Court File and Parties

COURT FILE NO.: 5857/14 DATE: 20200522 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Ian McLarty (Plaintiff) AND: 2210961 Ontario Limited and Comerica Bank (Defendants)

BEFORE: Justice A. K. Mitchell

COUNSEL: C. Whalman, for the Plaintiff L. Moffatt, for the Defendant, 2210961 Ontario Limited

HEARD: In writing.

COSTS ENDORSEMENT

[1] In this action the plaintiff, Ian McLarty, claimed for payment of amounts owing under an agreement between himself and the defendant, 2210961 Ontario Limited carrying on business as Great Lakes Food Company, for the supply of labour, services and materials. Great Lakes counter-claimed for damages arising from the plaintiff’s alleged deficient and negligent work.

[2] The matter was tried over 4 days. By my decision released April 16, 2020, I awarded judgment in favour of the plaintiff in the amount of $87,244, inclusive of HST, plus pre-judgment interest. I dismissed the counter-claim.

[3] I requested written cost submissions from the parties. Written submissions were received, and this is my decision with respect to entitlement and quantum of costs of these proceedings.

Positions of the Parties

[4] As the successful party, the plaintiff claims his costs of the action under a number of different scenarios – substantial indemnity costs throughout the litigation in the amount of $91,272.13 inclusive of disbursements ($19,062.59) and HST; partial indemnity costs up to June 18, 2018 with substantial indemnity costs thereafter in the all-inclusive amount of $87,113.89; enhanced higher partial indemnity costs in the all-inclusive amount of $84,010.09; or partial indemnity costs in the all-inclusive amount of $73,101.17.

[5] The defendant acknowledges that the plaintiff was successful at trial and is, therefore, entitled to his reasonable costs of the action. However, the defendant submits the amount claimed by the plaintiff under any of the scenarios is disproportionate, excessive and manifestly unreasonable. The defendant proposes that a reasonable award of costs is $55,000 inclusive of disbursements and HST.

Analysis

Legal Principles

[6] The court has a very broad discretion to award the costs of and incidental to a proceeding. The basic provision is in section 131(1) of the Courts of Justice Act, R.S.O. 1990, c.C-43:

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.

[7] To guide its discretion, the court must look primarily to the factors set out in rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Rule 57.01(1) provides that, in addition to the result in the proceeding and any offer to settle or to contribute made in writing, 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; (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, (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.

[8] However, the overarching principle is that an award of costs be fair and reasonable in all of the circumstances. [1]

[9] The Court of Appeal in Boucher at para. 4 stated:

In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs of the successful litigant.

Entitlement

[10] The plaintiff was successful at trial and is, therefore, presumptively, entitled to his fair and reasonable costs of the action. As already noted, entitlement is not in dispute.

[11] The issue then is: what are the plaintiff’s fair and reasonable costs of the action?

Scale

[12] Under rule 49.10, where the plaintiff serves an offer to settle and obtains judgment that is as or more favourable than the terms of the offer to settle, the plaintiff is entitled to his partial indemnity costs of the proceeding to the date the offer was served and after that date on a substantial indemnity basis. To trigger these cost consequences, rule 49.10 requires the offer:

(i) be made at least 7 days before the commencement of the trial; (ii) is not withdrawn and does not expire before the commencement of the hearing; and (iii) is not accepted by the defendant.

[13] This action was commenced by statement of claim issued March 20, 2014.

[14] Under Scenario 1, the plaintiff relies on an offer to settle the issues between the parties contained in an email dated December 2, 2013. The plaintiff offered to accept the sum of $115,945 plus HST less deduction for the value of the office work not completed and “other incentives” to be determined at a meeting. By responding email on December 13, 2013, the defendant advised it did not wish to negotiate any further payment to the plaintiff.

[15] The plaintiff submits that after trial it obtained judgment more favourable than the terms of the e-mail offer thereby entitling him to substantial indemnity costs throughout the action.

[16] I disagree. Rule 49 envisions that any offer which triggers its cost consequences be made in the context of an existing action. That is, any “rule 49 offer” cannot pre-date the commencement of the action. Moreover, the December 2013 email is vague and imprecise in its quantum and makes assessing whether its terms are more or less favourable than the terms of judgment near impossible. For example, the plaintiff suggests a deduction for “other incentives” without suggesting a monetary amount.

[17] Last, any offer to settle extended to the defendant in December 2013 was deemed withdrawn once the claim was issued and lien registered. This “offer” was not open for acceptance during the course of the litigation let alone at the commencement of trial.

[18] Under Scenario 2, the plaintiff served an offer to settle on June 18, 2018 whereunder the plaintiff agreed to accept the sum of $69,000 plus pre-judgement interest and costs as assessed (the “Offer”). The Offer remained open for acceptance until 5 minutes before the commencement of trial. The Offer was not accepted by the defendant.

[19] When compared to the terms of the judgment which awarded the plaintiff $87,244 plus pre-judgment interest, the terms of the judgment are clearly more favourable than the terms of the Offer. However, the Offer does not strictly comply with rule 49.10(1)(b) as it expired before the commencement of the trial leaving the defendant without the ability to accept this offer at the commencement of trial thereby avoiding the costs and uncertainty of trial. Presumptively, I find the Offer does not trigger the costs consequences of rule 49.10.

[20] However, that does not end the analysis under rule 49. Rule 49.13 provides residual discretion to consider any offer despite one not strictly complying with the requirements of rule 49.10. Rule 49.13 reads:

Despite rules 49.03, 49.10 and 49.11, the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer.

[21] Although not strictly complying with the requirements of rule 49.10, in keeping with the spirit and intent of rule 49, I find the Offer triggers the cost consequences of rule 49.10 and the plaintiff is entitled to his partial indemnity costs to the date of the Offer and his substantial indemnity costs thereafter. [2]

[22] I arrive at this conclusion after considering the following:

(a) The defendant made no attempt to accept the Offer whether immediately before trial or immediately following the commencement of trial making the 6-minute differential on the Offer’s expiration immaterial for purposes of the rule 49 analysis; (b) The defendant’s only counter-offer triggering rule 49 was an offer made December 30, 2019 in the all-inclusive amount of $25,000 payable monthly in instalments of $5000 each. Judgment following trial far exceeded the defendant’s counter-offer; and (c) The defendant made no effort to settle this liquidated claim through mediation or informal negotiation. Instead, the defendant pushed the matter forward to trial and conceded none of the issues.

[23] The defendant does not dispute that the Offer triggers the cost consequences of Rule 49.10 and does not deny the plaintiff’s entitlement to costs on a substantial indemnity basis post-June 18, 2018.

[24] Having found the plaintiff is entitled to his partial indemnity costs of the action to June 18, 2018 and his substantial indemnity costs from that date forward, the remaining issue is: what is a reasonable assessment of the plaintiff’s costs. To make this assessment, the factors in rule 57.01 must be considered.

Quantum

[25] The plaintiff claims partial indemnity fees of $7,557.60 to June 18, 2018 and substantial indemnity fees of $53,534.25 thereafter plus HST totalling $6,959.45. The plaintiff seeks reimbursement of his out-of-pocket disbursements of $19,062.59. [3] The total amount claimed under Scenario 2 is $87,113.89.

[26] The plaintiff filed in support of the amount claimed under Scenario 2 a Bill of Costs on a Partial Indemnity (67%) and Full Indemnity (100%) basis. I find that partial indemnity is two-thirds’ reimbursement and substantial indemnity is three-quarters’ reimbursement of actual costs. Using this approach, by my calculation the amounts arrived at are different than those calculated by plaintiff’s counsel using these same percentages. I calculate partial indemnity fees of $7,557.60 to June 18, 2018 and substantial indemnity fees thereafter of $44,791.88 plus HST of $6,805.43.

[27] As noted in Boucher, any award of costs - regardless of the scale - must be reasonable. When fixing costs, Courts should not simply engage in a number-crunching exercise involving the multiplication of hours spent by the hourly rates charged by the lawyers involved. Rather, costs should be assessed based upon what is reasonable to be paid by the unsuccessful party rather than what the successful party may have paid to (or was billed by) its own lawyers. The approach is a holistic one.

[28] Having regard to the factors in rule 57.01, I note the following in my assessment of the reasonableness of the amount claimed for fees and disbursements:

(a) At the outset, the plaintiff registered a lien claim in the amount of $203,400. I found the plaintiff’s lien claim to be exaggerated. This litigation may have been less adversarial and more amenable to early resolution if the plaintiff had not registered a lien (which was ultimately vacated on a motion brought by the defendant) to which he was not entitled and instead restricted his claim to his true liquidated damages. I note that by the time of trial, the plaintiff had reduced his claim to $120,000. After trial, the plaintiff recovered judgment for less than one-half of the original amount claimed; (b) Ms. Wahlman was lead counsel at trial. Ms. Whalman was called to the bar in 2002 and at the time of trial had 18 years’ experience. Over the course of the litigation (approximately 6 years), Ms. Whalman charged an hourly rate in the range of $350-$375. I find the hourly rate charged by Ms. Whalman to be reasonable; (c) By comparison, the defendant was represented throughout by Ms. Moffatt. Ms. Moffatt was called to the bar in 2015 and at the time of trial had 4 years’ experience. Ms. Moffatt charges an hourly rate of $295. (d) Ms. Whalman spent 96.4 hours preparing for and attending at trial. By comparison, Ms. Moffatt spent 72.7 hours. I find the time spent by Ms. Whalman was reasonable. However, accompanying Ms. Whalman at trial was junior counsel (like Ms. Moffatt, a 2015 call) who charged 56.1 hours. Given the simple nature of the claim, the short length of trial and Ms. Whalman’s greater experience than Ms. Moffatt’s experience, it was not reasonable to engage junior counsel to assist at trial. I am not persuaded by plaintiff’s reply submissions that because Ms. Whalman was feeling unwell during the trial it was reasonable to have junior counsel available as back-up if Ms. Whalman was unable to continue. (e) As already indicated, the claim was a simple breach of contract claim. The plaintiff claimed liquidated damages. The plaintiff is not entitled to claim additional amounts as a penalty for the defendant’s vigorous defence of the claim. The defendant’s penalty for not resolving the claim at an early stage and failing to respond to a request to admit is paying an award of costs on a substantial indemnity basis from June 18, 2018 through to the end of trial. I have already determined that counsel’s hourly rate and the time spent were both reasonable in the circumstances. This finding necessarily accounts for the time spent having to address the issues raised by the defendant in its defence; (f) This was not a complex case. Reduced to its essence, it was a claim for a liquidated amount. While of importance to the plaintiff, that is true in all cases and not unique to this one. Ultimately, the plaintiff’s full indemnity costs inclusive of disbursements and his own personal travel costs to prosecute his claim totalled $104,992.56 – 87% of the total amount claimed at trial and 110% of the amount recovered under the judgment. I find that the amount spent was disproportionate to the amount claimed and recovered. (g) By comparison, the defendant’s total actual costs including HST and disbursements was $67,467.28. Defendant’s costs guide the court in determining what the defendant could reasonably have expected to pay if unsuccessful. Of course, it is understandable that a successful plaintiff necessarily incurs greater costs because they bear the burden of proof and have met that burden of proof. The plaintiff submits that the defendant’s total costs were far greater than reflected in the time dockets of its legal counsel as the dockets omit time spent addressing various steps in these proceedings. I am not persuaded by this submission. The defendant provided copies of the redacted invoices issued to the defendant by its lawyers. Regardless of the time actually spent by the defendant’s lawyers defending this claim, the cost associated with any additional time spent was not passed along to the defendant. (h) I find that the defendant is not liable for the plaintiff’s duplicative costs associated with the court being unable to accommodate the trial in 2018. Each party should have to bear their own added costs associated with this exceptional circumstance which was beyond the parties’ control. Similarly, the defendant should not have to bear the duplication of costs associated with the plaintiff changing counsel. That is a circumstance unique to this case and unrelated to the defendant’s conduct. (i) The defendant did not answer undertakings given on discovery. Mr. Neate deposed a false affidavit. This conduct supports an increase in the award of costs; (j) The plaintiff seeks to be reimbursed the fees paid to Elaine Vegotsky, the plaintiff’s damages expert. At trial, the defendant argued the evidence of Ms. Vegotsky was inadmissible claiming it was unnecessary. Although I qualified Ms. Vegotsky as an expert in economic damage quantification and ruled her evidence admissible, I ultimately gave little weight to her evidence as it was helpful, but hardly necessary. Ms. Vegotsky’s evidence consisted of a simple mathematical calculation of amounts the plaintiff claimed were due and owing. No mathematical formula was applied to arrive at damages. Future damages were not claimed. The court was capable of extracting from the plaintiff’s evidence the amounts claimed for the value of work completed, the value of work not completed and value of the damage to the trailer, on its own, without expert assistance. The amount of $9,169.13 will be deducted from allowable disbursements; (k) The plaintiff claims reimbursement of amounts paid to the defendant for its costs of various motions including a motion to vacate the construction lien and motions to dismiss the action for delay. In support of its position, the plaintiff points to my finding that the representative of the defendant swore a false affidavit claiming the plaintiff “abandoned” the project in June 2013. The plaintiff submits that the court on the motion relied on this affidavit leading to the defendant successfully challenging the construction lien which resulted in a cost award against the plaintiff. I am not prepared to reconsider the issues on the motion and assess the possible impact of this false information on the outcome of the motion. The plaintiff did not seek to set aside the order obtained on the motion or the cost order made in favour of the defendant. That order stands and must be respected. Therefore, the amount of $1,350 is not allowable to the plaintiff as a disbursement.

Disposition

[29] After considering the subrule 57.01(1) factors and the other relevant circumstances of this case set forth above, the defendant shall pay to the plaintiff his reasonable partial indemnity fees to the date of the Offer and substantial indemnity fees from that date onward in the total amount of $45,000 plus HST in the amount of $5,850 together with disbursements in the amount of $7,351.48.

[30] The plaintiff provided a draft judgment for approval and signing. The Court does not have jurisdiction to sign a judgment as part of its assessment of costs unless on consent of the parties. However, to assist the parties in resolving the form of judgment, I find that the plaintiff was awarded $87,244 for damages and prejudgment interest. Prejudgment interest for the period June 18, 2013 to April 16, 2020 calculated at the rate of 1.3% per annum totals $7,750.18. Pursuant to this endorsement, the plaintiff is entitled to his costs of the action totalling $58,201.48.

“Justice A. K. Mitchell” Justice A. K. Mitchell Date: May 22, 2020

[1] See Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.) (“Boucher”); and, more recently, Davies v. Clarington (Municipality), 2009 ONCA 722. [2] See Thomas v. Bell Helmets Inc., 1999 ONCA 9312. [3] This amount does not include direct expenses of Mr. McLarty to participate in the litigation totaling $5,290.60.