COURT FILE NO.: 14-61078
DATE: 20200829
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
IHAB DIA, FATEN ZEINEDDINE, SAMER DIA (a minor by his litigation guardian IHAB DIA), ANISAH DIA (a minor by her litigation guardian IHAB DIA), ALI DIA (a minor by his litigation guardian IHAB DIA), and MOHAMED DIA (a minor by his litigation guardian IHAB DIA)
Plaintiffs
- and -
CALYPSO THEME WATERPARK, JACQUES BUI, JAMIE CROWDER, KHAMEA LOUANGRATH, PAOLO MESSINA AND SHAUN WHEELER
Defendants
AND BETWEEN:
PAOLO MESSINA
Plaintiff by Counterclaim
- and -
SAMER DIA AND MAHAMED ZEINEDDINE
Defendants by Counterclaim
James Bowie, for the Plaintiffs
M. James McMahon, for the Defendant Paolo Messina
M. James McMahon, for the Plaintiff by Counterclaim
James Bowie for the Defendants by Counterclaim
HEARD: In writing
COSTS ENDORSEMENT
H.J. Williams, J.
[1] Paolo Messina was successful in a summary judgment motion in which he asked for the plaintiffs’ action against him to be dismissed. The plaintiffs Samer and Anisah Dia had claimed that Mr. Messina was involved in an assault against them at the Calypso Theme Waterpark, east of Ottawa, in July 2013. I found no genuine issue requiring a trial; neither the plaintiffs nor any of the witnesses to the alleged assault had identified Mr. Messina or a man fitting his description as having been involved.
Mr. Messina’s Position
[2] Mr. Messina is seeking the costs of his motion and of his defence of the plaintiffs’ action. He seeks costs on a partial indemnity scale to the date of an offer to settle he made and “total indemnity” costs thereafter.
[3] Mr. Messina also claims $3,000.00 plus HST from the plaintiffs, representing the costs Calypso seeks from him as a result of his crossclaim against Calypso.
[4] Mr. Messina is asking for fees based on a partial indemnity hourly rate of $350.00 and a substantial indemnity rate of $450.00. The actual hourly rate charged by Mr. Messina’s lawyer was $350.00.
[5] According to Mr. Messina’s bills of costs, the costs he is claiming on a partial indemnity basis, inclusive of fees, disbursements and HST, are $28,355.70 ($27,564.79 plus an appearance fee of $700 and HST of $91.00) for the motion and $34,500.63 for the action, for a total of $62,856.42. On a substantial indemnity basis, Mr. Messina claims $36,353.93 ($35,336.93 plus an appearance fee of $900.00 and HST of $117.00) for the motion and $44,168.91 for the action, for a total of $80,522.84.
The Plaintiff’s Position
[6] The plaintiffs’ position is that the costs sought by Mr. Messina are “grossly exaggerated,” that there are no relevant offers and that costs should be awarded on a partial indemnity basis only. The plaintiffs also argue that the underpinning for the costs award should be the actual rate charged to Mr. Messina, which was $350.00, and not a partial indemnity rate of $350.00 or a full indemnity rate of $450.00, which Mr. Messina’s lawyer appears to base on his 30 years of experience as a lawyer. The plaintiffs do not take serious issue with the costs claimed for much of the action; they say the costs of the motion should be limited to $5,000.00.
Analysis
[7] I am satisfied that Mr. Messina is entitled to costs for both his summary judgment motion and for his defence of the action. The plaintiffs do not suggest otherwise.
[8] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C. 43, provides that the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court. Although discretionary, and therefore owed a high degree of deference, a court must fix costs on a principled basis. (Davies v. Clarington, 2009 ONCA 722, at para. 40.) Further, the court’s discretion under s. 131(1) is “[s]ubject to the provisions of an Act or rules of court.”
[9] Rule 57.01(4) of the Rules of Civil Procedure states that when the court awards costs, it shall fix them in accordance with Rule 57.01(1) and the Tariffs. (I will refer to “the Tariffs” below.)
[10] Rule 57.01 (1) provides as follows:
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.
Scale of Costs
[11] Mr. Messina has asked for costs on a partial indemnity basis for the period preceding an offer he made to settle the action, and on a substantial indemnity basis after the date of the offer.
[12] The general rule is that costs will be awarded on a partial indemnity basis. (Akagi v. Synergy Group (2000) Inc., 2015 ONCA 771 at para. 31.)
[13] Substantial indemnity costs awards are intended to be rare and are warranted in only two circumstances:
through the effect of Rule 49.10 of the Rules of Civil Procedure on an unaccepted offer to settle; or
where there has been “a clear finding of reprehensible conduct on the part of the party against which the cost award is being made.” (Davies, at para. 40.)
[14] Mr. Messina cannot point to either of the two circumstances identified in Davies. Mr. Messina made an oral offer of a without-costs dismissal of the plaintiffs’ action against him in August 2017. In December 2018, he made a time-limited offer to consent to a dismissal of the plaintiffs’ action, and to dismiss an action he had commenced against the plaintiff Samer Dia, in exchange for $12,500.00. Mr. Messina did not make a Rule 49 offer to settle in this case and, even if he had, as a defendant, he would have no entitlement to substantial indemnity costs under Rule 49.10. Further, while I fully appreciate Mr. Messina’s frustration arising from the plaintiffs’ refusal to release him from the action when they had no evidence against him, and that he made efforts to avoid the cost of a summary judgment motion, it was open to Mr. Messina to have brought his motion earlier. I do not consider the plaintiffs’ unawareness of or indifference to the strength of their case against Mr. Messina to amount to conduct at the substantial indemnity cost-triggering level of “reprehensible.”
[15] I accept the plaintiffs’ submission that Mr. Messina’s costs should be awarded on a partial indemnity basis.
The Assessment of Partial Indemnity Costs
[16] As I noted above, Mr. Messina seeks partial indemnity costs based on an hourly rate of $350.00, the rate actually charged by his lawyer. The plaintiffs object to this request.
[17] “Partial indemnity costs” are defined in the Rules of Civil Procedure, although not with any specificity. I referred to “the Tariffs” in para. 9, above; Rule 1.03(1) of the Rules of Civil Procedure defines “partial indemnity costs” as “costs awarded in accordance with Part I of Tariff A.” At one time, Part I of Tariff A included a costs grid but it now simply says that the fee for any step in a proceeding is to be determined in accordance with s. 131 of the Courts of Justice Act and the factors listed in Rule 57.01(1).
[18] The Court of Appeal has observed that the degree of indemnification intended by the partial indemnity scale of costs has never been precisely defined and is not a matter of precise mathematical calculation. (Whitfield v. Whitfield, 2016 ONCA 720 at para. 29.) Similarly, the Court of Appeal has concluded that a mechanical application of the same percentage discount in every case where costs are awarded on a partial indemnity scale would not be appropriate. (Wasserman, Arsenault Ltd. v. Sone, 2002 CanLII 45099 (ON CA) at para. 5.)
[19] The Court of Appeal has made it clear that the fixing of costs does not begin and end with a calculation of hours times rates. It has said that the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay rather than an amount fixed by the 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.), at para. 26.) (As of the date of this endorsement, Boucher has been cited in more than 3,500 cases.)
[20] In addition to its admonitions that it would be wrong to fix partial indemnity costs simply by multiplying hours and rates and then reducing the total by a certain percentage, the Court of Appeal has provided some helpful parameters for the exercise of fixing partial indemnity costs.
[21] For example, the Court of Appeal has said that it is an error in principle to award partial indemnity costs that amount to substantial indemnity costs (Boucher at para. 36.) Substantial indemnity costs are defined in Rule 1.03(1) of the Rules of Civil Procedure as being 1.5 times what would otherwise be awarded “in accordance with Part I of Tariff A,” which is, as noted in para. 17, above, the definition of partial indemnity costs.
[22] The Court of Appeal has also said that it is an error in principle to award partial indemnity costs that amount to actual or “full indemnity” costs (790668 Ontario Inc. v. D'Andrea Management Inc., 2015 ONCA 557 at para. 23.) "Full indemnity” is not a defined term. Full indemnity is the highest scale of costs and is distinct from the substantial indemnity scale. (Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766 at para. 8.) That substantial indemnity and full indemnity are not synonymous is evident from Rule 57.01(4), which refers to each separately: Rule 57.01(4)(c) confirms the court’s authority to make all or part of a cost award on a substantial indemnity basis and Rule 57.01(4)(d) says the court may award costs in an amount that represents full indemnity.
[23] Significantly, in a 2009 decision, the Court of Appeal said that partial indemnity costs must be less than two-thirds of a party’s full indemnity costs. (Marcoccia v. Ford Credit Canada Limited, 2009 ONCA 317 at para. 53.) This conclusion flows from the relationship between partial indemnity costs and substantial indemnity costs, the latter defined as 1.5 times the former, and the fact that substantial indemnity costs cannot equal and must be less than full indemnity costs:
Where the application of Rule 1.03 [which says that substantial indemnity costs are 1.5 partial indemnity costs] leads to substantial indemnity costs that are equal to or greater than a full indemnity award, it necessarily follows that the partial indemnity costs have been assessed too generously. Therefore, the effect of Rule 1.03 is to limit the trial judge’s discretion in assessing partial indemnity costs to something less than two-thirds of the solicitor’s full indemnity costs. (Emphasis added.) (Marcoccia, at para. 53.)
[24] Litigants cannot attempt to skirt the two-thirds rule by not disclosing their fee arrangements with their lawyers. The Rules of Civil Procedure contemplate disclosure of a party’s actual costs: Form 57A-Bill of Costs requires copies of “dockets or other evidence” in support of a party’s claim for fees; Form 57B-Costs Outline requires disclosure of “the rate actually charged by the party’s lawyer” or, if there is a contingency agreement, “the rate that would have been charged absent such an arrangement.” Depending upon the circumstances, one or both of these forms must be served by a party seeking costs. (Rules 57.01(5) and (6.))
[25] The court is under no obligation to tie its assessment of partial indemnity costs to the costs actually incurred by the party, other than to ensure, pursuant to Marcoccia, that the assessed amount is “something less than two-thirds” of the actual amount. If, for instance, the court were to consider a party’s actual costs to be outrageously high, it might well conclude that the fair and reasonable amount for the unsuccessful party to pay (pursuant to Boucher, at para. 26) is minimal in relation to the amount the successful party was actually charged. Even when full indemnity costs are fixed by the court, the successful party is not entitled to whatever costs were incurred; the quantum must still be fair and reasonable for what was involved in the particular proceeding. The award must also be proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding: Rule 1.04(1.1) (United Soils Management Ltd. v. Mohammed, 2019 ONCA 128 at para. 42.)
[26] In 2012, the Court of Appeal seems to have found no error in principle in a trial judge’s reduction of a party’s actual costs by 40 per cent to fix partial indemnity costs. (Eastern Power Limited v. Ontario Electricity Financial Corporation, 2012 ONCA 366 at paras. 11 and 26.) The trial judge had assessed the party’s substantial indemnity costs at 90 per cent of its actual costs and its partial indemnity costs at 60 per cent of its actual costs. The Court of Appeal concluded that the party was not entitled to substantial indemnity costs. To convert the substantial indemnity costs awarded by the trial judge to partial indemnity costs, the Court of Appeal awarded 60 per cent of the party’s actual costs instead of the 90 per cent awarded by the trial judge.
[27] In 2014, the Court of Appeal held that cost rates in the Information for the Profession set out in the preamble to Rule 57 were out of date and that amounts calculated at 55 per cent to 60 per cent of a reasonable actual rate might more appropriately reflect partial indemnity, particularly in the context of two sophisticated litigants well aware of the stakes. (Inter-Leasing, Inc. v. Ontario (Revenue), 2014 ONCA 683 at para. 5.)
[28] In 2015, the Court of Appeal referred to “the ordinary rule of thumb” that partial indemnity costs should be about one-third less than substantial indemnity costs (790668 Ontario Inc. v. D'Andrea Management Inc., 2015 ONCA 557 at para. 23), although it then went on to fix partial indemnity costs by reducing the successful party’s actual costs, and not its substantial indemnity costs, by one-third. The “ordinary rule” referred to in 790668 is roughly the converse of the Rule 1.03(1) definition of substantial indemnity as being 1.5 times partial indemnity costs.
[29] From these cases and rules, I have extracted the following principles relating to partial indemnity costs:
• Partial indemnity costs must be fixed in an amount that is fair and reasonable for the unsuccessful party to pay;
• Partial indemnity costs must be fixed in an amount that is proportionate to the importance and complexity of the issues and to the amount involved in a proceeding;
• The degree of indemnification intended by the partial indemnity scale of costs is not defined;
• Partial indemnity costs may be but are not necessarily equal to a certain percentage of a successful party’s actual costs;
• There is a limit to a court’s discretion to award partial indemnity costs that is tied to the actual or full indemnity costs of the successful party: Partial indemnity costs must be less than two-thirds of the successful party’s actual or full indemnity costs; and
• Litigants seeking costs must disclose their actual or full indemnity costs.
[30] I am satisfied that the plaintiffs are correct, and that Mr. Messina cannot be awarded partial indemnity costs based on an hourly rate of $350.00 when that was his lawyer’s actual hourly rate.
[31] To assess Mr. Messina’s partial indemnity costs, I turn to the factors in Rule 57.01(1), which include, in Rule 57.01(1)(0.a) the principle of indemnity, including the experience of the lawyer for the party entitled to costs, the rates charged and the hours spent.
[32] I have already noted, under “Mr. Messina’s position”, above, that according to Mr. Messina’s bills of costs, he is seeking costs on a partial indemnity basis of $62,856.42, consisting of $28,355.70 ($27,564.79 plus an appearance fee of $700 and HST of $91.00) for the motion and $34,500.63 for the action.
[33] Mr. Messina filed ten statements of account with his costs submissions. The accounts were issued to Mr. Messina from 2014 to 2020. In all but one of the accounts, Mr. Messina’s lawyer’s hourly rate was $350.00/hour; in one of the accounts, issued in 2019, the hourly rate charged was $450.00/hour.
[34] The last account, dated March 10, 2020, included a noteworthy arithmetical error: its total of $56,109.93 included fees of $48,160.00 for Mr. Messina’s lawyer and indicated that this number was the product of 68.8 hours times the hourly rate of $350.00. The time spent by the lawyer which appeared on the account added up to the 68.8 hours. However, 68.8 times $350.00 equals $24,080.00, 50 per cent of the $48,160.00 which appears to have been charged.
[35] I am certainly troubled by Mr. Messina’s law firm’s arithmetic. It is hard to imagine how such an error could have gone unnoticed, particularly after the plaintiffs’ lawyer, in his costs submissions, took issue with the disproportionate cost of the motion in relation to the balance of the action. Although he was given the opportunity to do so, Mr. Messina’s lawyer did not reply to the plaintiffs’ costs submissions. That said, while sloppy, because the costs of the motion sought by Mr. Messina in his bill of costs are much closer to my adjusted figure of $24,080.00 than double that amount, I am satisfied that the double-accounting was an error, albeit a big one, and was not meant to mislead the plaintiffs or the court,
[36] After reducing the fees charged to Mr. Messina to account for the $450.00/hour rate on the 2019 account and the $24,080.00 error on the March 10, 2020 account, the total actual fees charged to Mr. Messina since the beginning of his lawyer’s retainer in 2014, including the fees relating to the summary judgment motion, should have been $62,580.00: $37,950.00 for the action and $24,630.00 ($24,080.00 for Mr. Messina’s lawyer plus law clerk fees of $550.00) for the motion.
[37] I do not consider the $350.00/hour rate actually charged by Mr. Messina’s lawyer to be unreasonable, given his 30 years of experience.
[38] With respect to the hours spent, it is significant that, in their costs submissions, the plaintiffs do not appear to take issue with the billings for much of the action, including the pleadings, case conferences, examinations for discovery, mediation and a Wagg motion, describing these billings as appearing to be “entirely normal.” The plaintiffs did, understandably, take issue with the $56,109.92 Mr. Messina seems to have been charged for the summary judgment motion; I have already identified and adjusted for this error.
[39] When considering the factor in Rule 57.01(1)(0.b), the amount the unsuccessful party could reasonably expect to pay, it is difficult to assess the plaintiffs’ reasonable expectations in this case. The lawyer who represented the plaintiffs on the summary judgment motion was not the first lawyer to represent the plaintiffs in the action. I was not given a bill of costs or costs outline for the plaintiffs’ costs of the action. Consequently, I had no easy point of comparison with the costs of the action incurred by Mr. Messina. The plaintiffs did provide a bill of costs for the motion. It was in the amount of $2,825.00 on a full indemnity basis, about one-eighth of Mr. Messina’s full indemnity costs for the motion. However, to say that the plaintiffs’ approach to the summary judgment motion had been minimalist would be an understatement. They filed no responding evidence and filed a factum of less than five pages one day before the hearing of the motion. The one comparison I am able to make is in respect of the hourly rates of the parties’ lawyers; the lawyer who represented the plaintiffs on the motion charged an actual hourly rate of $250.00, compared to Mr. Messina’s lawyer’s $350.00/hour; the lawyer who represented the plaintiffs on the motion has five years of experience compared to Mr. Messina’s lawyer’s 30.
[40] I place considerable weight in this case on the factors in Rules 57.01(1)(e), (f) and (g), which consider conduct that may have affected the duration of a proceeding, whether any steps in the proceeding were improper, unnecessary or taken through negligence, mistake or excessive caution and whether a party denied or refused to admit anything that should have been admitted. Although I rejected Mr. Messina’s request for substantial indemnity costs, it was not lost on me that the plaintiffs started an action against Mr. Messina in 2014 for his role in an assault alleged to have taken place in 2013 and that they maintained their action against him for more than five years, despite having no evidence that he was one of the men involved in the assault. The plaintiffs filed no evidence in response to Mr. Messina’s summary judgment motion. Even though Mr. Messina included in his motion record a photograph of himself, there was no responding affidavit from any of the plaintiffs or their witnesses identifying him. At the hearing of the motion, the plaintiffs argued that Mr. Messina had not proven that he was not involved in the alleged assault, a burden Mr. Messina did not bear. The plaintiffs also argued that evidence that was not available at the motion but which may be available at trial could satisfy the trier of fact that Mr. Messina had been involved in the alleged assault. The plaintiffs did not put their best feet forward, as they are required to do when responding to a summary judgment motion. (Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at para. 26, aff’d 2014 ONCA 878 (Ont. C.A.))
[41] The plaintiffs should have taken a good hard look at their case against Mr. Messina and should have discontinued their action against him at the very latest upon receipt and review of his motion record and factum for the summary judgment motion. Instead, the plaintiffs closed their eyes, crossed their fingers and allowed the motion to proceed. I consider their conduct in this respect to be highly relevant to my assessment of the costs that would be fair and reasonable for them to pay.
[42] The plaintiffs have acknowledged that the fees charged for many of the steps in the action were not unreasonable. However, I do not believe the plaintiffs would have expected Mr. Messina’s costs of the motion to be eight times theirs.
[43] This matter was not particularly complex, but it was very important to Mr. Messina that the plaintiffs’ allegations against him be put to rest, that he be extracted from the plaintiffs’ action and he and his family not be required to incur any additional legal fees in his defence.
[44] I have concluded that, in all of the circumstances, the fair, reasonable and proportionate amount of fees for the plaintiffs to pay in this case is $25,000.00 for the action and $15,000.00 for the summary judgment motion for a total of $40,000.00, an amount which does not exceed two-thirds of Mr. Messina’s actual fees of $62,580.00, which I do not consider to be unreasonable. The plaintiffs shall also pay HST on the fees of $5,200.00. Mr. Messina shall also have his claimed disbursements of $1,082.01, inclusive of HST, for the action and his claimed disbursement of $747.63, inclusive of HST, for the summary judgment motion.
[45] In total, the plaintiffs, jointly and severally, shall pay Mr. Messina $47,029.64 on account of his costs of the action and the motion.
[46] Calypso’s costs of Mr. Messina’s crossclaim shall be fixed at $3,390.00, inclusive of HST. I exercise my discretion under s. 131 of the Courts of Justice Act and order that these costs be paid to Calypso by the plaintiffs at the conclusion of the action.
Date: August 29, 2020
COURT FILE NO.: 14-61078
DATE: 20200829
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: IHAB DIA, FATEN ZEINEDDINE, SAMER DIA (a minor by his litigation guardian IHAB DIA), ANISAH DIA (a minor by her litigation guardian IHAB DIA), ALI DIA (a minor by his litigation guardian IHAB DIA), and MOHAMED DIA (a minor by his litigation guardian IHAB DIA)
Plaintiffs
AND
CALYPSO THEME WATERPARK, JACQUES BUI, JAMIE CROWDER, KHAMEA LOUANGRATH, PAOLO MESSINA AND SHAUN WHEELER
Defendant
AND BETWEEN:
PAOLO MESSINA
Plaintiff by Counterclaim
AND
SAMER DIA AND MAHAMED ZEINEDDINE
Defendants by Counterclaim
BEFORE: Madam Justice H.J. Williams
COUNSEL: James Bowie, for the Plaintiffs/Defendants by Counterclaim
M. James McMahon, for the Defendant/Plaintiff by Counterclaim Paolo Messina
Costs endorsement
Madam Justice H. J. Williams
Released: August 29, 2020