Court File and Parties

Oshawa Court File No.: CV-17-1532-00SR Date: 2020-03-04 Superior Court of Justice - Ontario

Re: Royal Bank of Canada, Respondent/Plaintiff And: HCB Thickson Ltd., Richard H. Slaughter and Frank Snape, Moving Parties/Defendants

Before: The Honourable J. Dawe

Counsel: J. Davies, for the Respondent/Plaintiff P. Mack, for the Moving Parties/Defendants

Heard: In Writing

Endorsement

[1] On December 6, 2019 I released my decision [1] dismissing the Defendants’ motion to set aside a default judgment, and invited counsel to provide me with written submissions on costs.

[2] I subsequently received costs submissions from the Plaintiff/Respondent Royal Bank of Canada (“RBC”) – the successful party on the motion – and from the Defendant Frank Snape, but no costs submissions from the other two Defendants, HCB Thickson Ltd. (“HCB”) and Richard H. Slaughter.

[3] This case arises out of a loan RBC made to HCB to enable the company to set up a franchise hamburger restaurant in Whitby. Mr. Slaughter, who is HCB’s sole officer and director, agreed to guarantee 25% of the loan, as did his colleague Mr. Snape. The restaurant was not a success, and in April 2017 RBC demanded payment. The original loan had been for over $200,000, but at the time RBC called in the loan the balance stood at slightly less than $66,000. The amount for which the guarantors were liable was slightly less than $55,000.

[4] RBC seeks its costs on a substantial indemnity basis, noting that it was a term of the loan guarantees that Mr. Slaughter and Mr. Snape would indemnify RBC for its legal expenses. RBC has provided a Bill of Costs in which it seeks fees of $34,125 on a substantial indemnity basis and $22,425 on a partial indemnity basis. This reflects 97.5 hours of work by RBC’s counsel. With disbursements and taxes included, RBC’s total Bill of Costs comes to $41,972.28 on a substantial indemnity basis and $27,701.71 on a partial indemnity basis.

[5] Mr. Snape argues that such a costs award would be disproportionate having regard to the relatively modest amount of money at stake in the underlying action, arguing that RBC had no incentive to minimize its legal fees because the loan at issue was guaranteed by the federal government. In response, RBC points out that in order to claim compensation under the Canada Small Business Financing Program, RBC was obliged to first take steps to maximize recovery from the lender and the guarantors.

[6] In Royal & Sun Alliance v. Euro Landscape, 2019 ONSC 6045, Ricchetti J. explained (at paras. 6-7):

Generally, a court will enforce contractual terms for costs. In Bosse v. Mastercraft, [1995] O.J. No. 884 (C.A.), para. 66 the Court of Appeal stated:

As a general proposition, where there is a contractual right to costs, the court will exercise its discretion so as to reflect that right. However, the agreement of the parties cannot exclude the court’s discretion; it is open to the court to exercise its discretion contrary to the agreement. The court may refuse to enforce the contractual right where there is good reason for so doing ‑ where, for instance, the successful mortgagee has engaged in inequitable conduct or where the case presents special circumstances which render the imposition of solicitor and client costs unfair or unduly onerous in the particular circumstances.

Even when the court determines to enforce a contractual term for costs, it remains with the court to ensure that the full indemnity costs are fair and reasonable. In Romspen Investment Corp. v. 6711162 Canada Inc. (2014), 19 C.B.R. (6th) 131, at para. 3, Brown J. (as he then was) stated:

While Romspen is entitled to full indemnity costs by virtue of the mortgage, a contractual right to the costs of enforcement proceedings is subject to the court’s over-riding duty to ensure that costs awarded are fair and reasonable. Put another way, when a party, relying on a contractual term, seeks an award of full indemnity costs, the party must demonstrate that the costs sought are reasonable full indemnity costs.

[7] In this case, I am satisfied that RBC is prima facie entitled to claim its substantial indemnity costs as provided for in the loan guarantee agreements. I agree with RBC that “[a]s experienced business persons … the Defendants should have been aware that should their motion fail, there would be significant costs consequences”.

[8] At the same time, I am not persuaded that the specific costs figure RBC seeks is reasonable, for three main reasons. First, it is striking that all of the 97.5 hours claimed reflects work performed personally by Mr. Davies, who is a lawyer with 25 years’ experience. Although his hourly billing rate is relatively modest for a lawyer of his seniority, it seems to me that much of this work – including matters such as preparing a motion record, drafting affidavits, notices and orders, preparing witnesses for cross-examination, and preparing a book of authorities – reflects tasks one would ordinarily expect to see performed by more junior counsel.

[9] Second, some of counsel’s time dockets seems excessive on their face. For instance, I have difficulty accepting that it actually took two hours to prepare the Bill of Costs itself, given that it consists only of routine docketing information.

[10] Finally, I am not satisfied that the time spent by RBC’s counsel to respond to the Defendants’ motion was entirely justified in light of the lack of merit of the Defendants’ position. Moreover, RBC made a number of responding arguments that I rejected as not well founded in law, even though I ultimately agreed that the motion should be dismissed.

[11] Taking all of these factors into account, I am exercising my discretion and reducing the costs award to $22,750 in fees, plus $3,411.03 in disbursements. This comes to a total of $29,561.96 inclusive of HST, which will be payable jointly and severally by the Defendants.

The Honourable J. Dawe Date: March 4, 2020

[1] 2019 ONSC 7084.