Court File and Parties
COURT FILE NO.: 37/18 DATE: 2019 03 04 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Fatigue Fracture Technology, LLC, Applicant AND: Camtac Manufacturing Inc., Respondent
BEFORE: Justice G.D. Lemon
COUNSEL: Mr. Christopher A.L. Caruana, Counsel for the Applicant Mr. Abbas Kassam, Counsel for the Respondent
HEARD: February 26, 2019
Endorsement
The Issue
[1] The respondent, Camtac, moves for costs of this abandoned application in the amount of $73,119.59. If it is successful on that request, Camtac also seeks costs of this motion in the amount of $14,000.00. Fatigue concedes that it should pay costs in the amount of approximately $7,500.00 for the abandoned application.
Background
[2] In January of 2018, Fatigue brought an application for an order enforcing letters rogatory, requiring Camtac to provide documents and give testimony in relation to patent litigation in the United States. That application was returnable June 4, 2018. As part of that application, Fatigue brought an interim motion returnable April 3, 2018, for the same relief.
[3] On March 22, 2018, counsel for Camtac wrote to counsel for Fatigue. In that letter, he suggested that Fatigue would be required to post security for costs before it could proceed. He also noted that there were a number of deficiencies in the materials and the procedure taken by Fatigue.
[4] The proceedings were adjourned from time to time until, by November 15, 2018, both the motion and the application were abandoned. By that time, Camtac had filed a Notice of Appearance and made an offer to settle.
[5] On April 4, 2018, Camtac offered to settle the application such that the application would be withdrawn without costs. However, if the application were not withdrawn by April 9, 2018, then costs would be payable on a partial indemnity scale from the date of the offer to the date of acceptance.
Authorities
[6] Rule 57.01 of our Rules of Civil Procedure sets out the factors that the court may consider when determining costs. That Rule provides that the court may consider:
(a) the result in the proceeding; (b) any offer to settle or to contribute made in writing; (c) the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer; (d) 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; (e) the amount claimed and the amount recovered in the proceeding; (f) the apportionment of liability; (g) the complexity of the proceeding; (h) the importance of the issues; (i) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; (j) whether any step in the proceeding was, (i) improper, vexatious or unnecessary, or (ii) taken through negligence, mistake or excessive caution; (k) a party’s denial of or refusal to admit anything that should have been admitted; (l) whether it is appropriate to award any costs or more than one set of costs where a party, (i) commenced separate proceedings for claims that should have been made in one proceeding, or (ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and (m) any other matter relevant to the question of costs.
[7] Further, the fact that a party is successful in a proceeding or a step in a proceeding does not prevent the court from awarding costs against the party in a proper case.
[8] Modern costs rules are designed to foster three fundamental purposes: (1) to partially indemnify successful litigants for the cost of litigation; (2) to encourage settlement; and (3) to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan , (1999), 46 O.R. (3d) 330 , at para. 22.
[9] Costs awards, at the end of the day, should reflect “what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties”: see Boucher v. Public Accountants Council for the Province of Ontario , (2004), 71 O.R. (3d) 291 , at para. 24.
The Record
[10] In support of this costs request, Camtac filed four pages of a bill of costs. It seeks costs for work done by both Canadian and U.S. counsel.
[11] The Notice of Application and supporting material are not extensive. Although the exhibits to that supporting affidavit were not filed with this motion, the affidavit discloses that there were 9 exhibits, most of which appear to be correspondence. The affidavit was necessary to educate the motions judge on the background litigation.
[12] Despite that small amount of material, Camtac submits that it was necessary that four different counsel in two countries “review” this record for a total of just over 45 hours. A total of three lawyers then spent just over 20 hours preparing a responding application record. This material was never filed. I have not seen it. In the end, that work was not necessary.
[13] Despite the early request for security for costs, Camtac did not bring such a motion. Clearly, their position was accepted by Fatigue because Fatigue then made enquires to obtain security for costs. Before it could arrange such security, the American litigation was stayed. Accordingly, Fatigue withdrew the application.
[14] In support of the application, Fatigue filed a ten page affidavit. It is from one of Fatigue’s counsel in the United States. It primarily sets out the factual history of the U.S. litigation. The bill of costs sets out that counsel for Camtac, with 18 years of experience in this area, took 3.4 hours preparing for a cross-examination on this affidavit. The cross-examination did not occur. That is patently unreasonable.
[15] Camtac had teams of counsel in Canada and the United States. The Canadian team prepared the responding application record in just over 20 hours. In contrast, the U.S. team spent just shy of 35 hours simply “reviewing” the materials. Both are unreasonable for an application that did not move past the notice stage.
[16] Two separate U.S. counsel have docketed time to “Receive and Review Letters Rogatory.” One did that for 3.2 hours and one did that for 4 hours. That document is 7 pages in length. I was advised by counsel for the respondent that while they were from the same law firm, they were in different areas of the firm. This entry is unexplained.
[17] Two Canadian lawyers received the Notice of Abandonment. One for 1.7 hours and the other for 2.2 hours. One of them also spent a half hour with “correspondence with opposing counsel re costs”. A Notice of Abandonment is two pages if one counts the backing page. This amount of time is unreasonable.
[18] Two lawyers of unknown vintage from the American team each spent three hours with “Correspondence and gathering information and documents from client regarding Letters Rogatory”. There is nothing before me to explain this apparent duplication of effort.
[19] Canadian counsel wrote to “opposing counsel” for over 9 hours; American counsel wrote for over 10 hours. Canadian counsel wrote to U.S. counsel for just over 7 hours; U.S. counsel wrote to Canadian counsel for over 9 hours. All of that appears to be over this thin application and seven page order. That amount of correspondence is unexplained.
Analysis
[20] Cantac was successful and is entitled to its costs. Pursuant to Rule 38.08 (3), the respondent is entitled to costs when the application is withdrawn. But those costs are still to be determined by the usual factors.
[21] Cantac made an offer to settle which was arguably more favourable than this outcome. That is to its benefit.
[22] Of the six Canadian lawyers involved, two had ten years or more experience and the others had four years or less. I do not know the experience of the American lawyers but they charged $500.00 per hour.
[23] The lead Canadian lawyer charged $600.00 per hour and had 18 years of experience. He did most of the work. The rate is about right; however, there appears to have been little delegation to junior counsel at a more cost effective rate. Senior counsel even did the drafting of the unused responding material. With six lawyers involved, that work should have been done by junior counsel.
[24] As set out above, the rates charged and the hours spent are excessive.
[25] No one could expect that this amount would be charged for a Notice to Appear and an offer to settle. Camtac is entitled to costs but not in an amount that suggests success after hearing.
[26] Security for costs is an appropriate order to ensure that a responding party does not have to go to great lengths to defend itself unnecessarily. Rather than bring such an expeditious and relatively inexpensive motion, Camtac elected to spend hours of legal effort in two countries. That decision could not reasonably be expected by Fatigue.
[27] In the end result, a simple motion could have brought this matter to an end without the time allegedly spent on the application. Camtac can take all cautious steps that it believes necessary, but that does not mean that an unsuccessful party is required to pay for those steps.
[28] Had the matter proceeded, the factual background may well have been complex but the legal principals appear clear. The issues were important to both parties but only if the matter proceeded.
[29] In any effort to expedite the matter, Fatigue brought a motion within the application. That step is understandable but does add to the costs to be awarded for both the withdrawn motion and application.
[30] In summary, from my review of the materials, the request appears unreasonable and is unsupported or unexplained. The request is beyond what any unsuccessful party would reasonably expect to pay to withdraw an application at an early stage.
Result
[31] Taking all of that into consideration, I find that a fair and reasonable amount to be paid by Fatigue to Camtac, is $7500.00 (Can.) payable within 30 days. Those are the costs of the withdrawn application and interim motion.
Costs
[32] Given the result of this motion for those costs, I can foresee arguments by each party for costs against the other. If the costs of this motion are not resolved, either party may make its own written submissions within the next 15 days. Any responding material shall be filed within 15 days thereafter. Each submission will be no more than three pages, not including any bills of costs or offers to settle. There shall be no reply submissions unless I ask for them.
[33] Written submissions shall be forwarded to me at my office at the Superior Court Office, 74 Woolwich Street, Guelph, Ontario, N1H 3T9.
Lemon J. Date: March 4, 2019