COURT FILE NO.: CV-18-591984-0000

DATE: 20191009

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SKY SOLAR (CANADA) LTD., Plaintiff

AND:

ECONOMICAL MUTUAL INSURANCE COMPANY and FIRSTBROOK, CASSIE & ANDERSON LIMITED, Defendants

BEFORE: Cavanagh J.

COUNSEL: Rebecca Huang and Zina Rita, for the Plaintiff Marcus B. Snowden and Pearl Rombis, for the Defendant, Economical Mutual Insurance Company Ben Forrest, for the Defendant, Firstbrook, Cassie & Anderson Limited

HEARD: By written submissions

COSTS ENDORSEMENT

[1] I released my Reasons for Judgment in this action on July 9, 2019. The plaintiff’s action against both defendants was dismissed. The parties were unable to reach agreement with respect to costs and I received lengthy written submissions. This is my endorsement with respect to costs of the action.

[2] Counsel at trial for the defendant Economical Mutual Insurance Company (“Economical”) was counsel for both defendants from April 24, 2014 to July 20, 2016 with legal expenses to be shared equally between the defendants. After July 20, 2016, the defendant Firstbrook, Cassie & Anderson Limited (“FCA”) was separately represented, including at trial.

[3] I first address the costs claimed by Economical and FCA to July 20, 2016 and the costs claimed by Economical after July 20, 2016. Then, I address the costs claimed by FCA after July 20, 2016.

Costs claimed by Economical and FCA to July 20, 2016 and by Economical after July 20, 2016

Scale of costs

[4] The first question that arises is whether Economical is entitled to costs on an elevated, substantial indemnity scale after October 12, 2017 when it made an offer to settle that was not accepted by the plaintiff.

[5] Economical submits that it served an offer to settle on October 12, 2017 and an offer to contribute dated October 16, 2018, both of which remained open for acceptance up until the commencement of trial. Neither offer was accepted by the plaintiff. Economical submits that under rule 49.10 of the Rules of Civil Procedure, it is entitled to substantial indemnity costs from the date of its first offer to settle onwards.

[6] Economical’s submission with respect to rule 49.10 is not correct. Rule 49.10 does not provide for an award of substantial indemnity costs to a defendant who has made an offer to settle which was not accepted and the plaintiff’s action is dismissed: See 2049390 Ontario Inc. v. Leung, 2019 ONSC 2035 at paras. 11-12.

[7] In the alternative, Economical seeks costs on a substantial indemnity scale after its October 12, 2017 offer to settle based upon rule 49.13 which provides that the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made, and the terms of the offer.

[8] The October 12, 2017 offer to settle was a joint offer to settle made by the defendants to settle the action for a payment of $25,000 inclusive of interest and costs. The October 16, 2018 offer to contribute made by Economical was for payment of $25,000 plus prejudgment interest from November 1, 2013 to the date of acceptance.

[9] The fact that these offers were made and not accepted does not justify the exercise of discretion to award costs against Sky Solar on an elevated scale. In Iannarella v. Corbett, 2015 ONCA 110 (cited in 2049390 at para. 13) the Court of Appeal held at para. 139 that “[o]utside of rule 49.10, to make such an award [of substantial indemnity costs] as a matter of judicial discretion the court must find that the party has been guilty of egregious misconduct in the proceeding”. Sky Solar did not engage in egregious misconduct in this litigation.

[10] Cost should be awarded on the usual partial indemnity scale.

Partial Indemnity Hourly Rates

[11] With respect to the period to July 20, 2016, Economical submits that its one half share of fees on a partial indemnity scale should be fixed in the amount of $71,599.85 plus HST. Economical submits that for the period after July 20, 2016, its fees on a partial indemnity scale should be fixed in the amount of $319,154.76 plus HST. These amounts total $390,754.

[12] These amounts are calculated based upon 70% of the hourly rates actually charged by Economical’s counsel. Economical justifies its calculation of partial indemnity fees using 70% of actual rates charged, in part, because it calculated its substantial indemnity rates at 85% instead of 90%. Economical submits, in the alternative, that 66.6% is the lowest partial indemnity rate which is appropriate. Economical also submits that the preferred approach is to fix costs which are fair and reasonable in the circumstances of this action.

[13] Sky Solar submits that the calculation of partial indemnity fees should be done based upon hourly rates which are 60% of the actual hourly rates charged by counsel.

[14] The term “substantial indemnity costs” is defined in the Rules of Civil Procedure to mean “costs awarded in an amount that is 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A”. There is no definition for “partial indemnity costs”. In Whitfield v. Whitfield, 2016 ONCA 720 at para. 29, the Court of Appeal discussed the court’s discretion in respect of the discount to be applied for partial indemnity rates:

What discount should be applied is within the discretion of the Court and not a matter of precise mathematical calculation. As this Court noted in Wasserman, at para. 5:

The degree of indemnification intended by an award of partial indemnity has never been precisely defined. Indeed, a mechanical application of the same percentage discount in every case where costs are awarded on a partial indemnity scale would not be appropriate. In fixing costs, Courts must exercise their discretion, with due consideration of the factors set out in Rule 57.01(1), in order to achieve a just result in each case.

[15] In my view, for this action, a partial indemnity hourly rate of 60% of the full rate charged by the lawyers and other legal professionals is reasonable and would achieve a just result.

Costs in respect of motions

[16] Economical includes in its costs outline claims for fees for legal services provided in relation to several interlocutory motions. The plaintiff submits that costs for services in relation to these motions should not be allowed unless the orders made on these motions provide that costs will be determined by the trial judge.

[17] The following are the motions in respect of which the plaintiff submits Economical is not entitled to costs:

(a) Plaintiff’s motion for a further and better affidavit of documents. DiTomasso J. ordered that the defendants pay costs to the plaintiff.

(b) Plaintiff’s motion to amend the statement of claim. This motion was granted on consent and McCarthy J. made no order with respect to costs.

(c) Economical’s motion to amend its statement of defence and plaintiff’s cross-motion to strike part of Economical’s proposed amended affidavit of documents. Master Muir ordered that there be no costs of this motion.

(d) FCA’s motion to strike paragraphs of the plaintiff’s reply. Master Muir ordered that FCA pay costs to the plaintiff.

(e) Motion for consolidation of this action and other actions and for case management. This motion was on consent and the order of R.S.J. Morawetz (as he then was) provided for no costs.

[18] I accept the plaintiff’s submission that Economical is not entitled to costs in respect of these motions. In these motions, with the exception of the plaintiff’s motion to amend the statement of claim, there was an adjudication of the issue of costs. If Economical wished to have an order for costs of the plaintiff’s motion to amend its statement of claim, it was open to it to seek costs of this motion or to ask that costs be reserved to the trial judge. The orders in question do not provide for payment of costs to Economical or for costs to be reserved to the trial judge.

[19] In fixing costs, I take into account the costs claimed by Economical in respect of these motions.

Costs for counsel at trial

[20] At trial, Economical was represented by lead counsel, a 1990 call, and second counsel, a 1994 call. The plaintiff submits that the fees of second counsel should be disallowed and that, in her place, allowance should be made for fees at a lower rate for a lawyer called in 2011 who had been involved in the litigation before trial.

[21] I do not agree that the fees claimed for second counsel representing Economical should be disallowed. This was a complex trial involving a number of issues and second counsel took an active role in the trial. Given the nature of the action and the role played by second counsel, I do not regard the staffing of Economical’s legal team at trial to have been unreasonable for this case.

Fees for services in respect of related proceedings

[22] The plaintiff submits that Economical’s claim for costs includes fees for services provided in relation to other legal proceedings and that this claim for fees should be disallowed. I address the following claims for fees to which the plaintiff objects:

(a) Invoice dated January 11, 2015: Time spent to review Arbitrator’s Lax’s Award, Sky’s Notice of Appeal, and consider impact on action; and to provide client with advice. The decision made by Arbitrator Lax included a number of factual findings that the parties agreed were binding on them in the action. It was reasonable for counsel for Economical to review the award to identify these findings. The fees charged for the services should not be disallowed.

(b) Invoices dated June 6, 2017; November 28, 2017, and November 29, 2017: Services in relation to Chubb’s subrogated action. From the description of the services in Economical’s costs outline, the services relate to a separate action and the fees charged are not properly claimed by Economical as partial indemnity costs in this action. The fees charged for these services should not be allowed.

(c) Invoice dated October 2, 2017 and June 14, 2018: Services in relation to the plaintiff’s product liability action involving Marnoch and Marcus including court searches, review of pleadings and communications with respect to mediation in that action and settlement. Although counsel for Economical referred to other legal proceedings in which the plaintiff was involved in support of his submissions with respect to issue estoppel, I do not regard the services to relate to the action brought by the plaintiff against Economical and FCA and, accordingly, the fees charged for these services should not be allowed as partial indemnity costs.

(d) Invoice dated June 6, 2017 and June 14, 2018: Services in relation to Marnoch’s cost recovery application. Although counsel for Economical made reference to this proceeding at trial, I do not regard the services in relation to Marnoch’s application to be properly recoverable as partial indemnity costs in this action.

Fees and disbursements in relation to engineering expert evidence

[23] The plaintiff also submits that Economical’s claim for fees dealing with expert evidence given at trial by engineers should be disallowed because the evidence was necessary, in large part, due to Economical’s pursuit of a defence based upon an exclusion clause in the applicable insurance policy which was abandoned during its closing submissions.

[24] In response, Economical submits that the need for engineering evidence was driven by the plaintiff when it alleged that Economical had failed to do a full engineering assessment of the cause for the first fire and the second fire/shutdown event. Economical submits that it was forced to fully defend the plaintiff’s allegations of bad faith including the allegedly inadequate engineering investigation. Economical submits that the plaintiff delivered the first engineering expert report and, as a result of receiving this report, Economical retained an engineer to provide a responding report.

[25] The plaintiff called engineering evidence in its case in chief at trial, and not in reply, and it was not at all clear to me that the relevance of this evidence was limited to the defence pleaded by Economical with respect to the exclusion, and not to the plaintiff’s pleaded claim that Economical acted in bad faith in relation to its investigation. I am not satisfied that Economical acted unreasonably in the circumstances by tendering the engineering evidence in response to the plaintiff’s engineering evidence and, for this reason, I do not disallow Economical’s claim for costs in respect of this evidence.

Reasonableness of costs claimed by Economical for other services

[26] In its written submissions, the plaintiff objected to the fees claimed for services at various stages of the action including the plaintiff’s request to inspect documents, documentary production, examinations for discovery, responses to undertakings, expert evidence, offers to settle, legal research, pretrial conferences, trial and trial preparation, and preparation of costs submissions. The plaintiff submits that too much time was spent by counsel in relation to these steps taken in this action and that the fees claimed for these services should be reduced.

[27] The plaintiff submits that Economical’s total costs on a partial indemnity scale should be fixed at $120,000 plus HST.

[28] I have reviewed the amount of time claimed for the services in question. Although in respect of some of the activities the amount of time spent seems to be high for the services in question, overall, I am not able to conclude that it would be fair to significantly discount the fees claimed because counsel spent more time than was reasonably needed. I take the plaintiff’s submissions into account when I decide the amount that would be fair and reasonable for the plaintiff to pay to Economical.

Plaintiff’s bill of costs

[29] In support of its costs submissions, the plaintiff provided a bill of costs and redacted invoices for the period of time between the commencement of the action at trial, after deducting the time incurred for interlocutory motions in 2015-2017. The hourly rates used for senior counsel ranged from $240 (in 2017-2018) to $336 in 2016. These rates are calculated based upon 60% of counsel’s standard hourly rate. The fees claimed for trial preparation and for attendance at trial are based upon fixed fees, as opposed to being calculated based upon the amount of time expended. Accordingly, it is difficult to compare the time spent by plaintiff’s counsel in relation to these services with the time spent by Economical’s counsel for preparation for trial and attendance at trial. I take the plaintiff’s bill of costs into account when I determine the amount that would be fair and reasonable for the plaintiff to pay to Economical.

Fair and Reasonable Costs

[30] Economical and the plaintiff both submit that I should approach the task of fixing costs for this action by deciding what is fair and reasonable for the unsuccessful plaintiff to pay. I agree. As the Court of Appeal stated in Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (Ont. C.A.) at para. 26, overall, “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”. I also accept the statement of Morden A.C.J.O. in Murano v. Bank of Montreal, (1998) 1998 5633 (ON CA), 41 O.R. (3d) 222 (C.A.) at p. 299, cited in Boucher at para. 25, that “the total amount to be awarded in a protracted case of some complexity cannot be reasonably determined without some critical examination of the parts which comprise the proceeding”.

[31] This was a relatively complex action involving insurance coverage issues and claims based on allegations of bad faith and professional negligence. The action was vigorously prosecuted and defended. The issues were clearly important to the parties. The trial was held over ten days and, although in hindsight some of the evidence may not have been needed, I do not consider that any party’s conduct tended to shorten or unnecessarily lengthen the duration of the action or that any step in the action was improper, vexatious or unnecessary, or taken through negligence, mistake or excessive caution.

[32] The partial indemnity fees claimed by Economical (when recalculated based upon hourly rates equal to 60% of billing rates) are $334,932. This is comprised of fees for the period of time before July 20, 2016 of $61,371 (18.32% of total fees are allocated to this period of time and represent one-half of total allocation because of the equal split with FCA) plus fees of $273,561 (81.68% of the total for the period after July 20, 2016 when FCA retained separate counsel). When I make adjustments to this amount as outlined above and consider the amount that would be fair and reasonable for the plaintiff to pay to Economical, I fix fees to be paid in the amount of $275,000 comprised of $50,380 for the period of time up to July 20, 2016 (18.32%) and $224,620 (81.68%) for the period of time after this date.

Disbursements

[33] Economical claims one half of the disbursements incurred in the period up to July 20, 2016 ($4,337.68) and all of the disbursements for the period of time after that date ($7,830.22), a total of $12,167.90. In addition, Economical seeks recovery as a disbursement of the amounts paid to Envista Forensics which were charged for the services of James Wheeler, the expert witness called at trial by Economical ($35,314.73). These amounts total $47,482.63.

[34] In response, the plaintiff submits that Economical has claimed reimbursement of disbursements which are not allowable under Tariff A, Part II. The plaintiff relies upon rule 57.01(3) which provides that when the court awards costs, it shall fix them in accordance with subrule (1) and the Tariffs. The plaintiff submits that it is not able to determine what disbursements were properly incurred or claimed by Economical for this action. The plaintiff submits that its disbursements (other than for expert witnesses) totalled $7,826.17 plus HST, and it submits that Economical should be allowed the same amount, $7,900, plus HST.

[35] In addition, the plaintiff submits that disbursements claimed for the charges of Mr. Wheeler should be disallowed entirely.

[36] Tariff A, Part II includes a list of allowable disbursements in tariff items 21-34. Tariff item 35 provides for payment where ordered by the presiding judge or officer of, “for any other disbursement reasonably necessary for the conduct of the proceeding, a reasonable amount in the discretion of the assessment officer”.

[37] I reduce the disbursements claimed by Economical by the sum of (i) $455.09 (inclusive of HST) which is one-half of the disbursements listed on Appendix “A” that represent amounts paid in relation to other legal proceedings or amounts paid in relation to motions in respect of which the plaintiff was awarded costs or where no costs were ordered, and (ii) $1,325.05 that represents amounts paid in respect of similar motions as shown in Appendix “B” of Economical’s list of disbursements. These amounts total $1,780.14. I allow the other disbursements claimed by Economical, including the amount claimed for payment to litigation support vendors, because I regard these disbursements as reasonably necessary for the conduct of the action.

[38] For the reasons I have given, I do not disallow the disbursement claimed by Economical for Mr. Wheeler’s charges. The charges are supported by Mr. Wheeler’s time entries and his hourly rate is less than the rate charged by the plaintiff’s expert. Mr. Wheeler’s charges are reasonable and supported.

[39] I fix disbursements to be paid by the plaintiff to Economical in the amount of $45,702.49.

[40] I fix costs to be paid by the plaintiff to Economical in the sum of $356,452.49 which is comprised of fees of $275,000, HST on fees of $35,750, and disbursements including HST of $45,702.49.

Costs claimed by FCA

[41] The amount of fees to be paid by the plaintiff to FCA for the period up to July 20, 2016 representing one-half of the total fees fixed for this period (because of the equal split with Economical) is $50,380. HST on fees is $6,549.40. The disbursements to be paid by the plaintiff to FCA for this period total $3,882.59 inclusive of HST ($4,337.68 less $455.09). These amounts total $60,811.99.

[42] With respect to the period after July 16, 2016, FCA seeks costs on a partial indemnity scale in the amount of $155,809.41 comprised of fees in the amount of $120,036.80, HST on fees of $15,604.78, and disbursements (inclusive of HST) of $20,167.83. The fees are calculated based upon partial indemnity rates of approximately two-thirds of the actual hourly rates.

[43] In response, the plaintiff submits:

a. The partial indemnity rates should be 55-60% of the actual rates charged.

b. The charges for its counsel’s initial assessment of the case in the amount of $6,057.60 should not be allowed.

c. FCA’s claim of $3,712.50 for delivery of a fresh as amended statement of defence should not be allowed.

d. FCA’s claim of $11,497.50 for the examination for discovery that followed from delivery of the fresh as amended statement of defence should not be allowed.

e. FCA’s claim of $14,295.20 for attendances of two senior counsel for judicial conferences should not be allowed in full, and the claim for the most senior counsel should not be allowed.

f. FCA’s claims for reimbursement of payments for charges of two expert witnesses ($14,862.50 plus HST) who were not called as witnesses at trial should not be allowed.

g. FCA’s claim for legal fees to deal with expert evidence should be discounted by 50%.

h. FCA’s claims for costs of $1,265.80 for a motion to transfer the action to Toronto and for a waiver of mediation should not be allowed because, in respect of the first motion, motion judge ordered no costs and, in respect of the second motion, the order was made on consent with no order as to costs.

i. The amount claimed for trial preparation and trial should be calculated based on 6 trial days and according to a formula based upon 10 hours per day at trial and an equal amount for trial preparation.

j. Disbursements should be allowed for professional server/couriers ($781.98 plus HST), examiners’ fees and transcripts ($1,258.62 plus HST) and printing/photocopies (including one third share of the joint document brief) ($674.54 plus HST).

k. In an order dated October 6, 2016, Master Brott ordered FCA to pay $10,000 in costs to the plaintiff which was not paid and this amount should be deducted from any award of costs to FCA.

[44] The plaintiff submits that the total amount of costs which should be awarded to FCA for this action is $35,437.20 inclusive of HST.

[45] The claims against FCA in the action were for general damages in an amount exceeding $1 million plus aggravated and punitive damages. The plaintiff chose to sue FCA and FCA was entitled to be separately represented if it so chose. FCA was not required to be represented by the same counsel that was representing Economical. FCA is entitled to costs for services reasonably provided by its new counsel after July 20, 2016, including assessing the case, making necessary amendments to pleadings, and conducting additional examinations for discovery with respect to the amended pleadings. I would not reduce FCA’s claim for costs in relation to these services.

[46] I take into consideration the plaintiff’s submissions with respect to the attendance of two senior counsel at judicial conferences when I determine the amount that would be fair and reasonable for the plaintiff to pay to FCA.

[47] With respect to FCA’s claim for reimbursement of amounts paid to expert witnesses, these witnesses were retained to respond to an expert report from Maurice Audet delivered by the plaintiff in June 2017 in connection with the claim against FCA. At trial, FCA argued that significant portions of Mr. Audet’s report would not be properly admissible in evidence at trial and redactions were made to Mr. Audet’s report which limited the evidence he was able to give at trial. FCA submits that, as a result of these limitations, it decided not to call either of the experts that it had retained as witnesses at trial. FCA submits that the amounts claimed in its bill of costs for retaining, meeting with and instructing the two experts, and receiving and reviewing their respective reports, were reasonable and necessary expenses given the scope of Mr. Audet’s report as originally served, and its decision not to call them as witnesses should not disentitle it to recovery of partial indemnity fees and disbursements in relation to these experts.

[48] I accept the submissions made by FCA in respect of its two experts. When the plaintiff sued FCA for negligence and bad faith dealing, and delivered an expert report to support its claims, it would reasonably have expected that FCA would tender expert evidence in response. The fact that, as a result of how the trial unfolded, FCA decided not to call the experts as witnesses should not disentitle it to reasonable costs incurred in relation to these experts. The claim for the charge for one expert, Frank Szirt is $9,787.50 and the claim for the charge for the second expert, Jack Lee, is $5,075. I regard these charges to be reasonable disbursements and I allow them.

[49] I agree that FCA should not recover costs for the two motions for reasons I have given.

[50] I do not agree that the trial time for purposes of fixing costs should be reduced to 6 days. The trial took 10 days. The amount claimed for preparation for and attendance at trial (based upon a reasonable partial indemnity rate for this case) would be within the range of costs that the plaintiff would have reasonably expected to pay if it was unsuccessful. I allow the time claimed for preparation and attendance at trial.

[51] I consider the disbursements claimed by FCA to have been reasonably necessary for the conduct of this action, and I allow them as claimed.

[52] When I consider the amount that would be fair and reasonable for the plaintiff to pay to FCA, having regard to the plaintiff’s reasonable expectations, I fix fees to be paid by the plaintiff to FCA for the period after July 20, 2016 in the amount of $100,000. HST on these fees is $13,000. I fix disbursements to be paid by the plaintiff to FCA for this period in the amount of $20,167.83 (inclusive of HST).

[53] For the entire action, including for the period when FCA was represented by the same counsel as Economical, I fix fees to be paid by the plaintiff to FCA in the amount of $150,380 ($50,380 plus $100,000). HST on these fees is $19,549.40. I fix disbursements (inclusive of HST) in the amount of $ 24,050.42 ($3,882.59 plus $20,167.83). These amounts total $193,979.82. From this amount, $10,000 must be deducted to account for costs owed by FCA according to the order of Master Brott. The net amount to be paid by the plaintiff to FCA is $183,979.82.

Summary and disposition

[54] For these reasons:

a. I fix costs to be paid by the plaintiff to Economical in the amount of $356,452.49.

b. I fix costs to be paid by the plaintiff to FCA (net of the amount of costs owed by FCA to the plaintiff) in the amount of $183,979.82.

[55] If I have made any arithmetic errors, I may be spoken to.

Cavanagh J.

Date: October 9, 2019```