COURT FILE NO.: CV-14-517481

DATE: 2020904

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jack Ganz Consulting, Plaintiff

AND:

Recipe Unlimited Corporation, Defendant

BEFORE: Nishikawa J.

COUNSEL: M. Michael Title and Patricia Virc, for the Plaintiff

Kenneth Prehogan and Hayley Peglar, for the Defendant

HEARD: In writing

costs endorsement

Overview

[1] In May 2020, I granted summary judgment dismissing the Plaintiff’s claims against the Defendant: Jack Ganz Consulting Ltd. v. Recipe Unlimited Corporation, 2020 ONSC 3319. The parties were unable to agree on costs. The parties have submitted a large volume of material to supplement their cost submissions.

[2] The Defendant seeks costs of the action in the amount of $341,236.65. While the Defendant seeks costs on a substantial indemnity basis, from the bill of costs provided, this amount appears to be its actual costs. The Defendant’s partial indemnity costs are $251,565.16. Both amounts include HST and disbursements. Alternatively, the Defendant seeks substantial indemnity costs from September 3, 2014, when it made an offer to settle the Plaintiff’s claim for $70,000. The Defendant seeks an additional $3,000 for the preparation of costs submissions. The Defendant has deducted costs previously awarded.

[3] The Plaintiff submits that it has not engaged in conduct that would entitle the Defendant to its actual or substantial indemnity costs. The Plaintiff also opposes an award of substantial indemnity costs on the basis that the Defendant’s offer was not a Rule 49 offer to settle, but a pre-litigation offer made between the parties. The Plaintiff further submits that the Defendant’s costs are excessive, especially in comparison to its own costs, which are $93,029.65 at the partial indemnity rate, including HST and disbursements.

Analysis

Substantial Indemnity or Actual Costs

[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] In this case, the Plaintiff made allegations of bad faith on the part of the Defendant. In addition, the Plaintiff was found to have delayed the proceeding by making amendments on the eve of the hearing of the Defendant’s summary judgment motion. The Plaintiff also took steps that were inconsistent with statements made to the court. For example, after deposing that the proposed amendment would not negatively impact the summary judgment hearing, the Plaintiff subsequently brought a further motion for production.

[6] In my view, an allegation of bad faith in the context of a breach of contract claim is no more than an allegation that a party has breached the implied duty of good faith. Alleging bad faith in this context is not analogous to an allegation of fraudulent or deceitful conduct that could warrant substantial indemnity costs. In addition, the Plaintiff did not engage in egregious, malicious or high-handed conduct, in the proceeding or otherwise, that would warrant an award of substantial indemnity costs. While the Plaintiff’s shifting theories of liability and conduct of the proceeding delayed the matter and put the Defendant to additional legal costs, there is no basis upon which to find that it was malicious. This is not a rare or exceptional case of reprehensible conduct on the part of the Plaintiff. Moreover, the Defendant was awarded costs thrown away when the summary judgment hearing was adjourned.

[7] For the same reasons, there is no basis upon which this court could order recovery of the Defendant’s actual costs.

The Offer to Settle

[8] On September 3, 2014, the Defendant offered to settle the Plaintiff’s claim for $70,000 plus HST. The offer was made in an email from the Defendant’s Chief Financial Officer to the Plaintiff’s principal, Jack Ganz. The email was sent before the Plaintiff commenced the action.

[9] In Scanlon v. Standish (2002), 2002 20549 (ON CA), 57 O.R. (3d) 767, [2002] O.J. No. 194 (C.A.), at para. 8, the Court of Appeal held that r. 49 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 [“Rules”] does not apply to pre-litigation offers even if they purport to be made pursuant to r. 49.

[10] Since the Defendant’s offer was made before the action was commenced, the cost consequences of r. 49 do not apply. Moreover, the offer was made while the parties were attempting to resolve matters between them. It would not have been clear to the Plaintiff that the offer would have consequences under the Rules. In addition, the offer did not state that it remained open until trial. The Defendant is not entitled to costs on a substantial indemnity basis after the date of the offer.

Amount of Costs

[11] Pursuant to the Courts of Justice Act, s. 131(1), R.S.O. 1990, c. C.43, 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 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, while keeping in mind that the court should seek to balance the indemnity principle with the fundamental objective of access to justice.

[12] Rule 57.01(1) of the Rules 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.

[13] The Defendant was entirely successful on its motion for summary judgment and is entitled to its partial indemnity costs of the motion and the action. In making a claim for $27 million, and alleging bad faith, the Plaintiff ought to have expected that substantial legal fees would be incurred in defending the claim.

[14] The action involved the interpretation of a contract and the issue of whether the Plaintiff was an independent contractor or employee. While the issues were not particularly complex, the Plaintiff’s allegations shifted over time and required the gathering of evidence that covered a lengthy period of time.

[15] As a result of the Plaintiff’s shifting theory, broad documentary requests, and motions for production that were characterized as a “fishing expedition”, the Defendant incurred more legal fees than it otherwise would have had to. The amendment required that additional examinations be conducted. The Plaintiff raised certain issues, such as the return of a projector, that were without merit. The Plaintiff advanced the position that it was a dependent contractor, despite admitting that that it was not financially dependent. In response to the Defendant’s summary judgment motion, the Plaintiff argued that its claim could be substantiated by further evidence, despite clear case law that a party responding to a summary judgment motion must put its best foot forward.

[16] While the Plaintiff’s conduct lengthened the proceeding, the Defendant attempted to resolve the matter at an early stage. Although the September 2014 offer was not a r. 49 offer, the litigation could have been avoided.

[17] Notwithstanding the foregoing, given the steps involved and the brevity of the Defendant’s affidavits, I find that the time spent by Defendant’s counsel is somewhat disproportionate. Defendant’s counsel billed a total of 938.8 hours of lawyer time, while Plaintiff’s counsel billed a total of 408.4 hours. The Defendant notes that Plaintiff’s hours are not necessarily an accurate reflection of the tine spent because the Plaintiff has not provided a bill of costs for the action. However, some duplication of work or inefficiency by Defendant’s counsel likely resulted from changes in junior counsel on the file.

[18] As noted by the Plaintiff, the hourly rates of Defendant’s counsel are significantly higher than Plaintiff’s counsel. Both senior counsel were called to the bar in 1980. However, Mr. Prehogan’s actual hourly rate is $300 higher than Mr. Title’s hourly rate. In fixing fees on a partial indemnity basis, I find that it would be appropriate to apply a reduction to both the hourly rate and time spent by Defendant’s counsel.

[19] Based on the relevant considerations, I find that a fair and reasonable amount of costs of the motion and action, on a partial indemnity basis, is $180,000 and fix costs accordingly. This includes disbursements and HST, as well as the costs incurred in the preparation of costs submissions.

[20] 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: September 4, 2020