Court File and Parties

COURT FILE NO.: CV-10-22598 DATE: 2020-04-07 ONTARIO SUPERIOR COURT OF JUSTICE

RE: Bazar McBean LLP, S.D. Bazar Professional Corporation, David Bazar and Monique Deguire (Plaintiffs) - and – Stephen Chisholm, John Hammond and Inch Hammond Professional Corporation (Defendants)

BEFORE: A. J. Goodman J.

COUNSEL: M. Girard, for the Plaintiffs S. Lawler, for the Defendants

DATE: In chambers

Costs Endorsement

[1] After a protracted trial, in Reasons for Judgment (citation: 2020 ONSC 593), the plaintiffs were adjudged to be successful in establishing the defendants’ liability for solicitor’s professional negligence. The plaintiffs were awarded damages of $425,987.

[2] On January 30, 2020, the parties were invited to provide their respective submissions as to costs for this litigation. I have received and reviewed the materials filed.

[3] The plaintiffs seek costs on a partial and substantial indemnity basis in the aggregate amount of $556,264.18, including disbursements, in accordance with the Bill of Costs filed.

General Principles

[4] As a general principle, costs are in the absolute discretion of the court. The fixing of costs is not simply a mechanical exercise. The overall objective is “to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant. Consideration of costs must be made in accordance with Rule 57.01 of the Rules of Civil Procedure.

[5] The Court of Appeal, in Boucher v. Public Accountants Council for the Province of Ontario, (2004) 71 O.R. (3d) 291, articulated the principles that govern costs assessments. In that case, Armstrong J.A. noted that Rule 57.01(3) provides: “When the court awards costs, it shall fix them in accordance with subrule (1) and the tariffs.” He continued: “…Subrule (1) lists a broad range of factors that the court may consider in exercising its discretion to award costs under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43.”

[6] The court must, first and foremost, be fair and reasonable when exercising its discretion to award costs. Proportionality is of fundamental import.

Positions of the Parties

[7] The plaintiffs say that they were successful in the action and were awarded damages of $425,987.00. The plaintiffs delivered a valid Offer to Settle on April 12, 2019 for $315,000 plus costs. The plaintiffs submit that their result was better than any offer presented by the parties.

[8] The plaintiffs were represented by very experienced and senior counsel. The defendants were defended by their insurer; a sophisticated litigant. The plaintiffs submit that the action not only involved the issues of solicitor’s negligence but also a trial within a trial of the complex underlying action involving the Ontario Pension Board (“OPB”). The underlying OPB action required review of commercial tenancies, distraint, fraudulent preferences, misrepresentation and Certificate of Pending (“CPL”) issues.

[9] Plaintiffs’ counsel was required to review all of the extensive productions, discoveries and proceedings in the OPB action. The defendants had to expect that plaintiffs’ counsel would be required to spend significant time reviewing the underlying action as well as addressing solicitor’s negligence, causation and damages issues.

[10] The defendants acknowledge that the plaintiffs are entitled to their partial indemnity costs up to April 12, 2019, and to their substantial indemnity costs thereafter in respect of the OPB claim. The defendants do not contest the plaintiffs' disbursements or experts' costs. The defendants do not object to the time the plaintiffs’ lawyer spent on the file. The only issue is the partial and substantial indemnity rates being claimed.

Factors to be considered in Fixing Costs

[11] Rule 57.01(1) of the Rules of Civil Procedure contains what amounts to a non-exhaustive checklist of factors that should guide the court in its reasoning when awarding costs in the exercise of its discretion under section 131 of the Courts of Justice Act. Rule 57.01(1) provides, in part:

In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider… (0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer; (0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed; (a) the amount claimed and the amount recovered in the proceeding; (c) the complexity of the proceeding; (d) the importance of the issue; (e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; (f) whether any step in the proceeding was (i) improper, vexatious or unnecessary, or (i) any other matter relevant to the question of costs.

[12] The amount of costs varies widely depending on the circumstances, including the complexity of the issue(s), of facts, and the witnesses from whom evidence is required.

Discussion

[13] As mentioned, the defendants do not dispute the plaintiffs’ claim of entitlement to partial indemnity costs to April 12, 2019 and substantial indemnity costs from that date.

[14] I agree with the plaintiffs’ characterization of the proceedings as reflecting the true state of affairs in this litigation.

[15] In support of their respective positions, counsel have provided their respective books of authorities.

[16] I am persuaded that a valid Rule 49 offer is applicable. Based on the grounds provided in support of the plaintiffs’ request, I find that this is an appropriate case for the awarding of costs on a partial indemnity basis to the date of the offer, and substantial indemnity basis thereafter.

Bill of Costs

[17] With the defendants reasonable concessions on the issue of hours expended by Mr. Girard and his staff, as well as experts’ fees and disbursements, the only issue remaining for my determination is the rate to be imposed.

[18] It is widely accepted that the appropriate quantum of costs is not determined by multiplying hours by rates. Rather, “the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.”

[19] There must be practical and reasonable limits to the amounts awarded for costs and those amounts should bear some reasonable connection to the amount that should reasonably have been contemplated. I must consider what is reasonable in the circumstances, and all the relevant factors. However, when appropriate and necessary, a court ought to analyze the Bill of Costs in order to satisfy itself as to the reasonableness of the fees and expenses submitted for consideration.

[20] The plaintiffs submit that the rates are reasonable and fairly represent the appropriate costs to be awarded in this matter. The costs are commensurate with the serious nature of the claim and reflect the high quality of the oral and written submissions that were prepared leading up to trial and presented to the court over the period of this lengthy trial.

[21] The plaintiffs say that counsel has 34 years of experience. The plaintiffs were being charged $600 per hour for counsel and $125 per hour for other staff. The plaintiffs submit that the appropriate range for partial indemnity costs in this action is between $375 to $400 per hour for senior counsel. The Court of Appeal confirmed that the substantial indemnity rate is 1.5 times the partial indemnity rate: McBean v. Brewers Retail Inc., 2008 ONCA 405.

[22] The defendants submit that the plaintiffs' costs should be reduced on account of the following: the substantial indemnity and partial indemnity rates the plaintiffs seek are excessive in light of the special arrangement between the plaintiffs and its lawyers; the costs incurred up to April 12, 2019 should be reduced because the plaintiffs succeeded only on the OPB claim, but not on all of their claims; in respect of the amounts claimed for the student and clerk after April 12, 2019, and the amount of costs sought is disproportionate to the amount recovered at trial.

[23] The Bill of Costs claim that the plaintiffs are being charged $600 per hour by Mr. Girard. However, this does not reflect the complete agreement between the plaintiffs and their lawyer. In response to questions from defence counsel, the plaintiff's lawyer advised that there were no fee accounts rendered over the time that plaintiffs' counsel acted on the matter; and it was agreed between the plaintiffs and their lawyer at the outset that the fees would be charged on an hourly basis, and that the hourly rate would reflect his experience, the result obtained, his carrying of disbursements (except for experts) and the deferred payment of fees. Significantly, it is unknown what the plaintiff would have been charged if he had lost the lawsuit. Undoubtedly, it would have been less than $600/hr.

[24] The defendants say that a significant factor is what the defendants reasonably expect to pay as costs. The reasonable expectation of the defendants was that the plaintiffs’ lawyer would charge an hourly rate, agreed upon at the outset of the law suit, to his client. $600 an hour is the figure that the plaintiff agreed to pay with the benefit of hindsight. It does not reflect the plaintiffs' expectation as it is not the 'true' hourly rate. The substantial indemnity and partial indemnity rates for Mr. Girard should be set on the basis that his 'actual' rate is $400 per hour. This reflects the defendants’ reasonable expectation, as counsel charged $350 per hour.

[25] At para. 8 of the plaintiffs' submissions they claim that they are being charged $125 per hour for each of the articling student and the "senior licensed paralegal". At tab 4 of the plaintiff's cost submissions, which sets out how the fees are calculated, the clerk's time and some of the student's time is given a substantial hourly rate of $135. [1] In any event, the defendants say that these rates are excessive and more than what the client was being charged. ($100 per hour is a reasonable rate for a student and a clerk). Thus, the defendants argue that the partial indemnity rates should be $55 per hour and the substantial indemnity rates should be capped at $83 per hour.

[26] Contrary to the defendants’ position, success was not “substantially divided”, although I accept the defendants’ submissions that the plaintiffs recovered nothing in respect of the Muldoon case, suffered no damages in the Albazi case and abandoned its claim in respect of Pacex. The defendants add that approximately 90% of the time at trial was devoted to the OPB matter. I also accept the defendants’ submissions that the other claims took up a bigger portion of the pre-trial proceedings than they did at trial, in particular, examinations for discovery.

[27] From the written submissions, the defendants’ position is that the award ought to reflect the most just and reasonable rate. The calculation of expected fees should be in an amount the plaintiff could reasonably expect to pay.

[28] The triable issues were moderately complex and involved considerable research, preparation, expert witnesses, all of which resulted in a protracted trial with volumes of materials. Mr. Girard is a very competent lawyer with many years of experience.

[29] I accept Mr. Girard’s able submissions, including references to Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2010 ONSC 4064 and Spiteri Estate v. Canada (Attorney General), 2014 ONSC 6167. I do not agree with the defendant that Mr. Girard’s rate is excessive. I decline to employ the arbitrary reduction of counsel’s hourly rate on the basis of a discount rate LawPro has negotiated with Mr. Lawlor. As such, I am not prepared to adjust the rate as the defendants suggest. I find that the rates charged for both Mr. Girard and his support staff are reasonable.

[30] Overall, it may be that the defendants maintained a rigid approach to the litigation. At the same time, I also accept that the defendants had made efforts during the course of the trial to narrow the issues, including striking the jury and settling some of the non-contentious matters.

[31] Mr. Lawlor raised two other issues in support of a reduction of counsel’s rate. I accept that the defendants enjoyed some success on the other claims being advanced, especially as they related to various pre-trial costs being reduced.

[32] However, Mr. Girard responds that the Court of Appeal’s decision in Barresi v. Jones LaSalle Real Estate Service Inc., 2019 ONCA 884, at para. 20, provides that “…it is an error of law for the trial judge to depart from the presumption in r. 49.10(1) of the Rules of Civil Procedure on the basis that success at trial was divided in this case.” Barresi is instructive and also referred to Skye v. Mathews, (1996) 87 O.A.C.381 at para. 17: “[t]here is nothing in the offer to settle rules or the relevant policy considerations, which suggests that eligible offers should be viewed on an issue by issue basis”. The Court of Appeal was critical about the trial judge departing from the presumption on the basis that success was divided, Barresi had acted unreasonably by his conduct throughout the litigation.

[33] It is trite law that costs awards are not intended to be full indemnity for the actual costs incurred by the successful party. The question of what constituted an appropriate hourly rate for costs is to be determined by reference to the criteria in Rule 57.01 of the Rules of Civil Procedure and not by the terms of any retainer.

[34] I note that in Barresi, there is little discussion about the principle of proportionality. Indeed, in assessing costs, I must acknowledge the amounts claimed and the amount recovered in the proceeding, as well as the conduct of the overall litigation. The reasonable expectations of the unsuccessful defendant must also be taken into account: Mawji v. Axa Insurance Co., 2010 ONSC 2146, at paras. 36 - 40.

[35] Most significantly, my consideration of the proportionality principle in assessing the reasonable costs in this case warrants an overall decrease in respect of the plaintiffs’ counsel’s legal rate. In the exercise of my discretion, I impose a 25% reduction. [2]

[36] Thus, I have reduced the overall costs award for Mr. Girard and his staff accordingly. In sum, having reviewed the Bill of Costs filed, accepting the partial indemnity costs to April 12, 2019 of $136,123 and substantial indemnity costs of $256,600; the total is $392,723. As referenced above, when I deduct 25% of this amount, the adjusted legal costs are $294,542.

Conclusion

[37] The costs award should be fair, proportionate and tailored to the circumstances of the case.

[38] The disbursements expended by plaintiffs’ counsel and those paid to the expert witnesses are not in dispute.

[39] In the exercise of my discretion under Rule 57.01 of the Rules of Civil Procedure and the relevant authorities, it is ordered that the defendants pay costs in favour of the plaintiffs on a partial indemnity basis and substantial indemnity basis fixed at $294,542 plus HST for legal fees, $37,298 for disbursements plus applicable HST, and $69,163 for expert witness’ disbursements, all payable within 30 days.

“Justice A.J. Goodman”

Justice A. J. Goodman Date: April 7, 2020

[1] This was later corrected on consent to reflect $125 per hour at the substantial indemnity rate, an overall reduction of $880.00. [2] In addressing reasonable expectations and proportionality, I decline to go as high as a 33% reduction of fees as urged by counsel.