Court File and Parties

COURT FILE NO.: CV-09-383033 DATE: 20200224 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: ESTATES ASSOCIATES INC. Plaintiff

AND:

1645112 ONTARIO LTD., 1793411 ONTARIO LTD., MR. RONALD MCCOWAN AND MR. BRYON C. COHEN Defendants

BEFORE: FAVREAU J.

COUNSEL: Musharaff Iqbal, acting in person for the plaintiff Mr. Ronald McCowan and Amandeep Dhillon for the defendants 1645112 Ontario Ltd. and 1793411 Ontario Ltd. David Vaillancourt for the defendant Bryon C. Cohen

HEARD: in writing

Costs Endorsement

Introduction

[1] On November 4, 2019, I released a decision, reported as 2019 ONSC 6396, dismissing the claim brought by the plaintiff, Estates Associates Inc. ("Estates"), against 1645112 Ontario Ltd., 1793411 Ontario Ltd. and Ronald McCowan (the "McCowan defendants") and against Bryon C. Cohen.

[2] The claim arose from the McCowan defendants' purchase of a property owned by Estates. Estates alleged that the McCowan defendants were liable for fraud, conspiracy, negligent misrepresentation and breach of contract in relation to the transaction. Mr. Cohen acted as Estates' lawyer on the transaction, and Estates alleged that he was negligent and that he participated in the alleged conspiracy.

[3] This decision addresses the issue of costs.

Positions of the parties

[4] The McCowan defendants seek costs on a substantial indemnity basis in the amount of $212,962.04, or in the alternative costs on a partial indemnity basis in the amount $180,829.39. In seeking costs on an elevated scale, the McCowan defendants argue that Estates made unsubstantiated allegations of fraud against Mr. McCowan and that they beat their offer to settle for $95,000 made prior to trial.

[5] Mr. Cohen seeks costs on a substantial indemnity basis in the amount of $288,959.26, or alternatively on a partial indemnity basis in the amount of $249,490.06. Mr. Cohen submits that substantial indemnity costs are appropriate in this case because of the allegations that he participated in a conspiracy.

[6] On behalf of Estates, Mr. Iqbal argues that the amounts sought by the defendants are too high and exaggerated. He argues that he also made offers to settled that were rejected. He points out that, in their written submissions at the end of trial, the McCowan defendants submitted that the action should be dismissed "without costs".

Applicable principles

[7] 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."

[8] 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 amount of costs the unsuccessful party could reasonably expect to pay, the complexity of the procedure and the importance of the issues.

[9] 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.

[10] Costs on a substantial indemnity basis may be appropriate to address the conduct of a party or where an offer to settle meets the requirements of Rule 49 of the Rules of Civil Procedure.

[11] As the Court of Appeal held in Davies v. Clarington (Municipality), 2009 ONCA 722, at para. 30, an award of substantial indemnity costs to address a party's conduct is exceptional, and is only appropriate where the conduct is so reprehensible that it warrants the Court's disapproval through a higher costs award. Unsubstantiated allegations of improper conduct that are seriously prejudicial to the character or reputation of a party may warrant substantial indemnity costs: CIBC Mortgages Inc. v. Vieira, 2014 ONSC 56, at para. 5.

[12] With respect to offers to settle, Rule 49 of the Rules of Civil Procedure provides for the costs consequences of offers to settle in appropriate cases. With respect to offers made by a defendant, Rule 49.10(2) provides as follows:

(2) Where an offer to settle, (a) is made by a defendant at least seven days before the commencement of the hearing; (b) is not withdrawn and does not expire before the commencement of the hearing; and (c) is not accepted by the plaintiff, and the plaintiff obtains a judgment as favourable as 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.

Analysis

[13] This action was commenced in 2009. There have been many procedural issues along the way. There were two rounds of discoveries. The trial itself took three weeks and included extensive written submissions. While Mr. Iqbal is not a lawyer and he represented Estates on his own during much of the proceeding and the trial, this was nevertheless a hard-fought case that had some factual complexity and raised several legal issues. Both Estates and Mr. Cohen retained experts who prepared comprehensive reports. In that context, and keeping in mind that one of the considerations in awarding costs is the reasonable expectations of the parties, Mr. Iqbal should not be surprised that, as the losing party, Estates would face significant costs consequences.

[14] I also observe that, despite the relative complexity of the case, the McCowan defendants and Mr. Cohen both approached the defence of this case reasonably and efficiently. Both sets of defendants were only represented by one lawyer at trial. In addition, they cooperated with Mr. Iqbal throughout the trial to make sure that the trial ran smoothly.

[15] Below, I address the specific costs requests made by each set of parties, including the issue of the scale of costs. In determining the costs payable by each set of defendants, I have taken into consideration my general observations above about the relative complexity of the case, Estates’ reasonable expectations and the conduct of the defendants.

Costs to be awarded to the McCowan defendants

[16] In their costs submissions, the McCowan defendants seek costs on a full indemnity basis in the amount of $244,132.46, alternatively $212,962.04 on a substantial indemnity basis, and in the further alternative $180,829.39 on a partial indemnity basis.

[17] With respect to the scale of costs, in my view partial indemnity costs are appropriate.

[18] The McCowan defendants justify the request for full indemnity costs on the basis of the allegations of fraud and dishonest conduct made by Estates against Mr. McCowan. However, as reviewed above, allegations of this nature may justify costs on a substantial indemnity basis, but even the case put forward by the McCowan defendants does not suggest that such allegations justify costs on a full indemnity basis: Millerson Group Inc. v. Huntington Properties Ottawa Inc., 2017 ONSC 3794 (Sup. Ct.), at para. 15.

[19] In any event, in this case, I do not find that the allegations of fraud and conspiracy made against Mr. McCowan justify costs on a substantial indemnity basis. While Estates was unsuccessful in proving its claim against the McCowan defendants, I made findings of credibility against Mr. Cowan and ultimately dismissed the claim against these defendants on the basis that Estates did not prove its case on a balance of probabilities not on the basis that the allegations were devoid of any merit. Under the circumstances, I am not prepared to award substantial indemnity costs to the McCowan defendants based on the nature of the allegations made against Mr. McCowan.

[20] The McCowan defendants also seek to justify their claim for substantial indemnity costs on the basis of an offer to settle. They made an offer to settle the claim for $95,000 to Estates a few weeks before the trial started, and they argue that they should receive substantial indemnity costs at least from the date of the offer. I also reject this submission. Rule 49.10(2), which applies to offers made by defendants, does not provide for the payment of substantial indemnity costs in the case of a plaintiff who is unsuccessful at trial. Rather, it applies to costs payable where a plaintiff is successful at trial, but receives an award that is lower than the offer to settle. In such cases, the defendant may be entitled to partial indemnity costs from the date of the offer: see St. Elizabeth Home Society v. Hamilton (City), 2010 ONCA 280, at paras. 90-92.

[21] In terms of the quantum of costs, I note that the McCowan defendants’ written submissions appear to contain an error. Paragraph 15 of the submissions states that they seek $180,829.39 on a partial indemnity basis. However, the bill of costs attached to the submissions makes clear that this is the amount calculated for partial indemnity costs up to the date of the offer to settle and substantial indemnity costs from the date of the offer. The actual amount for partial indemnity costs set out in the bill of costs is $152,933.33, which represents $136,798.70 for fees, $14,329.15 for disbursements and $17,543.38 for HST.

[22] Given all of the factors reviewed above, including the relative complexity of the issues and the conduct of the litigation, I find that the partial indemnity costs sought by the McCowan defendants are generally reasonable, and I order that Estates is to pay $150,000 all inclusive in costs to the McCowan defendants.

[23] Before concluding on this issue, I must briefly address Mr. Iqbal’s submission that I should award no costs to the McCowan defendants because of the reference to seeking a dismissal “without costs” in the written submissions at trial. I accept Mr. Dhillon’s reply submission that this was an error and that his clients’ intention throughout the proceedings was to seek costs if successful at trial. There are no other indications of an intention to forego costs, and his clients should not be penalized due to what appears to be an inadvertent error.

Costs to be awarded to Mr. Cohen

[24] As referred to above, Mr. Cohen seeks costs in the amount of $288,959.26 on a substantial indemnity basis and costs in the amount of $259,490.06 on a partial indemnity basis.

[25] With respect to the scale of costs, again I find that costs on a partial indemnity basis are appropriate in this case. While Mr. Iqbal made allegations that Mr. Cohen participated in an alleged conspiracy with the other defendants and third parties, the focus of his claim were the allegations of negligence against Mr. Cohen. Under the circumstances, I do not find that the allegations against Mr. Cohen rise to the level of being seriously prejudicial to his character and reputation such that an award of substantial indemnity costs is warranted.

[26] With respect to the quantum of costs, I find that some of the hours spent on the case are excessive. For example, the bill of costs includes a claim for over 100 hours on a motion to remove Estates’ former lawyer as solicitor of record, a motion that ultimately did not proceed. In addition, the bill includes over 50 hours on a motion for summary judgment that was brought by defendants other than Mr. Cohen and on which Estates was ultimately successful in the Court of Appeal.

[27] Under the circumstances, I find that $175,000 inclusive of disbursement and HST is reasonable. This amount is comparable to the costs awarded to the McCowan defendants, but takes into account the fact that Mr. Cohen had to retain an expert on the standard of care issue which was a significant additional disbursement.

Conclusion

[28] For the reasons above, Estates is to pay costs in the amount of $150,000 all inclusive to the McCowan defendants and costs in the amount of $175,000 all inclusive to Mr. Cohen. These costs are to be paid within 30 days of the date of this decision.

FAVREAU J. Date: February 24, 2020