COURT FILE NO.: CV-11-2721
DATE: 20190607
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Inzola Group Limited
David Chernos, Stuart Svonkin and Emilia Galan, for the Plaintiff
Plaintiff
- and -
The Corporation of the City of Brampton
Adam Stephens, Daniel Rabinowitz, Elizabeth Bowker and Kate Genest, for the Defendant
Defendant
COSTS ENDORSEMENT
Sproat J.
I. Introduction
[1] Following a 38 day trial I dismissed Inzola’s claim. The parties provided me with written submissions on costs. Given the amount claimed I offered the parties an opportunity to make oral submissions, however, they were content to rely on their detailed written submissions.
II. THE BILL OF COSTS
[2] In setting out the amounts claimed I will round to the nearest one thousand dollars.
[3] The City claims $2,289,000 for fees on a partial indemnity basis. The City, however, claims that it should receive substantial indemnity costs from July 25, 2013. This was the date on which Inzola amended its pleading to make allegations which the City argues amounted to allegations of fraud and conspiracy.
[4] The City also claims disbursements of $719,000 including $430,000 paid to third party e-discovery contractors.
[5] While under no obligation to do so, Inzola did not provide information concerning the time spent, and the disbursements incurred, by its counsel.
III. SUBSTANTIAL OR PARTIAL INDEMNITY COSTS
[6] In Davies v. Clarington, 2009 ONCA 722, [2009] O.J. No. 4236 (Ont. C.A.) the Court stated:
[…] This court, following the principle established by the Supreme Court, has repeatedly said that elevated costs are warranted in only two circumstances. The first involves the operation of an offer to settle under rule 49.10, where substantial indemnity costs are explicitly authorized. The second is where the losing party has engaged in behaviour worthy of sanction.
In summary, while fixing costs is a discretionary exercise, attracting a high level of deference, it must be on a principled basis. The judicial discretion under rules 49.13 and 57.01 is not so broad as to permit a fundamental change to the law that governs the award of an elevated level of costs. Apart from the operation of rule 49.10, elevated costs should only be awarded on a clear finding of reprehensible conduct on the part of the party against which the cost award is being made. […]
[…] trial judges have expressed the view that denying elevated costs to defendants who submit an offer to settle, which is later revealed to be more favourable than the result at trial, acts as a disincentive to defendants to make reasonable offers to settle. This view, while understandable, is contrary to the wording, spirit and intent of rule 49. Rules cannot be incrementally changed through jurisprudence. Any change in the rules to take into account the position of defendants who legitimately try to curtail what turns out to be unnecessary litigation is a matter for the Rules Committee.
[7] On January 23, 2017 the City offered to settle by paying Inzola $250,000 plus costs of $1,000,000 or such greater amount as may be assessed for costs. The City concedes that Rule 49 does not address the situation of an offer made by a defendant in a case in which the action is dismissed.
[8] In accordance with Davies, I am obliged to disregard the City’s offer in considering whether elevated costs are appropriate.
[9] The City also argues that Inzola made unproven allegations akin to fraud and conspiracy. In this regard the City submitted:
- On July 25, 2013, the Plaintiff amended its Statement of Claim to allege the equivalent of a conspiracy action. The thrust of the Plaintiff’s case is captured in paragraph 5 of its Amended Statement of Claim:
The real reason for the improper disqualification of Inzola was bias. Certain individuals within the City administration were biased against Inzola because of, among other things, Inzola’s history of public insistence that the City abide by fair, open and transparent procurement processes, and of publicly calling the City to account for misstating the likely cost of constructing the buildings contemplated in the RFP. Certain individuals within the City administration were also biased in favour of the selected respondent, Dominus.
Inzola’s case was thereafter aggressively pursued on the basis that its disqualification was based on bias and bad faith on the part of the City. More specifically, Inzola alleged that bias on the part of Mayor Fennell, the City Manager (Deborah Dubenofsky), and the Chair and Vice Chair of the Evaluation Steering Committee (Mo Lewis and Julian Patteson, respectively), was the real reason for the disqualification and that the City’s stated reasons were nothing more than a pretext - a convenient excuse to remove Inzola from a rigged RFP process.
The Plaintiff’s theory was that the Mayor was biased against Inzola and did not want it to be the Preferred Respondent. This motivated the Mayor to cause the City Manager, who was also herself biased against Inzola, to improperly intervene in the RFP process to ensure that Inzola did not succeed. The City Manager in turn secretly directed the Chair and Vice Chair of the Evaluation Steering Committee to take improper actions in the RFP to ensure Inzola did not succeed. They were willing to do so, Inzola charged, because of the deeply held bias each of them held against Inzola’s principal, John Cutruzzola.
The “conspiracy” allegations were repeated in the Plaintiff’s Written Opening Statement, pursued aggressively throughout the Trial, and maintained in the Plaintiff’s Closing Submissions. The following statement summarizes the Plaintiff’s “conspiracy” allegation as it was presented at Trial:
In sum, the evidence at trial will establish that Ms. Dubenofsky, Mr. Lewis and Mr. Patteson, as well as Mayor Fennell, were biased in favour of Dominus and against Inzola, and that their bias infected the decision to disqualify Inzola for alleged breaches of the Communication Protocol of the RFP Document. Further, those City officials misled City Council in order to ensure that Inzola was not the successful respondent and that Dominus was. The City breached its obligations to conduct the 2009 RFP Process in a fair, open, transparent and unbiased manner. Instead, it engaged in a process that was unfair, secretive and driven by bias.
Ultimately, the Plaintiff’s allegations of conspiracy, bias, and bad faith were entirely dismissed.
During the Trial, certain witnesses gave testimony about the significant negative personal impacts caused by the Plaintiff’s allegations against them. The Plaintiff’s attacks on the City’s procurement policies, processes, integrity and honesty undermined the City’s reputation for professionalism and fairness and impugned the personal and professional reputations of long-time public servants.
[10] Inzola cited a long list of cases holding that for unproven allegations of misconduct to justify substantial indemnity costs they must have been made recklessly and without any evidentiary foundation. (For example, see Murano v. Bank of Montreal, 1998 ONSC 5633, 1998 Carswell Ont 2841; Unisys v. York Three Associates Inc., [2000] O.J. No. 3622, 2000 Carswell Ont 3449, aff'd 2001 7276 (ON CA), [2001] O.J. No. 3777 (C.A.).; Tingas-Demetriou v. Dublin, 2016 ONSC 3414, 2016 CarswellOnt 8713; Manning v. Herb Epp, [2006] O.J. No. 4239, 2006 CarswellOnt 6508).
[11] The following are examples of the evidence Inzola relied upon:
a) City staff made unprofessional, derogatory comments regarding Mr. Cutruzzola;
b) City staff advised Council that Dominus had an option to purchase 20 George St. when that was admittedly not correct;
c) City staff advised Council that Dominus had paid for the option on 20 George St. when that was admittedly not correct.
[12] I also note that the City brought a summary judgment motion which it ultimately abandoned after Inzola obtained evidence from Mr. Corbett as a witness on a pending motion. In his reasons awarding costs of the abandoned summary judgment motion to Inzola, (Inzola Group Limited v. Brampton (City of), 2017 ONSC 3822) Daley R.S.J. stated:
[34] No evidence was offered on behalf of the defendant as to the reasons for the decision to abandon the summary judgment motion in November 2016. It appears from the informational record produced, as distinct from evidence under oath or affirmation, that the evidence of John Corbett, the City Commissioner at the time of the RFP and a member of the Evaluation Steering Committee on the RFP, would be problematic for the defendant in terms of achieving any success on this summary judgment motion.
[35] Mr. Corbett was cross-examined on September 8, 2016, and without reciting the details of his evidence at that time, it is common ground and readily accepted by counsel for the defendant, that his evidence on that cross-examination seriously impugned the credibility of other senior city staff in the employ of the defendant on the critical issues at stake on the summary judgment motion. It was urged on behalf of the plaintiff that as Mr. Corbett was in the employ of the defendant at all material times, it knew or should be imputed to have known of the evidence he offered long before this cross-examination in September 2016.
[36] It is notable that the defendant offered no evidence with respect to when the defendant first became aware of the evidence to be offered by Mr. Corbett which seriously undermined the position of the defendant on this motion. On the other hand, on the type of record presented, absent properly tested viva voce evidence I cannot determine if and when the defendant knew of Mr. Corbett’s views or beliefs, as ultimately were disclosed on his cross-examination.
[37] It is, however, clear from the record that certainly at its latest, the defendant knew in September 2016 following the cross-examination of Mr. Corbett, that its chances of success on the summary judgment motion had been significantly reduced to the point that it would have clearly been prudent to abandon the motion sooner than later.
[13] While I did not accept all of Mr. Corbett’s evidence it provided some support some for Inzola’s position.
[14] As such, I find that Inzola did not advance the allegations it did without an evidentiary foundation or recklessly. The City is not, therefore, entitled to substantial indemnity costs.
IV. FEES
[15] The hourly rates charged by the City lawyers to the City’s insurer were significantly lower than the rates charged by Inzola’s counsel. This was a result of the fact that the rates insurers pay is significantly less than the market rate for commercial litigation.
[16] In awarding costs of the abandoned summary judgment application to Inzola in 2017, Daley R.S.J. concluded that hourly rates of $800 for Mr. Chernos and $625 for Mr. Svonkin were appropriate. The actual rates charged by the City lawyers, the top rate being $500 per hour, were obviously reasonable and within the reasonable expectation of Inzola.
[17] This case was obviously complex and of great importance to the parties given the amount claimed and the serious allegations made. The City was completely successful. The Rule 57.01 factors, therefore, support an award of substantial costs to the City.
[18] Inzola alleges that the time spent was increased by the fact that the City failed to comply with its Rule 30 discovery obligations and that the production of documents in an “iterative” fashion necessitated multiple examinations which was inefficient. Inzola also argued that additional cost was incurred by reason of the fact the City made many refusals at discovery and then abandoned many of them when Inzola brought a motion.
[19] In his June 20, 2017 decision on the costs of the summary judgment motion, Daley R.S.J. referred at paragraph 11 to the fact there had been delays in documentary production by the City. The City, pursuant to a November 4, 2013 court order should have produced its documents by February 28, 2014. In fact, documents were subsequently delivered as follows:
| Date of Production | Number of Documents Produced |
|---|---|
| Apr 17, 2014 | 105 |
| Apr 27, 2015 | 2,492 |
| Jul 10, 2015 | 937 |
| Jan 20, 2016 | 150 |
| Mar 14, 2016 | 1,146 |
| May 18, 2016 | 3,430 |
| Jun 3, 2016 | 682 |
| Oct 4 2017 | 540 |
| Oct 12 2017 | 408 |
[20] Examinations for discovery were conducted in May 2014 which presumably were necessary given the Inzola amendments in 2013 and the additional court ordered production due February 28, 2014
[21] The City’s total partial indemnity costs claim related to discovery is $435,000 of which approximately $298,000 is subsequent to the May 2014 examinations for discovery. I acknowledge the extreme difficulty of assessing the impact of delays in production. I also recognize that there is always, despite the best efforts of capable counsel, some additional production required after discoveries are conducted. In all the circumstances I think it fair to deduct $44,700, being 15% of $298,000, from the discovery costs of the City on the basis of inefficiency related to delayed production and refusals that were later abandoned.
[22] Inzola also takes issue with the fact that the City claims for time spent by 32 professionals. This litigation spanned 8 years so the fact that 14 students at law and 7 law clerks worked on it is not surprising or concerning. I make no deduction based on the number of professionals.
[23] As I will explain in greater detail, the City did not provide its actual dockets. The City did provide a detailed breakdown of the hours spent by each lawyer, student and clerk in relation to:
a) Pleadings pre and post July 25, 2013.
b) 23 discovery categories relating to document review, preparation for and attendance for discovery on 24 days.
c) Expert related fees
d) Six different motions
e) Pre-trial and mediation
f) Research
g) Miscellaneous matters such as communications with client and witnesses.
h) Trial preparation pre and post October 30, 2017.
i) Trial attendance
j) Closing submissions.
k) Preparation of Bill of Costs
[24] The City then deducted the amounts allocated to various motions in relation to which costs had already been determined.
[25] On February 14, 2019 Inzola requested that the City produce its actual dockets. By letter dated February 15, 2019 the City responded as follows:
We have your letter of February 14, 2019.
Providing the requested dockets, receipts and invoices will require a tremendous effort on our part. The time entries for this matter, covering the period 2011-2019 are extensive and involve two law firms. Docket entries will need to be reviewed and redacted for privilege.
Before agreeing to provide this information to you, please provide us with the total hours and amounts charged by your firm to your client, backing out as we have done the amounts for motions where costs were decided.
If, as we expect, the amount of time spent by your firm and the amounts charged to your client are similar (or greater) to our hours and charges, then a question arises as to the overall value of a detailed analysis of our dockets and invoices. Please provide us with this information so we can consider your request further.
In the event that we provide the requested information, we will be adding the associated costs of doing so to the amount of costs being claimed by our client.
Once we receive your response, we will confirm our position. If we cannot agree, we may need to seek Directions from Justice Sproat, both in terms of the request and its impact on the deadlines for the remaining submissions.
[26] The City Reply submission indicated that while it was willing to produce its redacted dockets, if that would assist the court, it would require additional time to do so.
[27] The City also cited Risorto v. State Farm Mutual Insurance Co., 2003 ONSC 43566 in which Winkler J. stated:
[10] The attack on the quantum of costs, insofar as the allegations of excess are concerned, in the present circumstances is no [page139] 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.
[28] I infer from the fact Inzola has not produced its own dockets, that the time its counsel devoted to the litigation was not disproportionate to that of counsel for the City. I am, therefore, satisfied that the amount claimed by the City is within the reasonable expectations of Inzola.
[29] Inzola points out that Form 57A provides that for a bill of costs a party is supposed to “attach copies of the dockets or other evidence”. Inzola submits that without the dockets it cannot determine matters such as whether all time attributable to motions has been excluded and whether there was a duplication of effort when the City added Miller Thomson LLP to its legal team six months prior to trial.
[30] Inzola has a valid point and if it wishes to review the dockets it is entitled to do so. The City shall, therefore, advise within 30 days as to how long it will take to provide redacted dockets. This 30 day period will also allow the parties some time to determine whether, in light of all my reasons, they can resolve the question of costs or at least this aspect of it. I say that because I anticipate that the production and redaction process will add thousands, perhaps tens of thousands of dollars, to the costs claim of the City.
[31] If this matter cannot be resolved, Inzola shall advise how long it needs to review the dockets and counsel shall provide me with a suggested timetable to provide further documentation and submissions.
V. DISBURSEMENTS
[32] Inzola submitted:
- The City is seeking an extremely large amount – over $719,000 – in respect of disbursements. Some of the amounts being claimed for particular types of disbursements are unusually large. For example, the City seeks:
a) $430,203.04 for “e-Discovery Services”;
b) $27,575.76 for copies/printing;
c) $38,731.65 for accommodation;
d) $13,486.04 for meals;
e) $2,347.34 for taxis;
f) $2,441,45 for mileage/parking;
g) $3,020.00 for “Summation Tech Support”;
h) $25,807.76 for examinations/transcripts; and
i) a total of $142,023.38 for experts.
The first of those amounts – over $430,000 for “e-Discovery Services” – is extreme by any measure. The City has not produced any invoices or records to shed light on why that amount is so large. In any event, Inzola never could have reasonably expected that the City would incur such a large amount of costs in connection with “e-discovery” in this case. While a significant number of documents were reviewed and produced, the order of magnitude of those documents was in the tens of thousands, not the hundreds of thousands or millions.
The City has not provided any supporting documentation for the other disbursements claimed, nor has it provided any documentation showing that those charges were billed to and paid by the City’s insurer – although (as described below) Inzola requested such documentation. Many of the amounts being claimed – such as those for meals, taxis, accommodations, parking and tech support – fall into categories of costs that many insurers ordinarily refuse to pay.
[33] The City subsequently did provide invoices substantiating an amount slightly higher than the amount claimed for the e-Discovery Services. The City submitted the following:
i. because of the volume of documents (approximately 65,000), the initial review and coding of documents was out-sourced to a third-party provider, ATD (subsequently acquired by Deloitte), which was a reputable service provider in the e-discovery field. Pursuant to ATD’s retainer, the initial review of the documents was done by Ontario ATD lawyers at a rate of $95/hour. This was a more cost-effective way to do the initial review of documents than having lawyers or clerks at Stieber Berlach LLP carry out that task (whose hourly rates were more than $95/hour);
ii. many individuals at different locations needed access to the documents over the course of the litigation, including witnesses, experts, and individuals at the City. Accordingly, it was determined that the most efficient and cost-effective manner of storing these documents would be on a web-based server (Eclipse). Use of Eclipse meant that witnesses, experts, and individuals at the City could access the documents using the internet, rather than multiple and voluminous paper briefs having to be copied, shipped and then stored. The costs of uploading the documentary database to the internet, and for internet cloud-based hosting, were therefore reasonable and necessary.
[34] Counsel for the City had no motive to incur unnecessary expenses. Obviously counsel made the judgment the e-discovery services would be cost effective. At the conclusion of the trial I took away 20 banker’s boxes of paper documents. While I appreciate that not all witnesses needed access to all documents, it remains that it would have been very expensive to prepare multiple paper briefs. While the e-discovery disbursement is a large amount, I accept that it is reasonable and recoverable.
[35] Inzola made the point that some insurers, as a policy, will not pay what would otherwise be reasonable disbursements. I would, therefore, also award the City the amounts claimed for copies/printing, accommodation, meals, taxis, mileage/parking, and summation tech support subject to the City demonstrating that these amounts were billed, and paid by, the City or its insurer in the ordinary course of the litigation.
[36] The claimed disbursements for experts are also reasonable.
VI. CONCLUSION
[37] Apart from the issues I have identified, the City is entitled to the partial indemnity costs it claims. I will deal with the outstanding issues after receiving the further submissions of counsel.
Sproat J.
Released: June 7, 2019
COURT FILE NO.: CV-11-2721
DATE: 20190607
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Inzola Group Limited
Plaintiff
- and -
The Corporation of the City of Brampton
Defendant
REASONS FOR JUDGMENT
Sproat J.
Released: June 7, 2019