COURT FILE NO.: CV-13-0356 (Barrie) and CV-13-472309 (Toronto)
DATE: 20200818
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1758704 ONTARIO INC. and 1191305 ONTARIO INC.
Plaintiffs
– and –
CARL PRIEST
Defendant
K.J. McKenzie, for the Plaintiffs
B. Teplitsky, for the Defendant
AND BETWEEN:
CARL PRIEST AND 1737161 ONTARIO LIMITED
Plaintiffs by Counterclaim
– and –
1758704 ONTARIO INC., 1191305 ONTARIO INC. and MARTIN DONKERS
Defendants to the Counterclaim
B. Teplitsky, for the Plaintiffs by Counterclaim
K.J. McKenzie, for the Defendants by Counterclaim
HEARD: In Writing
REASONS FOR DECISION ON COSTS
Overview
[1] The trial of this matter concerned the default of an asset purchase agreement. The plaintiff vendor began this action to recover the deficit, and the defendant purchaser counterclaimed, seeking damages for conversion, inducement of breach of contract, and intentional interference with economic relations.
[2] Following a five-day trial, the plaintiffs were wholly successful. I invited counsel to come to an agreement on costs, failing which I would accept written submissions. Counsel could not reach an agreement, and I am now in receipt of the plaintiffs’ submissions, the defendants’ responding submissions, and the plaintiffs’ reply submissions.
Parties’ Positions
Plaintiffs
[3] The plaintiffs submit they should be awarded their costs on a full indemnity basis, given the defendants’ “egregious, frivolous and vexatious and successful gaming of the system” for seven years. In their view, this was a simple matter in respect of which the defendants had no defence. Full indemnity equates to $182,098.60, comprised of costs of $147,653.15 (inclusive of HST), disbursements in the amount of $19,445.45, plus $15,000 in outstanding costs awards. Ms. McKenzie confirms that the costs of four separate motions, totalling $27,000, have been omitted from the bill of costs.
[4] The plaintiffs made a r. 49 Offer to Settle on November 11, 2019, via email, offering to settle for “the full amount and costs as set out in the default Judgment of the Honourable Justice Mulligan in this matter plus interest to the date of settlement at the rate set out in the default Judgment for a full and final settlement of this matter” (the “Offer”). The email advises that the amounts and interest rate were to be confirmed in a follow-up email. If such an email was sent, it did not make its way into the plaintiffs’ submissions.
[5] However, the written submissions clarify that the Offer represented the $368,339.79 awarded by Justice Mulligan on default judgment, plus 7% interest to the date of settlement, plus two outstanding costs awards totalling $15,000. The exact amount the plaintiffs offered to settle for is not clear, but when interest is factored in, the figure could be over $400,000.
[6] The plaintiffs submit that while the result at trial was not as favourable to the plaintiffs as Justice Mulligan’s award of damages, “the net result taking into account the offer for costs means the Plaintiff beat its Offer.”
Defendants
[7] The defendants submit they acted reasonably in defending the action, and it was the plaintiffs’ tactics which “significantly and unnecessarily prolonged the proceedings.”
[8] The defendants argue that the costs and disbursements sought by the plaintiffs are disproportionate to what they were awarded at trial. They take issue with the bill of costs itself, citing boilerplate descriptions of work, the $4,500 claimed for transcripts, the $7,000 claimed for photocopying, and the 13 hours of work counsel claims for preparing the Endorsement Brief I requested following the trial.
[9] Finally, the defendants submit the plaintiffs did not beat their Offer, and that a reasonable costs award in all of the circumstances would not exceed $65,000, inclusive of disbursements and HST.
Analysis
[10] Determining costs is a discretionary function of the court, governed by section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, and r. 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[11] Rule 57.01 lists the following factors for the court to consider when exercising its discretion to award costs:
(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 court should look to fix costs that are fair and reasonable, having regard to the expectation of the parties: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.). Rule 57.01(0.b) confirms that the court should consider the reasonable expectations of the losing party.
[13] One way to determine the reasonable expectations of a losing party is to review the losing party’s bill of costs. In this case, the defendants chose not to provide their bill of costs. Neither did they provide any information with respect to the time and disbursements incurred. Of course, there is no obligation on a losing party to provide a bill of costs, but the practice of doing so is preferable, in that it allows the court to assess costs that are fair, reasonable, and proportional: Risorto et al. v. State Farm Mutual Automobile Insurance Co., 2003 CanLII 43566 (ON SC), 64 O.R. (3d) 135 (S.C.J.), at para. 10.
[14] The failure to provide a bill of costs is a factor that the judge assessing costs may take into account when considering the losing party’s reasonable expectations: Smith Estate v. Rotstein, 2011 ONCA 491, 106 O.R. (3d) 161, at para. 50. Without knowing what the defendants’ costs were, I cannot complete a reasonableness analysis. Instead, I draw the inference that the defendants’ costs approach those incurred by the plaintiffs.
[15] The plaintiffs seek their costs on a full indemnity basis, given what they’ve characterized as aggressive conduct by the defendants. However, as my reasons for decision delineate (1758704 Ontario Inc. v. Priest, 2020 ONSC 3222), neither party came to court with particularly clean hands. Choices made by both parties contributed to the years of litigation and increased costs, but the balance tips in the plaintiffs’ favour. The plaintiffs are accordingly entitled to their costs at the higher end of the partial indemnity scale.
[16] There are a number of relevant r. 57.01 factors that bear consideration when assessing costs in this case. Ms. McKenzie is a twelve-year call, and is a Certified Specialist in Construction Law. Her hourly rate (between $250 and $425) is reasonable in the circumstances. I see no instances of over-lawyering in the bill of costs. Perhaps the descriptions of Fee Items could have been more particularized, but nothing stands out as being unusual over the course of a lengthy lawsuit. In my view, the number of hours being claimed is not excessive.
[17] I am not prepared to dissect the plaintiffs’ disbursements list item-by-item. Totalling less than $20,000, the disbursements are most reasonable for a lawsuit that began in 2013. This was a document-driven case, and the in-chief evidence of the parties was submitted by way of affidavit.
[18] The issues in this case are obviously important. The defendants defaulted on the asset purchase agreement, and the plaintiffs were entitled to seek redress. There is no evidence that the defendants made any offers to settle, thus the plaintiffs’ only choice was to go to trial. The trial itself was relatively straightforward in terms of issues to be determined.
[19] While there is a significant gap between the amount claimed in the statement of claim and the amount ultimately recovered, at trial the plaintiffs took a reasonable approach to damages and cannot be said to have overreached.
Offer to Settle
[20] A r. 49 offer to settle should be crafted with sufficient detail, such that the party considering it knows the precise amount they can expect to receive or are expected to pay: Davies v. Clarington (Municipality), 2019 ONSC 2292, 2019 CarswellOnt 5716 (S.C.J.), at para. 100.
[21] The Offer does not provide a definitive dollar figure. Based on my calculations, the plaintiffs offered to settle for approximately $380,000, plus interest. At trial, the plaintiffs were awarded $200,865.48, plus interest. Thus, the judgement obtained cannot be said to be at least as favourable as the Offer, and the cost consequences of r. 49(10) are not engaged.
Conclusion on Costs
[22] For the above reasons, I exercise my discretion and conclude that the plaintiffs are entitled to their costs as follows:
Fees (inclusive of HST): $103,357.21
Disbursements: $ 19,455.45
Outstanding Costs Award: $ 15,000.00
Total: $137,812.65
Additional Relief
[23] The plaintiffs seek two additional forms of relief. I asked counsel for the plaintiffs to provide a brief factum of law in respect of the additional relief. While a factum was not delivered, the Plaintiffs’ Responding Cost Submissions included submissions on these issues.
[24] First, the plaintiffs seek an Order that the Sheriff be directed to immediately enforce the current Writ on the defendants’ real property, despite the six-month waiting period pursuant to r. 60.07(18), which prevents the sale of land, pursuant to a writ of seizure and sale, until six months after the writ was filed with the Sheriff.
[25] Second, the plaintiffs ask that the both the main award and the costs award survive bankruptcy. This latter request is made in light of what the plaintiffs describe as the defendants arranging their finances to avoid any potential exposure.
[26] Counsel for the defendants does not address the propriety of these additional heads of relief, beyond advising that the defendants have appealed the trial decision, and as such any enforcement order would be stayed.
[27] I have not been provided with any precedents indicating I have the authority to grant the additional relief sought by the plaintiffs. However, I am mindful of the inherent jurisdiction of the Superior Court, as summarized in 80 Wellesley St. East Ltd. v. Fundy Bay Builders Ltd., 1972 CanLII 535 (ON CA), [1972] 2 O.R. 280 (C.A.), where the Court stated at para. 9:
“As a superior court of general jurisdiction the [Superior Court of Ontario] has all of the powers that are necessary to do justice between the parties. Except where provided specifically to the contrary, the court’s jurisdiction is unlimited and unrestricted in substantive law in civil matters.”
[28] The plaintiffs allege that the defendants “have had ample time to arrange [their] affairs while [they] game the system to avoid paying the debt.” I am not prepared to make such a finding. I am, however, persuaded that doing justice between the parties in this particular case requires a unique approach. It has taken the plaintiffs seven years to obtain judgment. Given that the Writ has been filed with the Sheriff since June 2019, pursuant to the Order of Justice DiTomaso, I am prepared to waive the six-month waiting period to enforce the Writ.
[29] However, I am not prepared to order that the judgment and costs award are bankruptcy-proof. There are other avenues available to the plaintiffs should they wish to advance arguments concerning the defendants’ financial activities – for example, the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29.
Madam Justice A.A. Casullo
Date: August 18, 2020