as bringing a claim against the plaintiffs’ former counsel.
[55] The defendant in response to the time dockets produced submits the limited production:
(a) do not enable determination of what amount was billed to the plaintiffs; and
(b) do not permit determination as to how the amounts in the plaintiffs’ Costs Outlines were determined as most of the dockets produced provide no totals of the docketed time.
[56] The plaintiffs responded: “The plaintiffs understand that extracting only the applicable time entries and applicable documents is an involved process.… If the defendant is unwilling to take the time to manually count the dockets for each relevant time period, that nonetheless does not make it impossible to determine or verify the amounts claimed in the Cost Outline.”
[57] It is not the responsibility of this court to estimate and exclude docketed items unrelated to this proceeding and then calculate the totals of eligible docketed time from the 42 pages of time dockets produced.
[58] The election to delete and not produce the additional, already calculated and available information, limited the intended review by defence counsel and the court.
[59] This response to court-ordered production is to be compared to the plaintiffs’ allegations below that the defendant has acted unreasonably and delayed resolution of issues.
[60] The hourly rates charged based on the years of call are reasonable.
[61] Time dockets produced indicate the appropriate allocation of work through the use of more junior and less costly personnel.
[62] There must be a reduction in lawyer time claimed as six different lawyers in the firm consecutively and not all at the same time, have represented the plaintiffs in this proceeding since 2013. That resulted in duplication in the form of subsequent lawyers learning about the detailed contractual and factual matrix, the numerous legal issues, the status of the proceeding and the inevitable discussion of the same with prior lawyers and the client.
[63] There is some excessive time charged in the form of two counsel at times attending court, such as the presence of two counsel on September 6, 2018 to present the agreed-upon terms of judgment and make oral cost submissions.
[64] I accordingly have reduced the docketed time claimed post summary judgment and its appeal by twenty five percent.
[65] Time docketed for work prior to the summary judgment motion was apparently mistakenly not included in the legal costs sought by the plaintiffs on that motion.
[66] The $31,681.26 of time charges now claimed for that pre-motion work in the plaintiffs’ Bill of Cost is to be compared to the $26,443.20 of time claimed for the same pre-motion work identified in Mr. Flewelling’s November 3, 2016 Cost Outline. I have been given no reason to prefer the higher amount.
[67] There is some duplication as plaintiffs’ counsel benefitted in argument of the summary judgment motion from the prior document production and their examination for discovery now claimed in preparation and argument of that summary motion for which a cost award was issued.
[68] The court accordingly has reduced the pre-motion time charges claimed and the $1,892.89 transcript fee by 50% and not the above 25% reduction of other time charges now claimed.
Reasonable Expectation of Unsuccessful Party – R. 57.01(O.b)
[69] Given the commercial nature of the share and land purchase transactions and the considerable amount of money the plaintiffs paid the defendant in anticipation of closing the land transaction, Mr. Nichols should have known the plaintiffs would not simply ignore his failure to obtain the necessary 511 Land severance authorization, abandon their payments in anticipation of closing and allow him to retain the monies paid.
[70] Mr. Nichols should have anticipated a considerable cost award as he failed to fulfil his contractual obligations and took steps which delayed conclusion of this proceeding.
Apportionment of Liability – R. 57.01(1) (b)
[71] This factor is not relevant in this case.
Proceeding Complexity – R. 57.01(1) (c)
[72] As previously determined, the degree of complexity was average involving primarily contractual and factual interpretation.
Importance of Issues – R. 57.01(1) (d)
[73] The level of financial investment by the plaintiffs in these commercial transactions and related issues were important to each party.
Conduct Tending to Lengthen Proceeding Unnecessarily - R. 57.01 (1)(e)
[74] The defendant delayed conclusion of the 511 Land transaction in failing to obtain severance consent and delayed conclusion of the proceeding by repeatedly changing counsel which resulted in delay and increased the legal cost of this proceeding for everyone.
[75] Apart from Rule 49.10 written settlement offers, a court as to its discretion in awarding costs must find that a party has been guilty of egregious misconduct in the proceeding to justify an award costs on a substantial indemnity scale: Iannarella v. Corbett, (2015) 124 O.R. 93d) 523, para 139 (Ont. C.A.).
[76] Mr. Nichols conduct comes close but does not meet the level of egregious.
[77] The defendant should have pursued obtaining the severance for the 511 Land, as he had contracted to do, particularly given the court’s comments on the point in the summary judgment decision.
[78] The plaintiffs incurred higher legal costs to address and find the grant of severance. Those added costs are now part however of what is being claimed.
[79] Litigation is acrimonious by nature. Actions for breach of contract and the failure of a party to not remedy that breach until the eve of trial does do not automatically attract a higher cost scale.
[80] Some elderly individuals can be stubborn, which it appears Mr. Nichols may have been at times. I have no evidence however that he acted as such since 2014. He was represented by counsel I understand for most of the time since the start of this proceeding. His dismissal of and change of counsel, despite the resulting delay, does not justify substantial indemnity cost. A plaintiff’s ability to seek a trial date represents the ultimate control in a proceeding like this.
[81] I would not increase costs to a scale of substantial indemnity for egregious conduct by the defendant.
Improper, Vexatious or Unnecessary Steps - R. 57.01 (f)
[82] I repeat the above comments as to R. 57.01(1) (e).
Admission Improperly Refused – R. 57.01(1)(g)
[83] Mr. Nichols delayed but then ultimately agreed on the eve of trial to the transfer of the 511 Land, thus initially increasing costs and then with his consent reducing what would have been the length of trial.
Disbursements
[84] Disbursement recovery should involve the cost thereof and not become a profit source.
[85] There is no evidence that the customary photocopy charge of 25 cents per page is not plaintiffs’ counsel’s cost, which shall therefore be the recovery rate and not the 50 cents per page claimed.
Conclusion
[86] The plaintiffs are awarded costs on a partial indemnity scale, in addition to the cost awards previously granted.
[87] The court in conclusion awards the plaintiffs’ total costs on a partial indemnity scale against the defendant in the total amount of $31,843.09 consisting of:
(a) January 2014 to January 2016 legal fees, reduced by 50%, totalling $8,410.95, plus $1,093.42 H.S.T. - $9,504.17;
(b) April 2017 to April 27, 2018 legal fees, reduced by one third, totalling $6,092.92 plus $792.08 H.S.T. - $6,885.00;
(c) April 28, to September 6, 2018 legal fee, reduced by one third, totalling $9,566.90, plus $1,243.70 H.S.T. - $10,810.60; and
(d) $4,109.13 for disbursements which includes a 50% reduction for transcripts and photocopying, plus H.S.T. of $534.19 - $4,643.32.
[88] This $31,843 cost award on a partial indemnity basis, combined with the $23,000 cost award on the summary judgment motion, is fair and reasonable.
Mr. Justice Paul Kane
Released: December 28, 2018
COURT FILE NO.: 13-63704
DATE: 2018/12/28
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Scott Andrew D’Ascenzo, 1702620 Ontario Inc. and 1686977 Ontario Inc.
Plaintiffs
– and –
Carl Albert Nichols
Defendant
COST DECISION
KANE J.
Released: December 28, 2018