Court File and Parties

Court File No.: CV-15-531407 Date: June 12, 2019

Ontario Superior Court of Justice

In the Matter of the Construction Act, R.S.O. 1990, c.C.30

Between:

JOHNVALE CONTRACTING LTD., Plaintiff Christopher Staples for the plaintiff, Tel.: 416-218-1147, Fax: 416-218-1847.

- and -

ZONTE INVESTMENTS INC., Defendant John R. Carruthers for the defendant, Tel.: 905-294-0666, Fax: 905-294-5688.

Decision: May 21, 2019. Master: C. Wiebe

Costs Decision

[1] On May 21, 2019 I released my Reasons for Judgment concerning the trial hearing in this matter. I realize now that I misdated the hearing date. The trial was heard on May 15, 2019. I granted judgment in favour of the plaintiff, Johnvale, in the amount of $21,903.58 on a lien claim of $24,327.43. As ordered, the parties have served and filed written submissions on costs. I have reviewed them and herein issue my costs award.

[2] The result is clearly in favour of Johnvale, and, therefore, Johnvale is entitled to costs.

[3] The greatest factor in my costs award other than the result is the question of offers to settle. This is a case that should have settled. In light of the offers to settle I have now seen, I conclude that it is the defendant, Zonte, that did not act reasonably in response to offers to settle, particularly given the evidence that came out at trial. On January 29, 2019, namely eight days after the trial management conference that scheduled the trial hearing and before any non-pleading work was done, Zonte delivered a written 7 day offer to settle offering to pay Johnvale the all-inclusive sum of $13,000. On February 8, 2019, Zonte delivered another 7 day offer to settle offering to pay $14,000. On February 12, 2019, Zonte delivered a Rule 49.10 offer of $14,500. On March 27, 2019 it delivered another Rule 49.10 offer offering to pay $15,100. These all were below the eventual trial judgment result.

[4] On the other hand, Johnvale presented offers all of which were less favourable to Johnvale than the eventual trial judgment result. On February 1, 2019, again namely before any serious, non-pleading related work began, Johnvale delivered an offer to settle offering to accept the all-inclusive amount of $24,000. Ten days later, on February 11, 2019, again before serious work began, Johnvale delivered another written offer to settle reducing the amount to $20,000 all-inclusive. Johnvale then on March 29, 2019, before the affidavits were prepared, delivered an offer to settle that offered to accept the all-inclusive sum of $18,500. This was Johnvale’s lowest offer, and was only $3,400 more than Zonte’s last offer. It is incomprehensible to me why this offer was no accepted given the trial evidence. Johnvale made one final offer on April 29, 2019 offering to accept $27,000 all-inclusive. All of Johnvale’s offers were Rule 49.10 offers.

[5] It is well settled law that Rule 49.10 is not technically binding on the court in a lien proceeding such as this as the Construction Act contains its own provisions concerning costs. It is also well settled law that this court should nevertheless be guided by Rule 49.10 in exercising its discretion on costs in order to encourage parties to reach settlements; see Luxterior Design Corp. v. Gelfand, 2014 CarswellOnt 18880 (Ont. Master) at paragraph 10. That is certainly the case here. I find that Zonte did not act reasonably in responding to offers to settle, and now should bear the consequence of that conduct. Mr. Staples showed that partial indemnity costs for the items of work in Johnvale’s Costs Outline before the first Johnvale offer totaled $2,653.50, and that the substantial indemnity costs for the items of work in Johvale’s Costs Outline after the first Johnvale offer totaled $24,043.50. The total is $26,697 (plus HST).

[6] The reasonable expectation of the losing party, Zonte, must also be kept in mind. I note that Zonte’s Costs Outline showed a figure of $26,367.20. It is not clear whether this figure is tax inclusive. With tax this figure is not that dissimilar from the above noted figure.

[7] Another factor to consider is the conduct of the parties. As noted in my Reasons for Judgment, Zonte made allegations of fraud against Johnvale, namely that its logs had been fabricated. There was no evidence to substantiate these gross allegations. Allegations of fraud that are not substantiated attract awards of substantial indemnity costs; see Wilfert v. McCallum, 2017 ONSC 4431 at paragraphs 22 and 23. Mr. Cimmino also admitted paying for items that he subsequently wanted paid back taking the position that he should not have paid.

[8] Mr. Carruthers referred to the doctrine of proportionality which now must be considered by the courts. He pointed out that Johnvale is seeking costs that exceed its judgment amount. But I agree with Mr. Staples’ counter-argument that it is also well settled law that a plaintiff should not be undercompensated for legitimately incurred costs, even in the case such as this of a modest claim and result. To simply reduce a costs award that is otherwise legitimate and unavoidable simply because of the modesty of the claim and result would be unfair; see Interborough Electric Inc. v. 724352 Ontario Ltd., 2016 ONSC 1115 (SCJ) at paragraph 58. I will not reduce the costs award as a whole on account of proportionality as a result.

[9] As to whether all of the claimed costs are reasonable, I note that Mr. Carruthers did not comment on the quantum of the claimed costs. The one area of concern for me in the Johnvale Costs Outline was the trial costs. Here there is a small issue of proportionality. The trial time is shown as being incurred at a $650 hourly rate, while the Zonte Costs Outline shows an hourly rate of $470. The $470 is a more reasonable rate in my view given the size of the claim. This will be taken into consideration.

[10] Considering all of the factors, and considering the additional costs Johnvale has incurred in preparing written costs submissions, I find that a reasonable award of costs in favour of Johnvale for this reference is $30,000. Zonte must pay Johnvale $30,000 in costs.

[11] As to the issue of whether PSO should be added to the deductions I applied in my judgment, I accept Mr. Staples’ submission that PSO does not apply to the discounted figures, as the discounts are inclusive sums. I will not add the PSO to the deductions.

[12] As to prejudgment interest, I note that the contract in issue specifies a monthly interest rate on overdue accounts of 1.5% and does not specify an annum rate. I, therefore, accept Mr. Carruthers’ submission that the federal Interest Act, R.S.C. 1985 c. I-15 section 4 applies and must be respected. However, I also accept Mr. Staples point that the 5% per annum interest rate specified by the Interest Act should be applied rather than the Courts of Justice rate. I so order. This will be the prejudgment and post-judgment interest rate on the judgment amount running from the date of the lien, namely October 3, 2017. The Courts of Justice rate of 3% per annum will be applied to the costs award running from today.

[13] I have prepared a report containing my findings and attach a copy of same. I have signed it today. It is available to be picked up along with an instructional sheet.

Released: June 12, 2019 MASTER C. WIEBE