COURT FILE NO.: CV-17-4SR DATE: 2020/04/03 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

LOUIS BALOGH and SANDRA AILEEN BALOGH Plaintiffs – and – R.C. YANTHA ELECTRIC LTD. And RODNEY YANTHA Defendants/Plaintiff by Counterclaim

AND BETWEEN

R.C. YANTHA ELECTRIC LTD. Plaintiff by Counterclaim -and- LOUIS BALOGH and SANDRA AILEEN BALOGH Defendants by Counterclaim

Counsel: Robert A. Leck, for Plaintiffs and Defendants by Counterclaim James L. MacGillivray, for the Defendants and R.C. Yantha Electric Ltd., Plaintiff by Counterclaim

HEARD: In writing

COSTS ENDORSEMENT

H. J. Williams J.

Background

[1] The plaintiffs were successful in their action against the defendants. After a four-day trial, I found that a property owned by the plaintiffs was not subject to a prescriptive easement or right of way in favour of an adjacent property owned by the defendant R. C. Yantha Electric Ltd. I also found that a track or path on the plaintiffs’ property was not an access road under Ontario’s Road Access Act, R.S.O. 1990, c. R.34.

[2] After Yantha Electric purchased its property in 2014, without the plaintiffs’ permission, the defendant Rodney Yantha took down part of the plaintiffs’ fence several times. Mr. Yantha also cut back some vegetation and tree branches on the plaintiffs’ land so that Mr. Yantha could drive across more easily and without scratching his truck.

[3] I found that the defendants had no right to access or cross the plaintiffs’ property.

The plaintiffs’ claim for costs

[4] The plaintiffs are now asking for costs on a substantial indemnity scale in the amount of $102,995.94, inclusive of fees of $85,327.50, HST on fees of $11,092.57, disbursements of $5,920.60 and HST on disbursements of $655.27.

[5] The plaintiffs argue that the defendants’ conduct left the plaintiffs no option but to start a legal action. The plaintiffs claim substantial indemnity costs for two reasons: 1) the defendants’ failure to accept an offer to cross the plaintiffs’ property in a different location; and 2) Mr. Yantha’s conduct, which the plaintiffs describe as “brazen.”

The defendants’ position

[6] The defendants argue that any costs should be awarded against the defendant corporation and not against Mr. Yantha personally, because the focus of the trial was on the defendant corporation’s counterclaim, which alleged that, as the owner of the adjacent property, it had the right to cross the plaintiffs’ property, either because of a right of way or an access road.

[7] The defendants also argue that there is no basis for costs to be awarded on other than a partial indemnity scale and that the hours claimed by the plaintiffs are excessive.

Analysis

Factors

[8] The factors to be considered when fixing costs are set out in Rule 57 of the Rules of Civil Procedure and include, in addition to the result and any offers to settle, the principle of indemnity and the amount of costs an unsuccessful party could reasonably expect to pay. The factors also include the amount claimed and recovered, the complexity of the proceeding and the importance of the issues. The court may also consider the conduct of the parties, whether any step in the proceeding was inappropriate, whether appropriate admissions were made and any other matter relevant to the question of costs.

Is the successful defendant entitled to costs?

[9] The parties agree that the plaintiffs are entitled to costs. The issues are the scale of costs and the amount.

What is the appropriate scale of costs?

[10] The defendants argue that there is no basis for an award of substantial indemnity costs. They argue that costs on an elevated scale are appropriate in only two circumstances: (1) if an offer triggers the costs consequences of Rule 49; or (2) if a party’s conduct should be sanctioned. (Davies v. Clarington (Municipality), 2009 ONCA 722 at para. 28).

Did the plaintiffs’ offer trigger Rule 49?

[11] The defendants argue that the plaintiffs’ November 5, 2015 offer should not trigger Rule 49. They say the offer was only a proposal of an alternative route across the plaintiffs’ property with some associated conditions. They say that the parties were never able to agree on a route.

[12] I agree with the defendants. Although the plaintiffs offered the defendants something and the defendants went to trial and ended up with nothing, the defendants cannot be penalized under subrule 49.10(1) for not having accepted the plaintiffs’ November 5, 2015 offer. The plaintiffs’ offer would have allowed the defendants to cross the plaintiffs’ property but it provided that further terms would need to be worked out “to the absolute satisfaction” of the plaintiffs. The November 5, 2015 offer was an olive branch and an invitation to further discussion but it was not an offer capable of acceptance.

[13] Further, the November 5, 2015 pre-dated the commencement of the plaintiffs’ action and does not qualify as a Rule 49 offer for that reason. (Scanlon v. Standish, 2002 ONCA 20549, 57 O.R. (3d) 767).

Are substantial indemnity costs warranted because of the defendants’ conduct?

[14] The defendants argue that conduct that would justify costs on a scale other than the default partial indemnity scale must be “reprehensible, scandalous or outrageous.” (Young v. Young, 1993 SCC 34, [1993] 4 SCR 3, as cited in Davies, supra, at para. 29). The defendants argue that their behaviour does not qualify.

[15] Some of my findings relevant to the defendants’ conduct are summarized below:

• The plaintiffs had purchased their property in 2005; they paid about $163,000.00 for 100 acres. They thought they had bought a quiet waterfront lot where they could build a home and enjoy their retirement.
• The plaintiffs were accommodating neighbours. In 2008, Mr. Yantha’s father, who owned the lot to the west of the plaintiffs’ lot, insisted that the plaintiffs had put up a fence on his side of their shared property line. Although the plaintiffs’ surveyor disagreed, the plaintiffs moved their fence eight feet to the east. Dr. Balogh said that peace with his neighbour had been more important to him than the strip of property.
• In 2014, Yantha Electric purchased its property, which was on the east side of the plaintiff’s property. Yantha Electric paid only $10,000.00 for a 22-acre waterfront property the vendor described as “lovely.” When Yantha Electric purchased the property, it received no written assurances from the vendor about road access to the property.
• Mr. Yantha’s plan was to build three cottages on the Yantha Electric property, one for each of his three children.
• Yantha Electric did not communicate with the plaintiffs before it purchased its property, even though Mr. Yantha and his father both owned lots on the same concession and, as I mentioned, Mr. Yantha’s father had previously dealt with the plaintiffs when Dr. Balogh erected a fence between their lots in 2008.
• After the Yantha Electric purchase, Mr. Yantha sought out the plaintiffs and asked them to sign an acknowledgment that he had the right to cross their property by using a track or path that cut through the plaintiffs’ property, roughly at the mid-point of its north-south axis. The plaintiffs refused to sign the acknowledgment.
• Knowing that the plaintiffs did not agree that the defendants had the right to cross their property, Mr. Yantha took down the portion of the fence Dr. Balogh had built six years earlier because it crossed and blocked the path Mr. Yantha maintained he had the right to travel; this included pulling out a steel post Dr. Balogh had installed in the middle of the path. Dr. Balogh repaired the fence three times after Mr. Yantha repeatedly took it down but then gave up.
• Mr. Yantha cut back branches and cleared vegetation on the plaintiffs’ property to facilitate his access to the property he had purchased.
• The plaintiffs offered to give the defendants a right of way over their property in a different location. Mr. Yantha rejected the offer, saying that the alternative route was through a “bottomless swamp” and that it would have been prohibitively expensive for him to build a road there. Mr. Yantha complained that the plaintiffs’ offer was not “neighbourly.”
• Mr. Yantha, his father and the vendor of the property all testified that they had accessed the Yantha Electric property for many years by using the route across the plaintiffs’ property, both before and after the plaintiffs purchased their property in 2005. For several reasons, I did not accept the evidence that any of them had used this route in the interval between the Baloghs’ purchase in 2005 and the Yantha Electric purchase in 2014. For example, I found that the fence Dr. Balogh built in 2008 that blocked the route was not taken down until 2015. I also found that if Mr. Yantha (Jr.) had been using the route regularly throughout the plaintiffs’ tenure, he would not have waited until 2015 to cut back low-hanging branches on the plaintiffs’ property so that pine cones would not scratch his truck.

[16] I agree with the plaintiffs’ argument that the defendants took a calculated risk; Yantha Electric purchased an attractive piece of waterfront property for a bargain basement price without any guarantee of road access. In order to access the property, Mr. Yantha then trespassed on and made alterations to the plaintiffs’ land, even after the plaintiffs objected. Regardless of whether the defendants genuinely believed they had the right to cross the plaintiffs’ land or simply expected the plaintiffs to cede rights to their property, as they had when Mr. Yantha Sr. demanded that they move their fence in 2008, I consider the three adjectives in paragraph 14 to accurately describe the defendants’ conduct.

[17] Knowing that the plaintiffs did not agree that there was a right of way or access road on their property, the defendants should not have resorted to the type of unilateral and aggressive action the Road Access Act is meant to prevent, by dismantling the plaintiffs’ fence, cutting back the plaintiffs’ trees and driving across the plaintiffs’ property without permission.

[18] I consider the defendants’ selfish indifference to the plaintiffs’ views, feelings and property rights to justify a strong message of disapproval from the court in the form of a costs order on a substantial indemnity scale.

[19] This substantial indemnity costs award is based on the conduct of the defendants and is in no way intended to reflect on the lawyer who represented them at the trial.

What is the appropriate amount of costs?

[20] I referred in paragraph 8 to some of the factors to be considered when costs are being awarded. In addition to the result in the proceeding, I consider the most relevant factors in this case to be the frequently competing principles of “indemnity” in subrule 57.01(1)(0.a) and “the amount of costs that an unsuccessful party could reasonably expect to pay” in subrule 57.01(1)(0.b).

[21] The defendants argue that the fees sought by the plaintiffs are excessive, particularly given that the action was started under Rule 76, the “simplified procedure” rule, there were no examinations for discovery and that the trial lasted only four days. The defendants also argue that they should not be responsible for any fees incurred before the statement of claim was prepared.

[22] The defendants do not appear to take issue with the plaintiffs’ lawyer’s hourly rate of $350.00; they argue that an appropriate rate, on a partial indemnity basis, would be $227.50, which is 65% of $350.00.

[23] The defendants argue that fees of $21,200.00 would be appropriate, approximately 25% of the fees sought by the plaintiffs.

[24] I will begin by addressing the defendants’ argument that time spent before the statement of claim was prepared should not be included in a costs award. Although the defendants did not elaborate, I infer that their argument is that costs should be awarded only for the steps in a proceeding that are authorized by the Rules of Civil Procedure (see Tariff A, Part I- Fees) and that any steps taken before the originating process is prepared are not authorized by the Rules.

[25] There is case law in support of the argument that while costs are a discretionary matter for a judge, steps not authorized by the rules should not be included in a costs order. Discussions with clients and correspondence not directly germane to a particular step in an action are offered as examples of tasks which should not be included. (Royal Laser Corp. v. Rivas, 2012 ONSC 2408 at para. 13; Saltsov v. Rolnick, [2010] O.J. No. 5606 (Ont. Div. Ct.)).

[26] In his reply submissions, the plaintiffs’ lawyer noted that he had spent a significant amount of time working on arranging the alternative route to the Yantha Electric property that was offered to the defendants. This offer was made in late November, 2015, well before the statement of claim was issued in May 3, 2017.

[27] Although the November, 2015 offer was not a Rule 49 offer for the reasons I have already set out, I consider it to have been an offer I was nonetheless entitled to consider under subrule 49.13, which allows a court to take into account any offer to settle made in writing, the date of the offer and the terms of the offer. Consequently, I consider the time spent by the plaintiffs’ lawyer relating to the November, 2015 offer to relate to a step in a proceeding authorized by the rules.

[28] Further, s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C. 43, which provides that costs are in the discretion of the court, refers not only to costs of a proceeding or a step in a proceeding but also to costs “incidental to” a proceeding or a step in a proceeding. I consider costs incurred by the plaintiffs prior to preparation of the statement of claim related to investigation and research to qualify as costs of or incidental to the statement of claim.

[29] I conclude that it would be appropriate to reduce the time spent by the plaintiffs’ lawyer in 2015, 2016 and early 2017, prior to the drafting of the statement of claim, somewhat, but not entirely.

[30] I turn now to the defendants’ argument that the time spent by the plaintiffs’ lawyer was excessive for an action under the simplified procedure. The defendants, by not delivering their own costs outline, have watered down their argument to this effect, by depriving me of any points of comparison.

[31] In response to this argument, the plaintiffs’ counsel argued that he had been required to prepare for trial twice because a witness the defendants had intended to call was unavailable for the first trial date and the trial was adjourned. I accept that this was the case.

[32] Unfortunately, the dockets filed by the plaintiffs’ counsel are so sorely lacking in detail that it is not possible for me to identify the nature of the tasks he was performing on behalf of the plaintiffs at any given time. Dozens of docket entries read only “work on file”, “telephone call from client” or “email to client.” These task descriptions are not very illuminating.

[33] To a certain extent, I will consider the plaintiffs’ boilerplate dockets and the defendants’ failure to disclose the number of hours their lawyer worked to cancel each other out.

[34] It is generally accepted that the costs award should reflect more what the court views as a fair and reasonable amount for the unsuccessful party to pay than any exact measure of the actual costs to the successful litigant. (Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 ONCA 14579, 71 O.R. (3d) 291 at para. 24, citing Zesta Engineering Ltd. v. Cloutier (2002), 2002 ONCA 45084, 164 O.A.C. 234 at para. 4).

[35] In this case, I consider fees of $70,000.00 to reflect a fair and reasonable amount for the defendants to pay. This amount also equals, approximately, 198 hours (representing a 50 per cent reduction of the hours docketed by the plaintiffs’ lawyer before the statement of claim was drafted) multiplied by $341.25 (which is 1.5 times the $227.50 partial indemnity rate the defendants appear to accept [1]) plus $2,412.50 (the fees incurred by the plaintiffs’ law clerk.)

[36] I agree with the defendants that they should not be required to pay a $2,120.00 surveyor’s invoice. Neither the date nor any particulars of this expense were provided by the plaintiffs, even after the defendants raised the appropriateness of this disbursement in their written submissions and the plaintiff had an opportunity to reply.

[37] The plaintiffs, however, shall have taxable disbursements of $2,920.60 plus HST of $379.68 plus their non-taxable disbursements of $880.00.

Conclusion

[38] The defendants shall pay the plaintiffs $70,000.00 in fees plus HST on fees of $9,100.00. The defendants shall also pay the plaintiffs $3,800.60 in disbursements plus HST of $379.68.

[39] I reject the defendants’ argument that the costs award should be against Yantha Electric only and not against Mr. Yantha. The plaintiffs’ action was successful against both defendants.

Released: April 3, 2020

COURT FILE NO.: CV-17-4SR DATE: 2020/04/03 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: LOUIS BALOGH and SANDRA AILEEN BALOGH Plaintiffs – and – R.C. YANTHA ELECTRIC LTD. and RODNEY YANTHA Defendants/Plaintiff by Counterclaim AND BETWEEN R.C. YANTHA ELECTRIC LTD Defendants/Plaintiff by Counterclaim -and- LOUIS BALOGH and SANDRA AILEEN BALOGH Defendants by Counterclaim COSTS ENDORSEMENT H. J. Williams J.

Released: April 3, 2020

[1] Rule 1.03(1) defines “substantial indemnity” as 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A.