Court File and Parties

COURT FILE NO.: CV-17-580107 MOTION HEARD: 20190911 REASONS RELEASED: 20191010 COSTS SUBMISSIONS FILED: 20200314 COSTS ENDORSEMENT RELEASED: 20200727

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

VANALT ELECTRICAL CONSTRUCTION, INC. Plaintiff

• and-

OZZ ELECTRIC INC., JOHN CINELLI AND STEVEN MUZZO Defendants

BEFORE: MASTER M.P. McGRAW

COUNSEL: D. Stoddard Email: dstoddard@healandco.com -for the Plaintiff

F. Souza Email: fsouza@lawtoronto.com -for the Defendants

COSTS ENDORSEMENT RELEASED: July 27, 2020

Costs Endorsement

I. Background

[1] The Plaintiff, Vanalt Electrical Construction, Inc. (“VEC”) brought a motion to compel the Defendants to answer 72 undertakings and 44 refusals/under advisements arising from examinations for discovery (the “VEC Motion”). Significant case management was provided over 3 court attendances and 3 telephone case conferences and counsel continued to exchange documents and positions. These efforts reduced the VEC Motion to 3 undertakings, 25 under advisements and 7 refusals. The Defendant Ozz Electric Inc. (“Ozz”) brought a motion to compel VEC to answer 4 under advisements and 1 undertaking (the “Ozz Motion”, together with the VEC Motion, the “Motions”).

[2] As the number of attendances would suggest, the Motions were contentious at every turn. This continued after the release of my Reasons For Endorsement dated October 10, 2019 (Vanalt Electrical Construction Inc. v. Ozz Electric Inc., 2019 ONSC 5893) (the “Reasons”). The parties could not agree on a form of order or costs and a fourth telephone case conference was held on February 11, 2020. As a result, the order was finalized and the parties filed written costs submissions in accordance with a timetable agreed to during the case conference.

II. The Law and Analysis

[3] VEC claims costs of $19,492.38 for the Motions on a partial indemnity scale. The Defendants seek costs of $5,393,46 on a partial indemnity scale or, in the alternative, that costs be reserved to the trial Judge.

[4] Section 131(1) of the Courts of Justice Act (Ontario) states that subject to the provisions of an Act or the Rules, 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 costs shall be paid. In exercising this discretion, the court may consider the factors set out in Rule 57.01(1) of the Rules of Civil Procedure.

[5] The overriding principles in determining costs are fairness and reasonableness (Boucher v. Public Accountants Council for the Province of Ontario, (2004), 71 O.R. (3d) 291 (C.A.); Deonath at para. 21). The general rule is that costs on a partial indemnity scale should follow the event which should only be departed from for very good reasons such as misconduct of the party, miscarriage in procedure or oppressive or vexatious conduct (1318706 Ontario Ltd. v. Niagara (Regional Municipality) (2005), 75 O.R. (3d) 405 (C.A.); 394 Lakeshore at paras. 12-14).

[6] Costs rules serve five purposes: (1) indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) facilitate access to justice, including access for impecunious litigants; (3) discourage frivolous claims and defences; (4) discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) encourage settlements (394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238 at para. 10; Deonath v. Iqbal, 2017 ONSC 3672 at para. 20).

[7] The relative success of the parties is typically the most relevant consideration in determining costs. The difficulty in the present case is the significant case management and productions over an extended period of time and the fact that 33 of the 38 remaining questions were ultimately adjourned. Therefore, while success is relevant, in my view the more prominent factor here is the conduct of the parties, namely steps they took or did not take which contributed to the costs of the Motions.

[8] As set out in the Reasons, substantially all of the disputed questions on the VEC Motion related to VEC’s trust claims and Ozz’s set-off defence.

[9] With respect to the 31 trust claim questions, the Defendants agreed prior to the hearing that if VEC is ultimately successful in proving that Ozz is contractually liable for any amount then all 3 Defendants would consent to Judgment in the same amount for breach of trust. The parties tried to negotiate a form of consent Judgment on this basis which would have in turn resolved all of the trust questions. However, the parties were unable to agree, VEC insisted that the questions be answered and the Defendants refused. The Defendants requested that the court approve their form of Judgment at the hearing. VEC opposed the Defendants’ form of Judgment and argued that the Defendants should consent to VEC’s own form of draft Judgment or be ordered to answer all of the disputed questions. I did not sign either Judgment or order that any of the 31 questions be answered. Given forthcoming examinations for discovery and the possibility that additional information and documentation may be produced, I adjourned 33 questions sine die (including the trust questions) without prejudice to VEC bringing them back before me after discovery.

[10] VEC submits that the adjournment resulted from Ozz’s consent to Judgment, therefore, VEC was successful on these questions. However, VEC sought to compel Ozz to answer the trust questions. There has been no determination by the court and therefore, no success to measure. Further, although Ozz has agreed to consent to Judgment in the action, it did not agree to answer the disputed questions on the VEC Motion. Whether any of these questions will be answered remains outstanding. My preference would be to deal with these costs now rather than deferring the issue like so many others on the Motions. However, given the significant number of questions, until there has been a final determination by the court, an agreement by the parties or at the very least, confirmation that nothing further will happen with these questions, it is not appropriate to order costs and I decline to do so at this time. Like the questions themselves, any issues with respect to costs may be brought back before me.

[11] With respect to the questions regarding Ozz’s set-off claim, Ozz’s positions and responses were largely elusive. Ozz variously indicated that its claim was $1,500,000, $1,700,000 and some portion of an unallocated $800,000 arbitration settlement with 2 non-parties for which it could not provide a breakdown. Further uncertainty and time resulted from Ozz’s failure to obtain a final copy of Change Direction 301 which is directly relevant to its set-off claim and the fact that it had to be directed to confirm confidentiality restrictions arising from the arbitration. Ultimately, Ozz was ordered to make best efforts to obtain a final copy of CD301 and given the uncertainty around its previous answers, confirm all documentation already produced to VEC upon which Ozz is relying in support of its set-off claim.

[12] With respect to the Ozz Motion, the primary dispute related to 3 under advisements in which Ozz sought all documentation and information related to the pricing for VEC’s entire fixed price contract amount of $2,690,000 for the projects at issue in this litigation. VEC refused, taking the position that the only relevant amount was a credit of $178,500 provided against the fixed price and that it had already provided sufficient information. I held that Ozz’s request for all documentation for the fixed contract price of $2,690,000 was disproportionate and not properly producible. However, I also disagreed with VEC that it was not obligated to produce documentation in support of the $178,500 credit. Accordingly, success was divided on these questions.

[13] Having considered all of the relevant factors and circumstances, I am satisfied that VEC is entitled to some costs at this time. I arrive at this conclusion largely on the basis of Ozz’s conduct which unnecessarily added to the time spent and costs of the VEC Motion, and to a lesser extent, the Ozz Motion. This includes the set-off questions and the Defendants’ conduct generally which resulted in VEC having to seek additional information and documentation by repeated follow-up, often with court assistance and directions, which the Defendants should have provided sooner and without VEC’s efforts and the court’s intervention. In the circumstances, I conclude that it is fair, reasonable, proportionate, consistent with Rule 1.04(1) of the Rules of Civil Procedure and within the reasonable expectations of the parties for the Defendants to pay costs to VEC fixed in the amount of $5,000 payable within 60 days. This amount also reflects my view that at least some of the work claimed by VEC could have been completed by other personnel at a lower billing rate and that there were instances where VEC’s follow-ups were unnecessary and/or could have been left to re-attendance on discovery. All of this is without prejudice to VEC’s right to seek costs related to the 33 adjourned questions once they have been disposed of by me, by agreement or otherwise.

Costs Endorsement Released: July 27, 2020

Master M.P. McGraw