Court File and Parties

COURT FILE NO.: CV-13-3728 and CV-13-3962 DATE: 2019 02 26

SUPERIOR COURT OF JUSTICE - ONTARIO

Court File No. CV-13-3728 RE: Northridge Homes Ltd., Plaintiff

• and - Manjit Sandhu and Harjinder Sandhu, Defendants

• AND -

Court File No. CV-13-3962 CAAJ Construction Inc. and 2225043 Ontario Inc. and 2142043 Ontario Inc., Plaintiffs -and- Manjit Sandhu and Harjinder Sandhu and Northridge Homes Ltd., Defendants

BEFORE: FRAGOMENI J.

COUNSEL: Jonathan Kulathungam, for the Plaintiff, Northridge Homes Ltd. Simon Schneiderman, for the Defendants, Manjit Sandhu and Harjinder Sandhu Harry Mann, for the Plaintiffs, CAAJ Construction Inc., 2225043 Ontario Inc. and 2142043 Ontario Inc. Jonathan Kulathungam for the Defendant, Northridge Homes Ltd. Simon Schneiderman, for the Defendants, Manjit Sandhu & Harjinder Sandhu

HEARD: In Writing

COSTS ENDORSEMENT

[1] The plaintiff, Northridge Homes Ltd. (Northridge) brought an action against the defendants, Manjit Sandhu and Harjinder Sandhu (Manjit and Harjinder or the defendants for ease of reference) for payment of $49,271.84. The action related to non-payment of work done on the defendants’ home. Northridge claimed that it provided all invoices to the defendants for the work done in the amount of $116,466.31 and as of June 27, 2013 there remained owing to the plaintiff the sum of $49,271.84.

[2] In a separate action, the plaintiffs, CAAJ Construction Inc. (CAAJ), 2225043 Ontario Inc. (222) and 2142043 Ontario Inc. (214), as sub-trades sued the defendants and Northridge for a total of $71,868.00. The two actions were heard together.

[3] Following a nine day trial, I granted the following relief to each of the plaintiffs:

Judgment shall issue in favour of Northridge in the sum of $32,401.84 with the appropriate pre-judgment interest from June 27, 2013 and post-judgment interest from the date of judgment in accordance with sections 128 and 129 of the Courts of Justice Act, RSO 1990, C. 43 as amended. A declaration shall also issue that the Plaintiff has a valid lien against the subject property of the Defendants. In default of payment the Plaintiff is entitled to sell the property and apply the proceeds to satisfy this judgment.

I am satisfied on the evidentiary record before me that these Plaintiffs are entitled to the relief requested and judgment shall issue as follows:

1. to CAAJ in the amount of $40,115.00
2. to 222 in the amount of $17,876.00
3. to 214 in the amount of $13,876.40

A declaration shall issue that each of the Plaintiffs are entitled to a lien in their respective amounts.

In default of payment the subject property may be sold and the proceeds applied to the amounts owing.

Pre-judgment and post judgment interest shall apply in accordance with sections 128 and 129 of the Courts of Justice Act, RSO 1990, C. 43, as amended.

[4] I have now received, reviewed and considered the following written submissions on costs:

1. Cost submissions of Northridge Homes Ltd. dated October 16, 2018;
2. Costs submissions of the plaintiffs, CAAJ, 222 and 214, dated October 17, 2018;
3. Responding costs submissions of the defendants filed November 2, 2018; and
4. Reply costs submissions of Northridge dated November 12, 2018.

[5] Northridge seeks costs as follows:

Partial Indemnity - $122,174.47 in fees plus $12,639.85 in disbursements for a total of $134,814.32 Substantial indemnity - $179,463.21 in fees plus $12,639.85 in disbursements for a total of $192,103.06.

[6] The disbursements set out by Northridge are as follows:

APPENDIX – DISBURSEMENTS

Photocopying, faxing, printing, long distance calls	2,400.13
Court Fees (including summons to witnesses)	695.50
Process Server, Paralegal, and Courier Fees	1,309.26
Litigation Software Fee	50.00
Legal Research Fees	2,680.71
Transcripts	2,204.57
Translators	1,065.97
Counsel Travel Reimbursement	779.57
Total:	11,185.71
H.S.T.	1,454.14
TOTAL DISBURSEMENTS AND H.S.T.	12,639.85

[7] Northridge points to the following factors in support of its position:

1. From the outset Northridge was prepared to compromise its claim. One month after the litigation was commenced, Northridge offered to resolve all outstanding issues for the all-inclusive sum of $30,000.00. In an affidavit sworn January 17, 2014 by Manjit Singh Sandhu, who is a friend of the defendant Manjit Sandhu, and who was present at a meeting with Gurdev Rai, Dalwir Rai, Manjit Sandhu and Rakesh Sood, he states the following at para. 5:

   At the meeting Gurdev Rai told Manjit Sandhu that if he paid $30,000.00 they would lift their lien that had been put on Manjit’s property.

2. By letter dated December 1, 2016, Northridge offered to settle all outstanding issues on both actions for $40,000 plus costs on a partial indemnity basis as assessed or agreed to.

3. The defendants adopted an aggressive approach to this matter. At para. 46 of his reasons dated December 11, 2015 relating to Northridge’s motion to inspect the site, LeMay J. made the following observations at para. 46:

   However, I would be remiss if I did not also observe that the Defendants’ approach to this motion was also less than ideal. They adopted an aggressive approach to the original site visit. Then, they opposed this motion unsuccessfully and are the authors of a substantial portion of the delay in this case. Granting access in October on a without prejudice basis would have been a more efficient approach to this litigation, which is something that is to be encouraged in Construction Lien cases.

4. The defendants made the trial “lengthier and more expensive than it ought to have been by …. raising trivial grounds of argument” and were ultimately unsuccessful in convincing the court of any of their defences or the new narrative which was introduced for the very first time at trial.

5. Northridge was required to prepare for, test, and respond to each of the ill-founded positions. This belaboured what ought to have been a straightforward construction lien trial, unnecessarily added to the litigation’s complexity, and lengthened the proceeding. The defendants reasonably ought to have known or expected that its “overzealous and, in the end, ill-founded defences” would result in significant costs being incurred.

6. The defendants’ obstructions regarding inspections, their plethora of unnecessary and unreliable witnesses, and Mr. Sandhu’s last-ditch efforts to “put the pieces together” and invent a new narrative resulted in a protracted proceeding and great expense incurred by Northridge.

7. Indeed, despite the obstacles erected by the defendants before and during trial, Northridge was successful in proving its case and obtaining judgment against the defendants in the amount of $32,401.84.

[8] CAAJ, 222 and 214 seek costs as follows:

Partial Indemnity - $52,147.75 + HST of $6,779.21 Substantial Indemnity - $78,221.63 plus $10,168.81 in HST Disbursements of $1,811.57

[9] The defendants submit that success at the trial was divided and, as such, there should be no costs awarded. In the alternative, the defendants submit that costs should be awarded to Northridge on a partial indemnity scale at $33,062.00 to reflect the 34% success at trial by the defendants and the refusal of the opportunity to conduct a summary trial. In the further alternative, the defendants argue that the gross amount of $75,010 should be reduced by 34%. Absent any reduction as requested, costs should be awarded on a partial indemnity basis in the total amount of $75,010 with disbursements limited to an aggregate sum of $10,255.71.

[10] With respect to the costs of CAAJ, 222 and 214, the defendants submit that there should be no order as to costs or in the alternative, costs should be fixed at $10,000.00 on a partial indemnity basis.

[11] The defendants refer to numerous factors to support their position in their written submissions on costs. I will not review all of them in these reasons but I do wish to refer to some:

1. Northridge and the sub-trade plaintiffs had an opportunity to choose the least expensive course regarding conducting a summary trial and declined the opportunity to do so. That refusal should be reflected in the cost consequences;
2. The court should give no weight to the $30,000 offer to resolve all issues as it was not made in writing and there is no evidence Harjinder Sandhu was present. This oral offer was not made to both defendants;
3. The $40,000 offer to settle was neither clear nor reasonable and should be given no weight. It was only made by Northridge but purports to bind the parties in both actions. There was nothing delivered by the sub-trade plaintiffs. This uncertainty takes it out of the Rule 49 offer;
4. The defendants were not responsible for prolonging the litigation. In any event, their conduct was not egregious or an abuse of the court’s process;
5. Success at trial was divided. Northridge’s claim was for $49,271.84. Judgment was for $32,401.84, which is 66% of their claim. About 34% of their claim was, therefore, disallowed;
6. Any costs award should be within the reasonable expectation of the unsuccessful party;
7. Northridge over lawyered and over-worked the file.

ANALYSIS & CONCLUSION

[12] In Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (Ont. C.A.), the court set out the following at paras. 26 and 38:

It is important to bear in mind that rule 57.01(3), which established the costs grid, provides:

57.01(3) When the court awards costs, it shall fix them in accordance with subrule (1) and the Tariffs.

Subrule (1) lists a broad range of factors that the court may consider in exercising its discretion to award costs under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The express language of rule 57.01(3) makes it clear that the fixing of costs is not simply a mechanical exercise. In particular, the rule makes clear that the fixing of costs does not begin and end with a calculation of hours times rates. The introduction of a costs grid was not meant to produce that result, but rather to signal that this is one factor in the assessment process, together with the other factors in rule 57.01. Overall, as this court has said, the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.

In deciding what is fair and reasonable, as suggested above, the expectation of the parties concerning the quantum of a costs award is a relevant factor. See Toronto (City) v. First Ontario Realty Corp. (2002), 59 O.R. (3d) 568, [2002] O.J. No. 2519 (S.C.J.) at p. 574 O.R. I refrain from attempting to articulate a more detailed or formulaic approach. The notions of fairness and reasonableness are embedded in the common law. Judges have been applying these notions for centuries to the factual matrix of particular cases.

[13] Rule 57.01(1)(0.b) states:

In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or contribute made in writing,

(0.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.

[14] In addition to these very important principles, in this case, the principle of proportionality is of critical importance in my assessment of the issues relating to the costs of this trial. In that regard, it is informative and useful to review some of the jurisprudence relating to the principle of proportionality.

Ontario Court of Appeal:

• Marcus v. Cochrane, 2014 ONCA 207, 317 O.A.C. 251, at para. 15:

  In fixing those costs, it is important to remember that the dispute was essentially about a claim for approximately $80,000. The partial indemnity bill of costs of appellant’s counsel Mr. Marks was $172,645.55. The full indemnity bill of costs of the respondents was $160,706.99. The comparison of what this dispute was about and what was spent on it is stark and difficult to justify. While undoubtedly Mr. Marks, as counsel asserting the claim, must bear the greater responsibility, the principle of proportionality which is fundamental to any sound costs award cries out for application by both counsel. With the assistance and indeed the direction of the trial judge if need be, counsel simply must cut the cloth to fit. The health of the justice system depends on it. Trial costs cannot serve as an incentive to look away from this important challenge.

• CNH Canada Ltd. v. Chesterman Farm Equipment Ltd., 2018 ONCA 637 at paras. 89 to 91:

  [89] Third, the Tribunal did not err in law by “failing to take into account” the principle of proportionality when awarding costs. The principle of proportionality is an overarching consideration in determining the appropriate quantum of costs: Barbour v. Bailey, 2016 ONCA 334, at para. 9. It requires a decision-maker to consider whether the costs incurred were justified in light of the circumstances of the case. The fact that a costs award exceeds a damages award does not necessarily mean that appellate intervention is warranted: e.g. The British Society of Audiology v. B. C. Decker Inc., 2010 ONCA 543, 268 O.A.C. 135, at paras. 25-31. Ultimately, the question is whether the costs award, in all the circumstances, is fair and reasonable.

  [90] In this case, the Tribunal ordered CNH to pay costs on a partial indemnity scale of approximately $375,000. Chesterman had sought costs of almost $640,000 on a substantial indemnity scale. CNH’s partial indemnity costs reflected fees of approximately $190,000.

  [91] The Tribunal noted that the proceeding had spanned several years and involved several interlocutory procedural hearings, seventeen hearing days, and an appeal to the Divisional Court. Notably, the Tribunal explicitly acknowledged the proportionality principle in its reasons, noting:

  The amount claimed by Chesterman was approximately $1 million while the amount recovered was approximately $200,000. Proportionality is something to be considered. An unfortunate reality of modern litigation is that frequently the cost of litigating can exceed the amount claimed or the amount recovered. However, the Tribunal is not bound to any proportionality formula. It would be unfair to use the proportionality principle to deny a successful party of a cost award.

Ontario Superior Court of Justice:

• Buchanan v. Geotel Communications Corp., 26 C.P.C. (5th) 87, at paras. 10 and 11:

  Having said all that, the bottom line is that the proposed costs are excessive. They are excessive from two perspectives: costs of this magnitude will make litigation inaccessible as a method of dispute resolution; costs of this magnitude are also disproportionate to the value of the legal work necessary to represent a client in this dispute. If counsel do not use more restraint in deciding how much to invest in litigation, they will put both the bar and the Courts out of business which will profoundly harm the public whom we both serve.

• Patene Building Supplies Ltd. v. Niagara Home Builders Inc., 2010 ONSC 468, 96 C.L.R. (3d) 209, at para. 1:

  The plaintiff was successful, and should be paid its costs. Those costs should be on the partial indemnity scale. They should also bear some reasonable proportionality to the amount of money awarded to the plaintiff as damages. Those damages were for less than $15,000.00. Accordingly, the plaintiff’s request for $8,977.55, plus GST is excessive. This was a short and simple trial. The plaintiff is entitled to judgment for costs fixed at $5,000.00, inclusive of GST and disbursements, as against both defendants, that liability being joint and several.

• Lipsitz v. Ontario, 2010 ONSC 5232 at para. 14:

  I agree that the fixing of Costs is not simply a mechanical exercise. I have carefully examined the Bill of Costs submitted by the Plaintiffs, as well as their counsel’s detailed dockets. Costs must be fair and reasonable in the circumstances of the case. In addition, the concept of proportionality must be kept in mind when Costs are being fixed.

• Canfield v. Brockville Ontario Speedway, 2018 ONSC 3288 at paras. 11 and 12, and paras. 66-69:

  [11] The principle of proportionality is one of general application to the interpretation of the Rules of Civil Procedure (rule 1.04(1.1)) and therefore applies to the application of the rules governing costs. As a general proposition: (i) proportionality does not override other considerations when determining costs; and (ii) proportionality should not be used as a sword to undercompensate a litigant for costs legitimately incurred: Aacurate General Contracting Ltd. v. Tarasco, 2015 ONSC 5980, at paras. 13-17; Dang v. Anderson, 2017 ONSC 2150, paras. 12-15.

  [12] Fixing of costs is not merely a mechanical exercise in reviewing the receiving party’s costs outline: Agius v. Home Depot Holdings Inc., 2011 ONSC 5272 at para. 11. The amount of costs should reflect an amount that the court considers to be fair and reasonable and within the expectations of the parties, rather than an exact measure of the actual costs of the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 19 A.C.W.S. (3d) 341 (Ont. C.A.) at para. 4; Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.). [66] The time spent on this case was, as previously stated, significant. There is no doubt that the case was extremely well prepared.

  [67] It would be churlish of the court to criticise a party for preparing too thoroughly. But, on the other hand, from a costs perspective, the party paying costs should only be responsible for indemnifying reasonable costs that are proportionate, having regard to the nature of the dispute.

  [68] Accordingly, the defendant should not be required to indemnify the plaintiff for all of the time spent on jury research. And, as indicated, the hourly rates used to calculate the claim for fees need to be adjusted.

  [69] Weighing these elements and the other factors discussed as best I can, without embarking upon a full scale assessment of the plaintiff’s fees, an appropriate downward adjustment to the plaintiff’s claim for $269,371 (plus H.S.T.) would be in the order of 30%, or $80,000.

[15] In Brough v. Lebeznick, 2017 ONSC 1392, LeMay J. set out the following at paras. 2 – 4:

In assessing costs, it is important to note that neither party was completely successful in advancing their claims. The Plaintiff was unsuccessful in claiming the entirety of the contract price because of deficiencies in the work the Plaintiff had performed. The Defendants were unsuccessful in advancing their counterclaim because they made a number of claims that were both remote and excessive. I will return to my assessment of which party was being more reasonable below. The total recovery by the Plaintiff, however, was $30,595.63.

I also note that none of the offers made by either party trigger the provisions of Rule 49 of the Rules of Civil Procedure.

Finally, I note that I asked the parties to address the principle of proportionality in advancing their costs claims. I will also address this issue in my analysis.

[16] At paras. 9 and 10. LeMay J. noted the following as it relates to proportionality:

Finally, I note that the principle of proportionality can apply in certain cases. However, I also note the decision in Aacurate General Contracting Ltd. V. Tarasco (2015 ONSC 5980) where McCarthy J. noted (at paragraph 15):

I am mindful that the principle of proportionality calls upon the court to consider the amount claimed for costs in relation to the amount recovered in the judgment, as well as the reasonable expectation of the parties. In my view, however, proportionality cannot and should not be routinely invoked to save litigants from the actual costs of proceedings in circumstances where those litigants have put forth a wholly unmeritorious defence to a legitimate claim or have caused the proceeding to become unduly prolonged or complicated. The principle should be applied thoughtfully and in a balanced fashion along with the other factors set out in rule 57.01.

In other words, the principle of proportionality should not be used to deprive a successful litigant of its costs simply because the claim is small. Overapplying the principle of proportionality will tend to encourage litigants who are resisting legitimate but modest claims to act unreasonably, either in their positions or in the conduct of the litigation.

[17] It is important to note at the outset that Northridge was at a very early stage of the proceedings prepared to resolve all outstanding issues for $30,000.00. I agree with the defendants, however, that this offer was not one that comes within Rule 49. I also take into account that there was no evidence that both defendants were present when those discussions took place. It is, however, an indication that Northridge was, from an early stage, prepared to compromise the amount of its claim.

[18] With respect to the $40,000 offer set out in the December 1, 2016 letter, again I agree with the position of the defendants that the letter does not fall within the parameters of Rule 49. There is no indication in that letter that the offer is binding on CAAJ, 222 and 214, or at least it is not clear that it is. The letter does, however, again demonstrate that the plaintiffs were prepared to compromise their position on the amounts being claimed. It is also important to note that Northridge was not completely successful in advancing its claims. CAAJ, 222 and 214 were successful.

[19] I have reviewed and considered the positions of the parties blaming the other side for why this trial took nine days in light of the amounts being claimed. I am satisfied that all parties share the blame for taking what should have been a relatively straightforward trial and having it turn into a nine day marathon.

[20] I agree with the general principle that proportionality should not be used to deprive a successful litigant of its costs simply because the claim is small. Having said that, however, the principle of proportionality cannot give way to allowing costs that are excessive or unreasonable in light of the amounts involved and the results achieved at trial.

[21] I am satisfied that success was mixed in this case.

[22] Northridge commences its costs submissions with the following statement:

It is remarkable that a construction lien action commenced in 2013 seeking payment of approximately $49,000 resulted in a trial taking place over nine days and two sittings.

[23] I take it from that statement that Northridge takes the position that this rather simple action dealing with unpaid invoices should have been relatively straightforward.

[24] The plaintiffs take the position that the defendants were solely responsible for this matter taking nine days whereas the defendants cast the blame on the plaintiffs. As I indicated earlier, all parties share the responsibility in not making the trial efficient and proportionate to what was at stake.

[25] I agree with Northridge that what happened is remarkable. It begs the question, therefore, that with such a simple trial how is it that Northridge expended the hundreds of hours of work utilizing so many people? The total number of hours allocated to this file is 468.2.

[26] The defendants take issue with the amount of time allocated to this file and set out the following in that regard:

Student time

It is submitted that none of the time for the students should be allowed. Given the student’s inexperience, the likely time required was probably unnecessarily lengthy.

Lawyers Hours

It is submitted that if costs were awarded to the Plaintiff, of the legal services claimed by Northridge:

a) “C.A’s” time of 23.2 hours at $150.00 hours on a partial indemnity rate is not contested; b) Mr. Kulathumgam’s time for a total of 222 hours on a partial indemnity rate of $315.00 an hour is not contested;

To expect the Defendants to reimburse the rate increase during litigation it is submitted is unreasonable and the hourly rate of $345.00 on partial indemnity scale, is opposed as excessive;

c) The student’s time of 72.6 hours should be disallowed; d) “TC’s” time of 121.6 hours should be disallowed; e) Previous counsel at $1,600.00 is not opposed. The cross-examinations should not have been necessary as the Motion for Summary Judgment should not have been brought. Thus the total for legal fees on a partial indemnity rate would be Mr. Kulathungam at $69,930.00 and CA of $3,480.00 and previous counsel at $1,600.00, an aggregate of $75,010.00.

[27] At paras. 112 to 116, the defendants submit that a reasonable approach to assessing the appropriate amount for costs is as follows:

Least expensive course not taken

There must be some evidence that the route taken was not the least expensive. It is submitted that evidence is there when one considers the time [spent] on the trial Northridge counsel.

It is submitted that the second trial segment of June 5 to 9, 2017 could have been avoided entirely if the parties had agreed to a summary trial. This would reduce the time spent by Mr. Kuluthungam by some 15 hours of preparation and 54.7 hours of trial attendance, a total of 69.7 hours. At $315.00 per hour this comes to $21,955.50.

It is submitted that a summary trial would have further reduced the written submission preparation time by a factor of at least 25% (9.4 hours) at $315.00 per hour, because there would be less to review. Thus from $75,010.00 there should be an aggregate reduction of $24,916.50 for a total of $50,094.00 (rounded).

Reduction for Divided Success

It is submitted that the figure of $50,094.00 should be further reduced by 34 per cent ($17,032.00) to $33,062.00 to reflect the 34 per cent success at trial by the Defendants.

In the alternative, the gross amount of $75,010.00 should be reduced by 34 per cent ($25,503.41) to $49,506.60, partial indemnity.

[28] I am satisfied in all the circumstances that the plaintiffs are entitled to some of their costs on a partial indemnity basis. I am also satisfied that success as it relates to Northridge’s claim was mixed.

[29] I am also satisfied that the majority of the work in conducting this trial was done by counsel for Northridge.

[30] I am prepared to fix costs and, guided by the legal principles set out in the reasons, I am satisfied that the following amounts are fair and reasonable:

• To Northridge – Fees in the all-inclusive sum of $50,000. Disbursements in the all-inclusive sum of $10,000
• To CAAJ, 222 and 214 - Fees in the all-inclusive sum of $10,000. Disbursements in the all-inclusive sum of $1,150.

[31] An order shall issue as follows:

1. That the defendants shall pay to Northridge costs in the total amount of $60,000.
2. That the defendants shall pay to CAAJ, 222 and 214 costs in the total amount of $11,150.

FRAGOMENI J. DATE: February 26, 2019