Court File and Parties

Court File No.: 13-56958 Date: 2020-05-15 Superior Court of Justice - Ontario

Re: SUSAN TATARYN and SUSAN G. TATARYN PROFESSIONAL CORPORATION, Plaintiffs -and- AXA INSURANCE CANADA (now known as INTACT INSURANCE COMPANY OF CANADA), CHARLES McLEOD, IRVIN HOFFMAN and COHEN & LORD INSURANCE BROKERS LIMITED, Defendants

Before: Mr. Justice Pierre E. Roger

Counsel: Brian C. Elkin, for the Plaintiffs Christopher Reil and Ashlee Barber, for the Defendant, AXA INSURANCE COMPANY (now Intact) Mark Charron and Jaime Wilson, for the Defendant, CHARLES MCLEOD Pasquale Santini, for the Defendants, IRVIN HOFFMAN AND COHEN & LORD INSURANCE BROKERS LIMITED

Costs Endorsement

[1] These are the reasons for the costs of motions heard in this action on January 9, 2020 (see Tataryn v. Axa Insurance Canada, 2020 ONSC 375).

[2] As indicated in my earlier decision, this action relates to a dispute over insurance for damage to an Ottawa property. The plaintiffs’ house was the subject of two occurrences of water damage: December 12, 2010; and March 6, 2012. The first occurrence gave rise to an unresolved action issued against the defendant, AXA Insurance Canada (under court file no. 11 – 53079). This second action incorporates both occurrences and is brought by the plaintiffs against their insurer, AXA now Intact; the independent insurance adjuster retained by AXA, Charles McLeod; and the plaintiffs’ insurance brokers, Irvin Hoffman and Cohen and Lord Insurance Brokers Limited.

[3] After the first occurrence of water damage, AXA agreed that the plaintiffs’ insurance policy provides insurance for the first loss, except for improvements required for bylaw compliance related improvements. AXA retained ClaimsPro as its agent to investigate and adjust the plaintiffs’ first loss and ClaimsPro appointed Mr. McLeod, who met with the plaintiffs. Some payments were made by AXA for the first loss, but the parties could not agree on the amount of the loss, and litigation is ongoing. For the second occurrence, AXA took the position that there was no insurance coverage, relying on an exclusion in the policy that provides that AXA does not insure loss or damage “occurring while the building is under construction”, and this action was started by the plaintiffs on March 5, 2013.

[4] The motions heard on January 9, 2020, were decided as follows:

a) The plaintiffs’ motions for better affidavits of documents and for additional examinations for discovery from the defendants, AXA and McLeod, were granted. b) The plaintiffs’ motion that their property was not subject to the “building is under construction” exclusion relied upon by AXA was granted. c) The defendant McLeod’s motions for summary judgment that (1) this action is statute-barred against him and (2) that this action be dismissed against him because of the absence of a duty of care and of a reasonable cause of action were dismissed on a without prejudice basis. d) The defendants’, Irvin Hoffman and Cohen and Lord Insurance Brokers Limited motion for summary judgment that the plaintiffs’ action is stature-barred against them was dismissed without prejudice to that issue being revisited at trial. e) The defendants’, Irvin Hoffman and Cohen and Lord Insurance Brokers Limited motion for summary judgment that the “building is under construction” exclusion does not apply was granted.

[5] Submissions on costs were all received by March 25, 2020.

[6] After considering the many arguments raised by the unsuccessful parties, I see no sufficient reason not to award the costs of these motions to the successful parties.

Production Motions

[7] With regards to the production motions, the consent disclosure order was put in issue by the plaintiffs on this motion as the plaintiffs sought production from the unsuccessful defendants of all relevant documents. The plaintiffs’ arguments on the production motions were essentially accepted and ordered by the court. It is therefore not unfair to order costs of these motions against AXA and McLeod for unsuccessfully defending the production motions because both were aware of the plaintiffs’ positions on these motions. Contrary to what is argued, this Court did not expand the scope of production, but rather, granted the plaintiffs’ production motions. This possibility should not have been a surprise to the unsuccessful defendants whose substantial positions in resisting these motions were contested by the plaintiffs and not accepted by the court. Furthermore, the fact that the plaintiffs may not have provided complete particulars of their damages does not impact my decision on the costs of these motions because the unsuccessful defendants failed to take steps before this Court to obtain particulars of the plaintiffs’ damages. Indeed, it seems a recurring theme of the unsuccessful defendants to communicate arguments to the plaintiffs as justification not to comply with the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“the Rules”); and yet to take no procedural step to resolve disagreements over their stated positions. As I alluded to in my earlier decision dealing with these motions, I do not think that it is appropriate for a party to refuse to comply with the Rules based on stated arguments without, at some point, proceeding to take some procedural step to resolve those issues. The plaintiffs brought these production motions and were successful. If the unsuccessful defendants wanted to resolve their stated arguments, they should have taken steps to resolve those issues – the plaintiffs did.

[8] However, on the amount of costs, the production motions are not subject to the motion for summary judgment test provided at rule 20.06 of the Rules. Rather, elevated costs (or substantial indemnity costs) for these production motions can be ordered when Rule 49 is triggered or when the losing party engaged in some sufficiently reprehensible conduct – neither is applicable to the facts of these production motions. Consequently, the costs of the production motions are payable on a partial indemnity basis.

[9] I agree with the defendant, McLeod, that he was largely prevented from producing all relevant documents because of AXA’s position that documents in his possession are the property of AXA and subject to its claim of litigation privilege. As a result, I find that the costs of the production motions are payable as follows: 75% by AXA and 25% by McLeod.

[10] The plaintiffs seek over $16,000 for the partial indemnity costs of the production motions. That amount is out of proportion with the complexity of the issues raised by these motions. Further, these motions, although important, were not complex. Consequently, a fair and reasonable amount for the partial indemnity costs of these production motions is rather in the range of about $7,000.00.

[11] Consequently, the partial indemnity costs of the production motions are hereby fixed in the all-inclusive amount of $5,250.00 payable by AXA to the plaintiffs and in the all-inclusive amount of $1,750 payable by McLeod to the plaintiffs, both within the next 30 days.

Motions relating to the “building is under construction” Exclusion

[12] The plaintiffs and the defendants, Irvin Hoffman and Cohen and Lord Insurance Brokers Limited, were successful on their respective motion for summary judgment that the “building is under construction” exclusion raised by AXA does not apply.

[13] AXA’s arguments that both actions should have been resolved long ago (presumably on AXA’s terms) and that the plaintiffs’ claims are likely to be minor or unsuccessful, miss the point that the plaintiffs were successful on their motion for summary judgment. Again, after having considered AXA’s arguments, I see no reason why the plaintiffs and the brokers should not be entitled to their costs of this motion.

[14] Dealing first with the costs of the brokers, AXA does not dispute that the brokers should be entitled to some costs from AXA. However, AXA alleges that the balance of costs should come from the plaintiffs because it alleges the plaintiffs’ action should have resolved years ago, the plaintiffs should have sought smaller damages, and parts of the plaintiffs’ action are likely to be unsuccessful. Again, I find AXA’s arguments unconvincing because they fail to address the fact that the plaintiffs were successful on this motion. The plaintiffs simply responded to AXA’s defence position that there was no insurance coverage. AXA relied on an exclusion in the insurance policy to argue that it does not insure loss or damage “occurring while the building is under construction”, and therefore, the plaintiffs added the other defendants. This motion was required because AXA chose to rely unsuccessfully on this clause of its policy. As a result, AXA should be responsible for the costs of this motion, including the costs of the successful brokers (not the plaintiffs).

[15] I also disagree with the arguments of AXA that the costs of this motion should be left to the trial judge - AXA argues that the trial judge would be better positioned to assess the merits of the plaintiffs’ claim. However, this argument runs contrary to the practice of our court to decide the costs of motions at the time of the motions, and it fails to address the fact that the plaintiffs were successful. The costs of the trial is another issue and the costs of the trial will be decided by the trial judge. Similarly, I also do not accept the arguments of the other defendants that the costs associated with other parts of these motions should be assessed at a later date, if and when these other motions return, because this would create uncertainty and because the plaintiffs’ success at this time would be difficult for the other judge to assess. It is more expeditious and fair that the costs of motions be assessed by the judge who heard the motions rather than leave the costs of motions to the uncertainties of a later decision if and when other motions are brought, and then to the much more difficult task of being assessed by a judge who did not hear the original motions.

[16] The brokers made offers to settle but none triggered rule 49. The brokers are therefore entitled to their partial indemnity costs.

[17] According to my review of the dockets provided by the lawyers for the brokers, their total fees and disbursements associated with both motions brought by the brokers, inclusive of applicable taxes, are in the range of about $31,000. Accepting the brokers’ argument that “it is only reasonable and fair to split the total fees equally”, I arrive at about $15,500 in total fees and disbursements for each of their two motions.

[18] A reasonable and proportionate amount for the brokers’ partial indemnity costs of this motion would, considering all the relevant factors including the importance of this motion, be in the range of about $10,000.

[19] Consequently, AXA shall pay the all-inclusive amount of $10,000 for the partial indemnity costs of this motion to the defendants, Irvin Hoffman and Cohen and Lord Insurance Brokers Limited, within the next 30 days.

[20] With regards to the plaintiffs’ costs of this motion, none of the plaintiffs’ offers, the conduct of the parties, or rule 26.06 triggers the availability of a higher scale of costs. Consequently, the plaintiffs are entitled to their costs of this motion on a partial indemnity basis.

[21] The plaintiffs seek about $10,000 from AXA for their partial indemnity costs associated with this motion (I note that the plaintiffs do not seek costs against the brokers for their motion on this coverage issue). Considering the complexity and the importance of this issue to the parties, and the other factors outlined at rule 57.01, this seems a reasonable and proportionate amount.

[22] Consequently, AXA shall pay the all-inclusive amount of $10,000 to the plaintiffs for their partial indemnity costs of this motion, within the next 30 days.

The defendants’ unsuccessful motions for summary judgment

[23] The defendant, McLeod’s motions for summary judgment that this action is statute-barred against him and that this action be dismissed against him because of the absence of a duty of care and of a reasonable cause of action were dismissed on a without prejudice basis. Similarly, the defendants’, Irvin Hoffman and Cohen and Lord Insurance Brokers Limited motion for summary judgment that the plaintiffs’ action is stature-barred against them was dismissed without prejudice to that issue being revisited at trial.

[24] The plaintiffs allege that the unsuccessful defendants acted unreasonably by bringing these motions for summary judgment (relying on rule 20.06 and cases such as Ashim v. Zia, 2015 ONSC 564). The plaintiffs argue that the evidence was clearly insufficient and could not allow the court to conclude whether there is no genuine issue requiring a trial, such that these motions should not have been brought. In support of this argument, they point to the fact that no evidence was adduced by either the adjuster or the brokers to support their respective argument that the limitation period effectively started to run on the presumed date of loss, and that neither addressed s. 5(1)(a) of the Limitations Act, 2002, S.O. 2002, c.24. They also argue that the plaintiffs were served with five motion records and five factums, that considerable time was required to respond to these motions, and that these motions were important to the plaintiffs.

[25] The brokers argue that the bylaw coverage previously in place was limited to $10,000, and therefore, that proportionality requires that costs be minimal (I note, however, that the fees of their lawyers to date exceed $81,000). They also argue divided success arguing that they won the “building under construction” exclusion motion, and therefore, the plaintiffs should not be entitled to their costs of resisting this unsuccessful motion as, the brokers allege, they won one and lost one. As well, the brokers argue that they filed no affidavit, that proceedings were kept to a minimum, and that they did not act unreasonably.

[26] The adjuster, McLeod, argues that their unsuccessful motions for summary judgment were dismissed on a without prejudice basis, such that he did not act unreasonably. He also argues that it is not clear that the evidence was inadequate, and therefore, this also supports that he did not act unreasonably. As well, he argues that his conduct was mandated by AXA and that the plaintiffs’ costs are excessive and disproportionate considering the complexity and importance of these issues.

[27] In my earlier decision, I found that the evidence of the plaintiffs showed that prior to March 5, 2011, the plaintiffs did not know enough facts to base a cause of action because the plaintiffs did not know by that time that some expenses related to compliance with existing bylaws would be required. As the second action (this action) was issued on March 5, 2013, I found that the plaintiffs had raised a genuine issue requiring a trial about whether the plaintiffs knew prior to March 5, 2011, that they had suffered some damage from the omission to include coverage for bylaw related expenses. At paragraph 16 of my earlier decision, I explained how the evidence showed that bylaw upgrade costs were not yet identified by that time. This evidence was known to McLeod and to the brokers and neither brought any evidence attempting to show that the plaintiffs should have been aware of such expenses prior to March 5, 2011.

[28] As indicated in Ashim, a moving party could be seen to have acted unreasonably, under rule 20.06 if the evidence was clearly insufficient to show facts on which the court could conclude that there was no genuine issue requiring a trial; that reprehensible conduct is not required.

[29] Here, the moving defendants did not file any evidence to contradict the plaintiffs’ evidence outlined above. The evidence upon which I relied to make my findings was available and should have been known to the moving defendants, yet neither addressed that evidence or its impact on discoverability. They had no satisfactory answer when questioned on this topic during the argument of the motion.

[30] Accordingly, I find that McLeod and the brokers acted unreasonably in bringing these motions, and therefore, the plaintiffs are entitled to their costs of these motions on a substantial indemnity basis.

[31] The plaintiffs seek about $95,000 for their substantial indemnity costs associated with these motions. I agree with the defendants that this amount is disproportionate. By comparison, the total fees and disbursements of the brokers for their two motions were in the range of about $31,000.

[32] These issues were important to the plaintiffs and were of moderate complexity. I disagree with the brokers that success was divided because I find that their successful motion, arguing that the “building is under construction” exclusion raised by AXA did not apply, was really against AXA and not against the plaintiffs because the plaintiffs had to proceed as they did because of the defence position adopted by AXA that this exclusion was applicable (and the plaintiffs did not oppose this motion but brought a similar motion). Similarly, the brokers arguments about proportionality are unconvincing when their own fees are in the range of $80,000. I disagree with the interpretation of the defendant, McLeod, (as stated in their costs submissions) – what I found in my earlier decision was that the evidence of the moving parties on these motions was inadequate. I made my findings without prejudice not because it was a close call, but because the discovery process is not yet completed (largely because to the positions adopted by AXA).

[33] Considering the above, a fair, reasonable, proportionate and expected amount for the total costs of defending these motions would rather be in the range of about $25 – $30,000. Consequently, I find that the substantial indemnity costs of defending these motions is $24,750. McLeod’s duty of care motion did not add much to the costs of these motions, and as a result, I will allocate these costs as follows: 60% to McLeod (for his two motions) and 40% to the brokers.

[34] Therefore, for the substantial indemnity costs of these motions, the defendant, McLeod, shall pay to the plaintiffs the all-inclusive amount of $14,850, and the defendants, Irvin Hoffman and Cohen and Lord Insurance Brokers Limited, shall pay to the plaintiffs the all-inclusive amount of $9,900.

Mr. Justice Pierre Roger Date: May 15, 2020