Court File and Parties
2020 ONSC 1366 Barrie Court File No.: CV-19-1322 Date: 2020-03-02 Superior Court of Justice - Ontario
Re: Infinity Construction Inc., Plaintiff And: Skyline Executive Acquisitions Inc. and Skyline Deerhurst Resort Inc., Defendants
Before: The Hon. Madam Justice S.E. Healey
Counsel: S. Barbier, Counsel for the Plaintiff S. Rogers and P. Healy, Counsel for the Defendants
Heard: By written submissions
Costs Endorsement
[1] This is the ruling on costs following a four-day trial. The plaintiff was completely successful at trial, obtaining judgment for the full amount of its claim and prejudgment interest calculated at the contractual interest rate of prime plus 5% compounded monthly on a series of unpaid invoices.
[2] The unpaid invoices totalled over $1.19 million. The defendants acknowledged that they owed the plaintiff $743,894. The evidence bore out that the defendants knew that they owed that amount throughout this litigation and even earlier. The senior vice president of development testified that when he was hired in November 2014, he was made aware that between $600,000-$700,000 was owed to the plaintiff. Inexplicably, it had never been paid. At para. 149 of the Reasons for Judgment this court concluded that this non-payment was an attempt by the defendants to force the plaintiff, an economically weaker company, to settle in terms favourable to the defendants.
[3] The amount of $444,960 remained in dispute during the trial. This court granted judgment to the plaintiff in the amount of $1,188,853.81 plus interest calculated from May 29, 2016. The plaintiff’s counsel sought input from an accountant with respect to the interest calculation. Interest calculated pursuant to the contract was $429,298 as of February 7, 2020, for total recovery of $1,618,151.94. The per diem sum is $393.98. The defendants do not dispute the interest calculations.
[4] Infinity seeks costs of the trial and preparation of costs submissions calculated on a substantial indemnity scale in the amount of $201,587.75 plus HST and disbursements of $9,842.32 for a total of $237,637.78, to be paid within 30 days.
[5] The plaintiff’s submissions in support of the scale of costs may be summarized as follows: 1) had the defendants paid the undisputed amount, the dispute over the balance owed could have been settled and a trial avoided, therefore the trial was unnecessary and vexatious; 2) withholding payment was a tactical effort to exert financial pressure on the plaintiff; 3) the defendants made very low global settlement offers for this action and another ongoing action between the parties; 4) the last written offer delivered by the plaintiff should be dealt with by the court as if it was a r. 49 offer because, although not served seven days prior to trial, its late timing was a result of the trial being called in to start earlier than anticipated; and 5) the defendants proceeded to trial with no real prospect of success.
[6] The defendants’ submissions in support of both the amount and the scale of costs, which it submits should be the usual partial indemnity scale, may be summarized as follows: 1) the plaintiff’s costs and hours spent are far higher than reasonable, showing 568 hours of lawyer time over the course of the action, as opposed to the defendants’ 215 hours of lawyer time; 2) none of the plaintiff’s offers meet the requirement to trigger the cost consequences of r. 49; and 3) there is no reason to award substantial indemnity costs and legitimate defences were advanced.
[7] I will first deal with whether r. 49.10 is engaged. It is not. The plaintiff’s last offer to settle was made the evening before the trial commenced. The parties and their counsel knew months in advance that this action was scheduled to be called for trial during the sittings commencing in Central East Region on November 18, 2019. Despite that knowledge, on Friday, November 15, 2019 the plaintiff revoked its r. 49 offer of $1.15M, made on October 11, 2019, taking the risk that the trial would not be called to begin the following Monday. The plaintiff states that counsel were advised by the trial coordinator’s office that the trial would not be called in to start before November 25, 2019. The trial coordinator attempts to provide the most up-to-date information prior to the sittings but cannot control nor guarantee what settlements may occur in other cases over the weekend before the first day of the trial sittings. It was a gamble taken by the plaintiff, and not a factor that can be taken into account in deciding whether the requirements of r. 49.10 have been met. Those requirements were not met in these circumstances because the offer was not made seven days before trial.
[8] This, however, does not prevent the court from taking the written settlement offers made by the parties into account in exercising its discretion with respect to costs, as provided by r. 49.13. Even in the absence of an offer that attracts the provisions of that rule, the court must not ignore offers that demonstrate a genuine and continuing effort to settle the action, and pre-trial efforts by counsel to expedite the conduct of the trial, when deciding the appropriate order as to costs: Bifolchi v. Sherar (Litigation Administrator of) (1998), 38 O.R. (3d) 772 (C.A.), at para. 20.
[9] However, the law is clear that in these circumstances, where r. 49.10 is not engaged, enhanced costs should be awarded only on a clear finding of reprehensible conduct on the part of the party against whom the costs order is being made: Smith v. Inco Ltd., 2013 ONCA 724 at para. 61; Davies v. Clarington (Municipality), 2009 ONCA 722 at paras. 28-31.
[10] The deliberate act by the defendants of withholding a large sum of money known to be owed over the years that this litigation has been ongoing, for the purpose of leveraging a favourable settlement, comes very close to crossing the line into reprehensible conduct. Yet, in my view, it stops just short in the circumstances of this case. It is certainly not conduct to be encouraged, and may attract costs on a higher scale in other circumstances. I do not accept the plaintiff’s argument that, had the $743,894 been paid, the effect would have been settlement and a trial avoided. There is no basis to reach that conclusion. And the trial was not made longer by the non-payment; the evidence heard was almost exclusively that which related to the invoices with outstanding balances.
[11] Also, the result to the defendants of their conduct is that they must pay the penalty of an 8% interest rate. The plaintiff has submitted, as its counsel did during closing submissions, that the plaintiff has incurred high interest debt as a result of the non-payment. There is insufficient evidence to satisfy the court that the plaintiff will be left uncompensated for these financing costs at the end of the day.
[12] Accordingly, I find that the facts do not meet the test to warrant an award of costs on a substantial indemnity basis.
[13] The court has broad discretion in deciding whether to award costs, to whom, and in what amount: s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. However, that discretion is to be exercised in accordance with the provisions of an act or the Rules of Civil Procedure: 1465778 Ontario Inc. v. 1122077 Ontario Ltd. (2006), 82 O.R. (3d) 757 (C.A.); Andersen v. St. Jude Medical Inc. (2006), 264 D.L.R. (4th) 557 (Div. Ct.).
[14] Rule 57.01 of the Rules sets out the factors a court may consider when deciding costs. Despite those factors, the court’s authority under r. 57.01(1) remains discretionary: Ontario v. Rothmans Inc., 2013 ONCA 353, 115 O.R. (3d) 561, at para. 134.
[15] Infinity was completely successful in the action, and the recovery of this judgment was of obvious significance to a family-run business.
[16] Unsuccessful litigants should expect to pay similar amounts by way of costs across similar pieces of litigation involving similar conduct: Walker v. Ritchie, 2006 SCC 45, [2006] 2 S.C.R. 428, at para. 28; 1465778 Ontario Inc., at paras. 39-40; Larcade v. Ontario (Ministry of Community and Social Services) (2006), O.A.C. 247, 35 C.P.C. (6th) 55 (Div. Ct.), at para 6.
[17] Although the defendants argue that the plaintiff should only be entitled to recover $100,000 inclusive based on its own bill of costs, the fees charged by plaintiff’s counsel are well within the range of reasonableness and, expectedly, higher than the defendants’ due to the burden of proof. The plaintiff’s bill of costs attaches 20 pages of details including a description of the work and hours spent. The defendants have not pointed to which of those steps it considers unnecessary or involving an excessive expenditure of time. The plaintiff’s counsel notes that the time entries exclude time spent on discharging liens and the summary judgment motion, and that where entries were for attendances in both this action and the additional action between the parties, only half of the time entry has been claimed.
[18] I am satisfied in reviewing the bill of costs that the rates and hours spent are all within reasonable limits.
[19] A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness in the context of the particular case. The quantum awarded should reflect an amount that the court considers to be fair and reasonable, rather than any exact measure of the actual costs to the successful party: St. Jude Medical, at para. 49; Zesta Engineering Ltd. v. Cloutier (2002), 164 O.A.C. 234 (Ont. C.A.), at para. 4; Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), at para. 24.
[20] The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: St. Jude Medical, at para. 22; Boucher, at para. 38. In this regard, I note that with respect to the summary judgment motion brought by the defendants, which took only one day to argue, the defendants sought partial indemnity costs of $38,593.27. The Bill of Costs filed by the defendants indicates that the actual hourly rates for its counsel range from $600-$715 per hour. I reach the conclusion that the costs being sought by the plaintiff are within the reasonable expectation of the defendants.
[21] I also take into account the fact that the outcome at trial was better than either of the last two offers to settle made by the plaintiff. Had they been accepted by the defendants a trial would have been avoided and both parties would have been spared considerable expense.
[22] Having considered each of the factors set out in r. 57.01, and “stepping back” to consider the appropriateness of the costs overall, I find that an amount that is fair and reasonable to award to the plaintiff is $175,000 inclusive of HST. Order to issue accordingly.