Court File and Parties

COURT FILE NO.: CV-18-26045 COURT FILE NO.: CV-19-27466 DATE: 20200422 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Calibur Tool and Mold Inc., Applicant (Responding Party on CV-19-27466) AND: Ecotemp Manufacturing Inc., Lynn Johner, Jerry Arneaud, Ecotemp International Inc., and 2095212 Ontario Inc., Respondents (Moving Parties on CV-19-27466)

BEFORE: Justice George W. King

COUNSEL: Owen D. Thomas, Counsel, for the Applicant (Responding Party) Samantha Schreiber, Counsel, for the Respondents (Moving Parties)

HEARD: May 1, 2019 and written submissions

COSTS ENDORSEMENT

[1] This costs ruling arises out of litigation between Calibur Tool and Mold Inc. (“Calibur”) and Ecotemp Manufacturing Inc. (“Ecotemp”) (and related Ecotemp parties) pertaining to a dispute regarding a commercial lease (the “lease”).

[2] At issue are costs relating to an application made by Calibur with respect to the lease (CV-18-26045) (that included an injunction application) and subsequent litigation commenced by Ecotemp also relating to the interpretation of the lease (CV-19-27466).

Background

a) Calibur

[3] Calibur carried on a mold manufacturing business in the City of Windsor. It operated in a leased portion of a building owned by Ecotemp located at 8400 Twin Oaks Drive (“Twin Oaks property”).

b) Ecotemp

[4] Ecotemp was owned by Lynn Johner (“Johner”). Ms. Johner resided in Alberta.

[5] The parent company, Ecotemp International Inc. (“Eco International”), and 2095212 Ontario Inc. (“209”) eventually were added as respondents in these proceedings.

[6] 209 was a legal successor to Ecotemp and a subsidiary of Eco International.

[7] Unless the circumstances require otherwise, I will refer to all of the respondents collectively as “Ecotemp” or the “Ecotemp defendants”.

[8] At all material times, Jerry Arneaud (“Arneaud”) was employed by, and acting on behalf of, Ecotemp. As all of his actions were on behalf of his employer who would be vicariously liable for his actions, I have determined that Arneaud is not a party personally affected by this costs ruling.

[9] In addition to owning the Twin Oaks property, Ecotemp was in the business of manufacturing and distributing various heating systems and other products. Ecotemp carried out this business in a portion of the Twin Oaks property it utilized for this commercial operation. There was a shared shipping and receiving door.

c) The Twin Oaks Premises Leased to Calibur

[10] Calibur and Ecotemp entered into a lease for a portion of the Twin Oaks property for a five-year period, effective on March 1, 2016.

[11] The basic rent was set at $2,488.21 monthly for the first year. The lease provided the basic rent would increase to $2,869.75 monthly in years two and three. It would eventually increase to $3,458.33 for years four and five.

[12] In addition to basic rent, the lease provided for Calibur to pay a proportionate share of the electrical utilities. Specifically, the utility cost for the first year was to be based on an estimate and the final calculation was to be reconciled annually the following year and adjusted according to usage. This will be referred to as the “additional rent”.

d) The Utilities Dispute Regarding Additional Rent

[13] After completion of the first year of the lease, a dispute arose between the parties with respect to the quantification of the additional rent owed by Calibur.

[14] From May 2017 onwards, a dialogue between the parties with respect to this dispute went without a resolution.

e) The Interim Interlocutory Injunction

[15] That dispute percolated until February 2, 2018 when Calibur sought an interim interlocutory injunction on an ex parte basis. Calibur provided the court with affidavit evidence that Ecotemp had situated vehicles to block the common shipping and receiving door at the Twin Oaks property. This prevented Calibur from shipping finished product or receiving materials. This was the only point of ingress/egress for vehicles at the Twin Oaks property.

[16] There was other evidence that, upon discovery, Calibur had towed the vehicles from the shipping entrance, but the vehicles were returned to block the entrance. The court also received evidence that no local towing company would attend to remove the vehicles given a threat of becoming legally embroiled in this situation between the parties by Ecotemp.

[17] Based on the information provided to the court on February 2, 2018, I granted an interim interlocutory injunction against Ecotemp, Johner and Arneaud. The order prohibited anyone from blocking, impeding, instructing or otherwise disrupting Calibur from open use and enjoyment of the shipping and receiving door of the Twin Oaks property.

[18] As the moving party where there was a sum in dispute, I ordered Calibur to pay the sum of $21,535.86 into court by February 7, 2018, pursuant to Rule 45.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[19] The injunction was in effect until the matter was returnable on February 13, 2018 and Calibur was ordered to provide notice of the proceedings and to serve the documents on the named Ecotemp respondents.

f) Subsequent Litigation Events

i) Injunctive Relief

[20] On February 13, 2018, I extended the interim interlocutory injunction order dated February 2, 2018, on consent. Eco International and 209 were added as parties.

[21] On March 13, 2018, Carey J. extended the injunction on the consent of the parties to July 16, 2018. He also ordered examinations of the respondent Johner be completed by June 18, 2018. Costs were reserved to the motion judge.

[22] The injunction was again extended on consent until further order of the court by Bondy J. on July 16, 2018 with the issue of costs remaining reserved to the judge hearing the application scheduled for October 1, 2018.

ii) The Utilities Dispute Regarding Additional Rent

[23] Both parties pursued independent procedures seeking a judicial determination that their respective interpretations of the relevant language in the lease regarding the calculation of the additional rent was correct.

[24] Calibur commenced action CV-18-26045 contemporaneously with their motion for continuation of the interim/interlocutory injunction initially granted on February 2, 2018. The claim sought declaratory relief, inter alia, in relation to the method of calculating the utilities to be paid by Calibur.

[25] Ecotemp, 209, Eco International and Johner commenced their own application on February 22, 2019 (CV-19-27466), seeking a remedy that Calibur pay the additional rent it calculated as appropriate. More specifically, Ecotemp sought an order for Calibur to pay the adjustments of the additional rent based on its interpretation of the lease agreement.

[26] There was a flurry of litigation activity in 2018 related to this issue. Eventually, Ecotemp also sought to have its application heard at the same time, or directly before or after, the Calibur action. Those matters came back before the court on March 11, 2019.

iii) Consent Order – March 11, 2019

[27] On March 11, 2019, the parties appeared before me and presented the court with a draft consent order effectively resolving all substantive issues pertaining to the quantification of the additional rent both retroactively and prospectively, and the injunction issues. The order provided, inter alia, as follows:

1. The injunction continued through the term of the lease.
2. Notwithstanding the injunction, the respondents maintained the right to pursue “any right of action, or other right” if they assert a breach of the lease.
3. A methodology for adjusting and reconciling annually utility usage for amounts in excess of $15,981.80 as billed by the provider, Enwin, or as prorated monthly.
4. Calibur was required to pay $18,175.50 to Ecotemp. This amount represented the balance in excess of the $16,981.80 threshold for 2018.
5. Ecotemp was obligated to account for 44% of their proportionate share of the $36,141.48 “yearly additional rent” paid by Calibur.
6. Within 30 days of receipt of the adjusted numbers, Calibur was to pay Ecotemp all amounts in excess of $16,981.80 per year.
7. The parties jointly consented to payment out of court pursuant to Rule 72.03(4) of the Rules of Civil Procedure the sum of $31,967.39 to Ecotemp’s counsel, in trust.

[28] The parties were unable to resolve the issue of costs and attended before the court on May 1, 2019 to address those issues. Both parties are seeking to be awarded costs with respect to this matter. Both parties submitted cost outlines. Their respective positions are described below.

Calibur

[29] Calibur seeks costs on a partial indemnity rate for the entirety of the proceedings as follows:

Fees and HST $66,076.75 Total Disbursements (with HST) 2,019.56 TOTAL $68,096.31

[30] Those amounts are based on Mr. O. Thomas spending 231.5 hours and Mr. D. Laing working 2.4 hours. The partial indemnity rate for both counsel is $250 per hour.

[31] However, Calibur also submits that they should be entitled to the fees of Mr. O. Thomas at a substantial indemnity rate of $310 per hour for 133.2 hours spent commencing on December 5, 2018. This would add $7,992, plus applicable HST, to the total amount of recoverable costs.

[32] Calibur takes the position that they were required to bring the action to seek a resolution of the additional rent issue and had to take the necessary steps to obtain the injunction given the conduct of the Ecotemp defendants in blocking the shipping door.

Ecotemp

[33] Ecotemp responds by asserting the application filed by Calibur was both unnecessary and, in the end, achieved nothing. As well, Ecotemp submits the injunction was unnecessary. To demonstrate that, counsel references that Ecotemp consented to the interim injunction.

[34] Ecotemp seeks fees broken down as follows:

i) $20,628.15 and $2,689.50 in disbursements on the application; ii) $7,282.85 in fees and $4,527.24 on disbursements on the injunction application; and iii) $1,209.10 and $676.65 in disbursements on the application to have the leasehold dispute matters heard together.

All of the above amounts are inclusive of the applicable HST.

[35] Two counsel worked on this matter for the Ecotemp defendants. Ms. Schreiber performed all of the work at an actual rate of $350. She was called to the bar in 2013. Ms. Horvat was called to the bar in 2002 and her actual rate is $520.

General Principles and Jurisprudence

[36] Generally, a successful party has a reasonable expectation that a costs award will be made in its favour.

[37] Section 131(1) of the Courts of Justice Act, as amended, provides:

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.

[38] As well, r. 57.01(1) of the Rules of Civil Procedure outlines the myriad of factors which may be considered by the court when making a costs determination, as follows:

In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(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;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(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

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs.

[39] The over-arching principle for determining costs was set out in Boucher v. Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (C.A.). The court stated that determining costs is not simply a “mechanical” exercise. Factors such as the experience of counsel, rates charged and hours spent are considerations. However, the overriding principle is “reasonableness”, with a view to balancing “compensation of the successful party” with the “goal of fostering access to justice” as applied to the factual matrix of the particular case.

[40] In Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, the Court of Appeal for Ontario relied on the Divisional Court’s summary in Andersen v. St. Jude Medical Inc. (2006), D.L.R. (4th) 557 (Ont. Div. Ct.), of the principles that must be considered when awarding costs. At para. 51 of Davies, the Court of Appeal reiterated:

1. The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in r. 57.01(1): Boucher, Moon [v. Sher (2004) , 246 D.L.R. (4th) 440 (Ont. C.A.)], and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), , 75 O.R. (3d) 638 (C.A.).
2. A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case: Boucher. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 119 A.C.W.S. (3d) 341 (Ont. C.A.), at para. 4.
3. The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: rule 57.01(1)(0.b).
4. The court should seek to avoid inconsistency with comparable awards in other cases. “Like cases, [if they can be found], should conclude with like substantive results”: Murano v. Bank of Montreal (1998), 41 O.R. (3d) 222 (C.A.), at p. 249.
5. The court should seek to balance the indemnity principle with the fundamental objective of access to justice: Boucher.

[41] Epstein J.A. then went on at para. 52 to restate the settled proposition:

[T]he overriding principles is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in a particular proceeding at para. 37, where Armstrong J.A. said “[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice. [Emphasis added.]

[42] A successful party does not have a right to costs but it does have a reasonable expectation that a costs award will be made in its favour. Normally, costs follow the event and are awarded on a partial indemnity basis payable forthwith (within 30 days). Discretion can be exercised in exceptional circumstances to depart from any of those “norms”: see DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601, at para. 5; and Yelda v. Vu, 2013 ONSC 5903, at para. 11, leave to appeal refused, 2014 ONCA 353.

[43] The quantum awarded should reflect an amount that the court considers to be fair and reasonable within the factual matrix of the particular case rather than a precise measure of the actual costs of the successful litigant: see Zesta Engineering Ltd. v. Cloutier, [2002] O.J. No. 4495 (C.A.) at para. 4.

[44] I have taken all of these factors and principles into consideration in determining the quantum of costs in this matter.

Costs

a) Injunction Application

Analysis

[45] For the reasons that follow, I am awarding Calibur costs on a partial indemnity basis, but only for the injunction process.

[46] I start the analysis by indicating that I have treated the injunction process as discrete from the litigation on the merits of the substance of the lease dispute regarding the calculation of the additional rent.

[47] While the injunction application arose out of that broader lease dispute, the injunction process itself was independent of the broader issue. That is, the injunction was granted solely and exclusively to permit Calibur to re-establish unfettered ingress and egress to the leased premises. The injunction application was not, per se, determinative of any of the issue with respect to the lease dispute. That is, the injunction application was the result of the improper actions of Ecotemp regarding access to the Twin Oaks property. While the actions of Ecotemp may have been triggered by frustration arising out of the leasehold dispute, the injunction application was not dispositive of any of the lease issues.

[48] I reject the suggestion of Ecotemp that the actions of Calibur with respect to the leasehold dispute should effectively disentitle Calibur to costs pertaining to the injunction. The injunction application was a necessary step taken to prevent Calibur from suffering irreparable harm as access to their leased premises was being denied by the landlord – Ecotemp.

[49] I reject the representation by Ecotemp that the injunction application was unnecessary. On the material provided to the court on February 2, 2018, it was clear that Ecotemp had attempted to cause economic harm to Calibur by blocking access to the leased premises. This was reinforced and exacerbated by the return of the vehicles to the shipping and receiving door after Calibur had them towed.

[50] I reject the suggestion in the affidavit of Ms. Johner that while her vehicle was parked “just inside the shipping and receiving door” she “accidentally took the keys with her to Edmonton”. The vehicles were towed and then replaced. The suggestion that the whole incident was a misunderstanding worsened by the accidental removal of the keys to Alberta is, at best, circumspect.

[51] In these circumstances, the ex parte application was anything but “unnecessary”. The ability of Calibur to ship product and receive materials had been impeded – twice.

[52] The submission of Ecotemp that the injunction was unnecessary because Ecotemp consented to the injunction is, at best, baffling. There was nothing consensual about the vehicles impeding the property. The process was jump started by those actions. The consent to the continuation granted later does not support a determination that the injunction application was unnecessary as it is equally logical to conclude that Ecotemp consented to the continuation of the injunction because it was well aware it had misconducted itself and did not want to exacerbate the situation. I give this submission no weight.

[53] Even if the lease interpretation had proceeded to trial and Calibur was unsuccessful, I would still be awarding them costs relating to the injunction. That award of costs may have been an offset against costs awarded to Ecotemp on the lease interpretation issue but, nonetheless, is appropriate in the circumstances with respect to the injunction.

[54] In respect of the rest of the injunction application, I start with the general proposition that costs are generally awarded to the successful party.

[55] Costs submissions were filed by Calibur on July 5, 2018, pertaining almost exclusively to the injunction application and continuation-related attendances. At that time, Calibur submitted fees and HST totalling $16,921.75. There were disbursements of $1,107.93. All hours were based on a partial indemnity rate of $250. They totalled 57.5 hours for Mr. O. Thomas who was called in 1997. Mr. D. Laing (1985) spent 2.4 hours. From the schedule of attendances provided, it would appear that approximately 45 of those hours related to the injunction application and subsequent injunction related attendances.

[56] I have considered that the injunction application was of average complexity. However, given that Calibur had been denied vehicle access to the leased facilities, the matter was of great importance to the company.

[57] Accordingly, costs in respect of the injunction application are awarded to Calibur in the amount of $11,250 plus applicable HST of $1,462.50 and disbursements (including applicable HST) of $1,107.93, for a total of $13,820.43.

b) Additional Rent

[58] Both parties are seeking costs with respect to the proceedings they respectively commenced to determine the additional rent owing for utilities pursuant to the lease.

[59] In this regard, they each provided the court with extensive written submissions as to why they should be awarded costs on April 18, 2019. Ecotemp filed a reply dated April 26, 2019. As well, submissions were heard on May 1, 2019.

[60] Both parties attempted to persuade the court that the eventual outcome codified in the consent order dated March 11, 2019 justified their actions, constituted success, and should ultimately trigger an award of costs in their favour. In effect, the respective parties have attempted to convince the court that they “won” the settlement.

Analysis

[61] I have carefully reviewed these written and oral submissions and have concluded that it is not appropriate to award either party costs on these applications.

[62] Try as I might, it was not possible to determine who fared better on the settlement. Even a rudimentary assessment of whether either party made a superior offer justifying an award of costs is fraught with uncertainty. In these circumstances, the court should not award costs.

[63] I start by noting this is not a r. 49.10 situation.

[64] By virtue of the settlement, I can conclude that the parties reached a mutually satisfactory (or perhaps mutually unsatisfactory) resolution of the additional rent. Having said that, I must also conclude that had either party truly been in a position of litigation strength (or superiority) when the agreement was reached, that would likely have resulted in the disposition of the costs issue in some respect.

[65] Should the matter have gone to trial and the outcome been the terms of the settlement, that order would in all likelihood have included a pronouncement that, in the circumstances of there being mixed success, there would be no order as to costs.

[66] This is borne out of the materials filed by the parties. At para. 60 of the Calibur Brief, counsel elaborately sets out how the settlement “substantially reflects the relief sought by the Applicant...”.

[67] This is juxtaposed with paras. 30 and 31 of the Reply Brief filed by Ecotemp, in which counsel states as follows:

30. When comparing the offers to settle served by the parties with the Order obtained on March 11, 2019, the court should bear only one thing in mind: the method of calculation that the parties agreed upon was the method of calculation that the respondents first used to reconcile the utilities consumption on May 4, 2017.
31. Calibur submits that the reconciliation of Additional Rent as defined in the Lease is paramount to the final calculation of the utilities consumed by Calibur, but the respondents maintain that these issues are separate and apart.

[68] On a review of these submissions, it is clear the parties were ad idem in the settlement as to a reconciliation of additional rent owing and the path forward in calculating same. It is also clear they were not in agreement as to which party actually “succeeded” in this process. However, for whatever reason or reasons, they were unable to resolve costs.

[69] In such circumstances, I note that had it been essential that the issue of costs be determined in the settlement, the inability of the parties to resolve the issue of costs might have unravelled the “deal” they reached on the other issues. That is, it is possible that the respective parties were able to agree to those terms with respect to the additional rent and were prepared to take their chances regarding costs.

[70] All of this leads to the conclusion that it is not appropriate to award costs with respect to the process to determine the additional rent.

[71] Additionally, Calibur referenced various offers to settle to suggest to the court that following the offer it made on December 5, 2018, it should be awarded costs on a substantial indemnity basis.

[72] I disagree. In addition to there not being a quantifiable r. 49.10 offer to consider, the process suggested by Calibur to assess their offer is not capable of proper evaluation on this costs determination. That is, I am unable to conclude there was a clear offer made by Calibur to Ecotemp that was rejected and that the settlement reached was less favourable to Ecotemp.

[73] As set out in Kearney v. Hill, 2017 ONSC 6306, it is generally settled law that in situations where all issues are settled, the court is “slow to make an award of costs against one of the parties” (para. 27) in the absence of exceptional circumstances (para. 29).

[74] Both parties submit such exceptional circumstance exists in this case as against the other party. I do not accept either suggestion. It cannot be reasonably concluded that either party so misconducted itself as to justify the intervention of the court with respect to costs. A vigorous effort in litigation to achieve objectives is the norm, not the exception.

[75] For all of the reasons, I make no order for costs except with respect to the injunction application.

[76] In the circumstances, I also make no order for costs with respect to the costs submissions.

Order

[77] The Ecotemp defendants (excluding Jerry Arneaud) are jointly and severally ordered to pay Calibur costs of $13,820.43, inclusive of HST, with 30 days to pay.

“Electronic signature signed and released by King J. ” George W. King Justice Date: April 22, 2020