Court File and Parties

COURT FILE NO.: CV-13-493849 DATE: 20190401 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: 2049390 ONTARIO INC. Plaintiff

AND:

DORIS LEUNG AND PACIFIC INSURANCE BROKER INC. Defendants

BEFORE: FAVREAU J.

COUNSEL: Lee Akazaki, for the Plaintiff Barry P. Papazian and Michael Krygier-Baum, for the Defendants

HEARD: In writing

Costs Endorsement

Introduction

[1] In a decision reported at 2018 ONSC 5759, I dismissed the plaintiff's action after a two-week trial.

[2] At the conclusion of my reasons, I invited the parties to agree on costs, failing which I set a schedule for the receipt of cost submissions.

[3] It appears that the parties have not been able to agree on costs.

[4] The defendants seek costs in the amount of $212,632.10. As part of this amount, they claim costs on a substantial indemnity scale as of January 17, 2018, which is when they made an offer to settle the case.

[5] The plaintiff argues that the defendants should be entitled to no more than approximately $40,000 in costs. The plaintiff takes the position that there is no basis for awarding costs on a substantial indemnity basis for any part of the case and they argue that the defendants have failed to provide adequate support for the time and disbursements claimed.

General Principles

[6] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, provides that "subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid".

[7] In determining the costs of a proceeding, the Court is to consider the factors set out in Rule 57.01(1) of the Rules of Civil Procedure, including the principle of indemnity, the amount claimed, the complexity of the procedure, and the importance of the issues.

[8] The Court is also to consider the principles established by the Court of Appeal for Ontario in Boucher v. Public Accountants Council (Ontario), (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.), including that the objective of fixing costs is to set an amount that is fair and reasonable in the circumstances of the case.

[9] In 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238 (Sup. Ct.), at para. 10., Perell J. described the purposes of the modern costs rules as follows:

(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.

Analysis

Scale of costs

[10] The defendants made an offer to settle to the plaintiff on January 17, 2018, which was approximately 3 ½ weeks before the beginning of trial. They claim that the offer complied with Rule 49 of the Civil Procedure, and that they are entitled to costs on a substantial indemnity basis as of January 17, 2018.

[11] The plaintiff argues that the cost consequences of an offer to settle set out in Rule 49.10 only apply to circumstances in which the plaintiff is successful at trial.

[12] I agree. Rule 49.10(2), which deals with offers made by defendants, provides that where "the plaintiff obtains a judgment as favourable or less favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless the court orders otherwise" (emphasis added).

[13] While Rule 49.13 appears to give the Court residual discretion to consider offers to settle when considering costs in circumstances other than those set out in Rule 49.10, the Court of Appeal has consistently warned that the discretion to order costs on a substantial indemnity scale should only be exercised in cases involving egregious conduct by the party against which costs are awarded. For example, relatively recently, in Iannarella v. Corbett, 2015 ONCA 110, at paras. 138-139, the Court held as follows:

138 The trial judge stated that he was exercising his discretion under this court's decision in S.& A. Strasser Ltd. v. Richmond Hill (Town) (1990), 1 O.R. (3d) 243 (C.A.). In that case the court cited rule 49.13, which provides that notwithstanding rule 49.10, in assessing costs a court "may take into account any offer to settle made in writing."

139 The development of this court's approach to awards of substantial indemnity costs has evolved since Strasser, as this court noted in Boucher v. Public Accountants Council (Ontario), 2009 ONCA 722, 100 O.R. (3d) 66. Outside of rule 49.10, to make such an award as a matter of judicial discretion the court must find that the party has been guilty of egregious misconduct in the proceeding. See St. Elizabeth Home Society v. Hamilton (City), 2010 ONCA 280, at para. 92 and McBride Metal Fabricating Corp. v. H. & W. Sales Co. (2002), 59 O.R. (3d) 97 (C.A), at para. 39.

[14] In this case, the defendants do not argue that the plaintiff's conduct in the litigation was egregious nor do I see any basis for making such a finding.

[15] Accordingly, in my view, partial indemnity is the appropriate scale for costs throughout the proceeding.

Quantum of costs

[16] As mentioned above, the defendants seek costs in the amount of $212,632.10, which includes fees in the amount of $183,163.11, disbursements of $26,078.75 and HST on fees and disbursements. The calculation of fees put forward by the defendants is based on partial indemnity rates up to January 17, 2018, and substantial indemnity rates from January 17, 2018 to the end of trial. By my calculation, applying defence counsel’s partial indemnity rates to the hours they spent as of January 17, 2018 to the end of trial, the fee portion of the costs claim is reduced to $127,994. The total claim for costs, inclusive of disbursements and HST, then becomes approximately $175,000.

[17] The defendants argue that the time spent by counsel on the various tasks in the case is reasonable, given the complexity of the issues, and given some of the plaintiffs' conduct at trial. For example, they argue that the plaintiff’s representative increased the necessary trial time by being elusive when he was cross-examined at trial.

[18] The plaintiff argues that I should not award costs based on the hours and the list of disbursements set out in the defendants' bill of costs because the defendants' counsel have failed to provide their dockets and any invoices in support of the amounts claimed. In support of this argument, the plaintiff relies on language in Form 57A to the effect that dockets and invoices should be attached to a bill of costs. In the absence of such evidence, the plaintiff argues that the defendants should be entitled to no more than approximately $40,000 for fees.

[19] Notably, no authority has been provided for this proposition.

[20] Notably, the plaintiffs have not put forward their own bill of costs to show that the costs claimed by the defendants fall outside of their reasonable expectations. In addition, rather than suggesting that it is improper for me to accept the hours claimed by the defendants in the absence of supporting dockets and invoices for disbursements, it was certainly open to the plaintiff to request this information from counsel before making submissions. I am not aware of any requirement that this back up documentation be provided to the Court as a pre-condition to obtaining a reasonable costs award.

[21] As the Courts have stated repeatedly, the exercise of awarding costs is not to proceed on a line by line basis. Rather, as held in Boucher, the role of the Court is to consider what quantum of costs is reasonable in the circumstances. In this case, the hourly rates claimed by the defendants' counsel are very reasonable. The number of hours spent is also reasonable in the circumstances of this case. The amount claimed by the plaintiff exceeded $1.8 million, there were numerous factual issues between the parties, and both sides required expert evidence. In addition, generally, the disbursements claimed are reasonable. However, I do agree with the plaintiff that it should not be responsible for paying for the fee claimed by Arcon Engineering which was not called at trial and that there should be some reduction for Frank Szirt's fee, given that I found that his report overstepped the proper function of an expert.

[22] In all of the circumstances, in my view, a costs award of $150,000 inclusive of disbursements and HST is reasonable in the circumstances of this case.

Conclusion

[23] In conclusion, the defendants are entitled to their costs of the action on a partial indemnity basis in the amount of $150,000 inclusive of disbursements and HST, payable within 60 days.

FAVREAU J. DATE: April 1, 2019