Court File and Parties

Court File No.: CV-18-606032 Date: 2020-06-24 Superior Court of Justice - Ontario

Re: OMJ Mortgage Capital Inc. And: King Square Ltd.

Before: Nishikawa J.

Counsel: Melvyn Solomon, for the Plaintiff Maurice Neirinck, for the Defendant

Heard: In writing

Costs Endorsement

Overview

[1] In February 2020, I granted judgment of $741,000 to the Plaintiff, OMJ Mortgage Capital Inc. ("OMJ") for commissions on loans secured in favour of the Defendant, King Square Limited ("KSL"): OMJ Mortgage Capital Inc. v. King Square Limited, 2020 ONSC 1188. I dismissed OMJ's claim for commission on a third loan.

[2] OMJ seeks its costs on a substantial indemnity basis in the amount of $223,650.27, including $14,022.54 in disbursements and $24,116.46 in HST. OMJ seeks substantial indemnity costs from the date of its offer to settle, March 1, 2019, on the basis that it was more successful than its offer at trial. OMJ seeks substantial indemnity costs before that date based on my finding that KSL acted in bad faith in failing to disclose to OMJ that it had secured further loans from the same lender. Alternatively, OMJ seeks partial indemnity costs until March 1, 2019 and substantial indemnity costs thereafter, for a total of $214,482.86.

[3] KSL submits that OMJ is not entitled to substantial indemnity costs before the date of its offer to settle because bad faith is not a sufficient basis for an award of substantial indemnity costs. KSL further submits that OMJ's costs cannot be fixed because OMJ has not provided a breakdown of its costs. Alternatively, KSL submits that OMJ's costs are excessive. Given that its own partial indemnity costs are $89,354.35 (including disbursements of $3,149.47 and HST) KSL submits that costs should not be fixed at more than $130,000.

Analysis

Costs Until the Offer to Settle

[4] Substantial indemnity costs may be warranted where a party has engaged in reprehensible, scandalous or outrageous conduct in the proceeding: Davies v. Clarington (Municipality) (2009), 100 O.R. (3d) 66 (C.A.), 2009 ONCA 722, at paras. 28-29. The Court of Appeal has repeatedly stated that substantial indemnity costs are reserved to those rare and exceptional case where a party has engaged in egregious or high-handed conduct warranting an expression of the court's disapproval.

[5] While I found that KSL's failure to disclose that it obtained further loans from the lender that OMJ had introduced breached the duty of good faith, a finding of bad faith does not necessarily warrant costs on a substantial indemnity basis. There was no egregious, malicious or high-handed conduct, in the proceeding or otherwise, that would warrant an award of substantial indemnity costs before the date of the offer to settle.

[6] OMJ's costs until its offer to settle are to be determined on a partial indemnity basis.

Costs After the Offer to Settle

[7] On March 1, 2019, OMJ made an offer to settle the action for $750,000 including interest to that date. At trial, OMJ was awarded $741,000 in damages plus interest. If interest accrued to the date of the offer is added to the amount awarded, the total would be $760,253. OMJ was thus somewhat more successful at trial than its offer to settle. The offer contained an element of compromise, since OMJ's entire claim was for over $1.198 million. Had the offer been accepted, the parties would have avoided significant legal fees incurred in proceeding to trial.

[8] I find that OMJ's offer meets the requirements of r. 49.10(1) of the Rules of Civil Procedure. It is therefore appropriate that OMJ receive costs on a substantial indemnity basis after the date of the offer.

Amount

[9] Based on the foregoing, OMJ is entitled to its partial indemnity costs until March 1, 2019 and its substantial indemnity costs after that date. OMJ's costs on a partial indemnity basis until March 1, 2019 were $19,666.62 (including HST and disbursements.) OMJ's substantial indemnity costs after March 1, 2019 were $194,816.24 (including HST and disbursements.)

[10] Pursuant to the Courts of Justice Act, s. 131(1), the Court has broad discretion when determining the issue of costs. The overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.). The court must also consider the principle of proportionality in R. 1.01(1.1) of the Rules of Civil Procedure, while keeping in mind that the court should seek to balance the indemnity principle with the fundamental objective of access to justice.

[11] Rule 57.01(1) of the Rules of Civil Procedure sets out the factors to be considered by the court when determining the issue of costs:

(1) 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.

[12] The matter involved the interpretation of agreements entered into between the parties and was not particularly complex. Since evidence in chief was submitted by affidavit, the trial took four days. There was one day of examinations for discovery. The parties attended two pre-trial conferences.

[13] Given the above steps, the amount of time spent by Plaintiff's counsel strikes me as disproportionately high, especially in comparison to the time spent by Defendant's counsel. Plaintiff's counsel submits that the Defendant's costs outline is low because many items, including appearances and preparation of document briefs, were not included. There were many volumes of materials prepared for trial and it was not always clear for what purpose, since there was some unnecessary duplication.

[14] The time spent on a motion to amend that did not proceed should be subtracted.

[15] In addition, the Defendant may not reasonably have expected to pay for 239 hours at senior counsel's rate when certain tasks could have been delegated to junior counsel. I also note that while counsel's year of call is comparative (Mr. Solomon was called in 1976 and Mr. Neirinck was called in 1975), Mr. Solomon's hourly rate is $200 higher than Mr. Neirinck's hourly rate.

[16] Based on the foregoing considerations, I find that a fair and reasonable amount of costs on a partial indemnity basis until March 1, 2019 is $19,666.62. and a fair and reasonable amount on a substantial indemnity basis thereafter, is $140,000.00. Accordingly, I fix costs of the action at $159,666.62, including disbursements and HST, as well as the costs incurred in the preparation of costs submissions.

[17] This endorsement is effective as an order of this court as of the date of release without the necessity of a further order being issued and entered. Counsel may nonetheless submit a draft order through my judicial assistant at roxanne.johnson@ontario.ca.

Nishikawa J.

Date: June 24, 2020