COURT FILE NO.: CV-16-552087
DATE: 2019 11 13
SUPERIOR COURT OF JUSTICE - ONTARIO
IN THE MATTER OF the Construction Lien Act, RSO 1990, c. C.30, as amended
RE: ERVIN’S RENOVATIONS INC. Plaintiff (Defendant by counterclaim)
- and -
NICOLE MARIE ISKANDER and CHRISTOPHER ISKANDER Defendants (Plaintiffs by counterclaim)
BEFORE: Master Todd Robinson
COUNSEL: D. Morris, for the plaintiff
PARTIES: N. Iskander, for herself
C. Iskander, for himself
HEARD: In writing
COSTS ENDORSEMENT
[1] Pursuant to reasons for judgment dated September 20, 2019, Ervin’s Renovations Inc. (“ERI”) was found to have failed to prove entitlement to a lien under the now-former Construction Lien Act, RSO 1990, c. C.30 (the “CLA”) (the provisions of which remain applicable to this proceeding by operation of Section 87.3 of the current Construction Act, RSO 1990, c. C.30). Nicole Iskander and Christopher Iskander (together, the “Owners”) were found to have proved their set-off defence to the extent of a judgment in the amount of $738.20, plus pre-judgment interest pursuant to the Courts of Justice Act, RSO 1990, c. C.43 (the “CJA”). A schedule for written costs submissions was set if the parties could not agree as to costs.
[2] Written submissions have been delivered by both sides. Both ERI and the Owners seek their respective costs of this proceeding. ERI seeks its costs on a partial indemnity basis calculated in the amount of $21,995.49, less the judgment awarded, for a net costs award of $21,257.28. The Owners seek their costs on a substantial indemnity basis in the amount of $15,229.41 or, alternatively, on a partial indemnity basis in the amount of $10,567.03, claiming only legal fees incurred for prior legal representation and their disbursements. No costs compensation is sought by the Owners for their time expended as self-represented litigants in preparing for and conducting the trial.
[3] In determining costs, Section 86 of the CLA and Rule 57.01 of the Rules of Civil Procedure, RRO 1990, Reg 194 afford broad discretion to fashion a costs award that the court deems fit and just in the circumstances. The general principles applicable when determining costs are well settled. Costs are discretionary. Rule 57.01 sets out factors to be considered by the court in exercising that discretion, which are in addition to considering the result of the proceeding and any written offers to settle. The court must also consider the overall objective of fixing an amount that is fair and reasonable in the particular proceeding, having regard to the expectations of the parties concerning the quantum of costs: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 OR (3d) 291 (CA) at paras. 26 and 38.
[4] ERI argues that, although the Owners obtained a nominal judgment, ERI was the more successful party and that costs of the proceeding should be viewed and allocated into two portions: first, ERI’s claim for the value of services and materials it supplied and, second, the Owners’ negligence claim. ERI argues that it was successful in proving that the value of ERI’s supply of services and materials was greater than the position taken by the Owners, which is argued as tantamount to obtaining a judgment against the Owners calculated by ERI to be $5,328.77. ERI accordingly seeks 60% of its partial indemnity costs for this first half of the proceeding. ERI further argues that it was entirely successful in opposing the Owners’ counterclaim, so should be entitled to 100% of its partial indemnity costs for this second half of the proceeding.
[5] The Owners argue that no finding regarding the success of either ERI or the Owners is necessary, since the Owners made offers to settle pursuant to Rule 49 and ultimately obtained a more favourable judgment than the offers made. The Owners thereby argue that they are entitled to substantial indemnity costs. The Owners nevertheless take the position that they were the successful parties, having defeated ERI’s claim and obtained a judgment, which they argue constitutes success on the counterclaim. The Owners rely on Jomar Cattle Feeders Inc. v. Murphy, 2007 CanLII 14333 (ONSC), in which Reilly J. held that the defendants’ successful counterclaim in that action was a complete defence to the plaintiff’s claim and awarded costs in favour of the defendants.
[6] I disagree with ERI that the total costs of the action and counterclaim should be separated into two portions. Determinations made and costs incurred in respect of ERI’s claim, the Owners’ set-off defence, and the Owners’ counterclaim are intertwined. ERI was successful in establishing a breach of contract by the Owners justifying ERI’s termination of the contract. ERI did prove a total supply of services and materials in excess of the amount that the Owners claimed was supplied. However, the Owners’ set-offs are not independent from or unrelated to ERI’s claim.
[7] Pursuant to Section 17(3) of the CLA and Section 111 of the CJA, the Owners were entitled to pursue a defence of set-off for deficiencies, overcharges and other damages in response to ERI’s claim. As provided in Section 111(3) of the CJA, where a larger sum is found to be due from a plaintiff to a defendant than is found to be due from that defendant to the plaintiff, the defendant is entitled to judgment for the balance. That is what occurred here.
[8] But for the proven set-offs claimed by the Owners, ERI would have obtained a judgment for $4,724.39 after crediting the payments made by the Owners. However, the Owners were successful in a sufficient number of their set-off defences to defeat a judgment against them. As a result, no amounts were found owing to ERI pursuant to its contract and, by operation of Section 17(3) of the CLA, any value of ERI’s lien was similarly eroded. The Owners obtained a judgment against ERI (albeit a nominal one) notwithstanding my determination that ERI’s termination of the contract was justified. I accordingly do not agree with ERI’s submission that it was definitely the more successful party in this proceeding.
[9] Before commenting on other factors, I address the Owners’ position that they made, and beat, Rule 49 offers to settle. Costs consequences of failing to accept a Rule 49 offer only apply where a plaintiff obtains judgment. Pursuant to Rule 49.10(1), presumptive substantial indemnity costs from the date of an offer arises where the plaintiff obtains a judgment that is as favourable or more favourable than the plaintiff’s offer. Rule 49.10(2) provides that a defendant is presumptively entitled to partial indemnity costs from the date of an offer where a plaintiff obtains judgment as favourable or less favourable than the defendant’s offer. There is no provision in Rule 49 by which a defendant is presumptively entitled to either substantial or partial indemnity costs where s/he makes an offer to settle and ultimately obtains judgment instead of the plaintiff.
[10] Having reviewed the offers to settle, I do not view them as offers from a plaintiff by counterclaim, but rather as offers to settle from a defendant. They are also not complaint Rule 49 offers. Notably, the last offer made did not preserve any of the prior offers and expired on June 18, 2018, despite Rule 49 requiring that an offer remain open until trial to trigger the presumptive cost consequences. Accordingly, since all of the offers to settle had been deemed revoked or had expired by June 18, 2018, it follows that they are not offers that trigger any costs consequences pursuant to Rule 49.10. I am nevertheless entitled to consider the offers in accordance with Rule 49.13. I agree with the Owners’ submissions in that regard.
[11] Having completed those assessments, I have further considered all relevant factors in exercising of my discretion regarding costs. Without going through every factor in detail, I note the following:
(a) I agree that the Owners’ claim for substantial indemnity costs is less than the partial indemnity costs claimed by ERI. This is a factor in considering the reasonable expectations of the parties.
(b) Issues in dispute were not complex.
(c) There were no issues regarding the conduct of the trial. Both sides contributed to what was an organized and efficiently run trial, for which I am appreciative.
(d) There has been divided success in the ultimate result:
(i) ERI claimed $34,346. The Owners’ claimed for $10,791 in overpayment, $27,983 in rectification costs, and additional damages for costs to correct deficiencies and complete work. The net judgment in favour of the Owners is $738.20.
(ii) The Owners staunchly maintained that ERI breached the contract by negligently performing excavation work and that the Owners’ were thereby justified in retaining NuSite Waterproofing Contractors Ltd. (“NuSite”) to complete installation of the concrete bench to remedy the ensuing structural foundation issue. ERI was successful in arguing that its excavation had not been performed negligently and that engaging NuSite to perform work within ERI’s contractual scope constituted a significant breach of contract by the Owners. This was a substantial issue in the litigation on which ERI was successful.
(iii) ERI failed to lead sufficient evidence to substantiate all services and materials it allegedly supplied. Similarly, the Owners failed to lead sufficient evidence to substantiate all alleged deficiencies and other set-offs.
(iv) Neither side was entirely successful or unsuccessful in their cases. I see little merit in assessing who was perhaps more successful given the ultimate result.
(e) Overall, I find that claimed rates and disbursements by both sides are reasonable, although the time spent by ERI’s counsel seems high given the lateness of his retainer and the quantum in dispute. No details or categorization is provided to explain or break down the 60.0 hours of time claimed for work performed by ERI’s counsel prior to preparing for and attending trial. No time for ERI’s former counsel appears to be claimed in the bill of costs, so ERI’s total legal costs are presumably higher than what has been claimed.
(f) The Owners argue that ERI failed to take a realistic view of the merits of its claim and that the litigation was unnecessary and avoidable. They further argue that the net result of a nominal damages award to the Owners was a “considerable waste of time, energy, and money for all parties involved.” There is some truth to this position. However, I cannot find that ERI had a meritless case or that it was unreasonable for ERI to proceed to trial. I take a similar view of the Owners’ case. This is not a proceeding where it is clear from the evidence that ERI could not have been successful. While I agree resolution before trial would have saved time, energy and money for both sides, on the materials before me, I do not fault either side for proceeding to trial in the absence of being able to reach resolution themselves.
(g) ERI does not appear to have made any offers to settle (or at least none were submitted). The Owners offered both a dismissal of the proceeding without costs and payment of $1,000.00 to ERI. I agree that ERI has been less successful than both of those offers, but also acknowledge that the offers had been deemed revoked or expired by June 18, 2018, which was 9 months prior to trial. If any further settlement offers or discussions occurred after that time, nothing is before the court. I do not find the offers to settle to be particularly persuasive in my costs assessment.
[12] Having weighed the factors in Rule 57.01, the impact of the offers to settle, the divided success on determinations made for each disputed issue and the ultimate outcome, I have reached the conclusion that, in the circumstances of this particular proceeding, the fair and reasonable result is that the parties each bear their own costs. So ordered.
MASTER TODD ROBINSON
DATE: November 13, 2019