COURT FILE NO.: CV-08-34649 PD1

DATE: 2020-09-08

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SOFTCOM SOLUTIONS INC., SONYA ZENZ, DAN CATTO, DENNIS DOHEY, JOSEPH J. IAMARINO, CYNTHIA L. IAMARINO, IREN KISS, JOHN KISS, KAROLINE KISS CAMPANA, LESLIE KISS, DOLORES ROMANUK, MICHAEL ROMANUK AND SOFTCOM SOLUTIONS PARTNERSHIP, Plaintiffs

AND:

ATTORNEY GENERAL OF CANADA, CANADA REVENUE AGENCY, LYNN WATSON, TERRY LAW, JOHN HAISANUK, PETER HERYET, TERRY HARTER, GREG HOPFAUF, CLAUDE LEMARCHE, MICHELLE LEVAC, LUCIA FAVRET AND ROBERT GOLDSTEIN, Defendants

BEFORE: Schabas J.

COUNSEL: Sam Laufer, for the Plaintiffs

Maria Vujnovic, Michael Bader and Kaitlin Coward, for the Defendants

HEARD: Written submissions on costs

COSTS ENDORSEMENT

Introduction

[1] This matter was tried before me over 8 days in December 2019, followed by one day of argument in February, 2020. On May 28, 2020, I released my Reasons for Judgment in which I dismissed the action: Softcom Solutions Inc. v. Canada (Attorney General), 2020 ONSC 3290. The defendants now seek costs of the action.

[2] As I noted at paragraphs 3 and 4 of my Reasons for Judgment, the trial arose from a summary judgment motion brought by the defendants, and much of the evidence was filed in writing, including transcripts of out of court cross-examinations conducted over 11 days, and the evidence of John Haisanuk from a preliminary inquiry in 2001. The action was litigated efficiently after it was reactivated in 2016. The parties did not go through lengthy discoveries and there were no significant interlocutory motions.

[3] The facts underlying the causes of action took place over 20 years ago. Much of the evidence as to the conduct of CRA was well-documented and established through a written record that included notes of interviews, contemporaneous memoranda and transcripts. While some facts were in dispute, this was largely due to assertions by the plaintiffs which were unsupported and contrary to the documentary record. As I stated in my Reasons for Judgment, at paragraph 156, the action was against the CRA for its conduct, and there was an extensive record leaving little in issue as to what CRA did, or did not do, leaving the legal issues of “whether their actions were reasonable and met an appropriate standard of care in the circumstances based on information they were provided, and whether they complied with the Charter.

[4] The defendants now seek $766,325.50 in costs on a partial indemnity basis. This is based on an amount that is said to have been billed to Canada Revenue Agency set out in a Bill of Costs of $847,164.10. The defendants say that amount should reduced by 30% to reflect a partial indemnity recovery, to $593,014.87. They also seek $173,310.63 in disbursements. The plaintiffs, on the other hand, submit that an appropriate amount would be in the range of $160,000 to $170,000, including disbursements.

Legal principles

[5] The Court of Appeal has identified the overriding principle in awarding costs is to fix an amount that is reasonable in the circumstances. In Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 Epstein J.A. stated at paras. 51-52:

As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding at para. 37, where Armstrong J.A. said “[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice.”

[6] My role, therefore, is to award an amount that is fair and reasonable for the plaintiffs to pay in the particular circumstances of this case. I am not to be guided by the actual costs incurred by the successful litigant, although I should not disregard it either: Boucher v. Public Accountants Counsel for Ontario, 2004 14579 (ON CA), 2004 14579 (Ont. C.A.). In addition, I must have regard to the principle of proportionality (R. 1.01(1.1)), and the need to balance the indemnity principle with the fundamental objective of access to justice. In exercising my discretion, I must also have regard to the factors set out in Rule 57.01(1) of the Rules of Civil Procedure.

Discussion

[7] The defendants argue that the amount claimed favours a large award; however, they acknowledge that the damages claim ultimately asserted was “a fraction of the amount originally claimed” and, I note, is approximately the same as the costs now claimed by the defendants. Plaintiffs often overstate their damages in pleadings, as clearly occurred here, and I place limited weight on this factor.

[8] Although the case raised an important issue as to whether CRA investigators owe a duty of care to persons under investigation, this did not require large amounts of evidence but, rather, was an interesting legal issue addressed largely based on jurisprudence. It did not add significantly to the costs.

[9] While the plaintiffs pleaded numerous causes of action, as plaintiffs often do, the action raised essentially four issues, as the defendants themselves put it in their closing submissions: (1) whether Haisanuk’s contacts with SI during his audit breached the Charter, in particular the principles in Jarvis; (2) whether the audit and/or investigation was conducted negligently, including whether they owed a duty of care to the plaintiffs and, if so, whether their conduct fell below an acceptable standard; (3) whether the CRA auditors and/or investigators committed a misfeasance in public office; and (4) damages.

[10] Aside from some mild complaints about having been unnecessarily noted in default and some adjournments, the defendants point to no specific conduct that would justify an increased costs award against the plaintiffs.

[11] The plaintiffs, on the other hand, raise a number of complaints about the defendants’ conduct, such as the defendants’ failure to produce an affidavit of documents, what the plaintiffs submit were unnecessary demands for particulars by the defendants, and efforts to settle on an Agreed Statement of Facts which were rebuffed by the defendants, among other things. They also continue to complain about the fact that the defendants failed to disclose Haisanuk’s illness following the staying of proceedings in 2009, arguing that they lost the opportunity to examine him and preserve his evidence beyond that obtained in the preliminary inquiry. I can place little weight on these complaints as there is limited information before me on the attempts to shorten matters. Further, based on the positions of the parties, a trial was inevitable and necessary. Having said that, it was also presented in an efficient manner, with abbreviated direct examinations and cross-examinations and a full written record.

[12] Ultimately, the issue is quantum, and the parties are far apart, as the defendants seek costs, albeit at reduced government rates for the work of three counsel, while the plaintiffs were represented, for the most part, by just one counsel.

[13] The defendants have not produced any dockets to provide details of the time claimed, which would likely contain many hours which are not recoverable on a partial indemnity basis, including, for example, meetings with clients. Rather, there are just blocks in which lump sums are claimed based on total hours which, in my view, are excessive.

[14] For example, from March to October, 2016, Ms. Vujnovic apparently docketed over 300 hours on work that culminated in a statement of defence. There was then over 300 hours spent by her drafting affidavits for the summary judgment motion, followed by a similar amount of time preparing and conducting cross-examinations on the summary judgment evidence, and almost 300 hours again in reviewing the transcripts and answering undertakings. During this time Ms. Vujnovic was assisted by a law clerk. The total amount claimed for this segment is approximately $260,000. While I appreciate that the facts required review and investigation, at the end of the day, there were a limited number of affidavits and the evidence largely retread ground that had been covered in documents and at a preliminary inquiry year earlier. The time is excessive.

[15] Commencing in April, 2018, Mr. Bader and Ms. Coward joined the team. It is not clear why Mr Bader, a very senior counsel, was brought in, as Ms Vujnovic had carriage of the matter and continued to lead the case through the trial. Mr. Bader’s role at trial was limited to making the argument on the admission of the Haisanuk transcripts and conducting the cross-examination of the plaintiff’s experts, but his work clearly overlapped with the work of Ms. Vujnovic. It seems to me that the plaintiffs should not reasonably have to expect to pay for two senior counsel in these circumstances.

[16] Bringing in Mr. Bader and Ms. Coward, did not result in a reduction in time spent by Ms. Vujnovic. Without details, the defendants seek costs for about 400 hours of time spent by Ms. Vujnovic and Mr. Bader, two senior counsel, between April 1 and August 31, 2018, described generally as reviewing and revising a draft agreed statement of facts, responding to a request to admit and conducting legal research. Ms. Coward seems to become more involved starting in September 2018, and between the three of them another 400 hours was spent on reviewing expert reports and conducting legal research from September to December, 2018, one year before the trial. From then until the commencement of the trial in December 2019, the three counsel spent over 1000 hours on the matter, even though the written record had been effectively completed a year earlier, and cross-examinations had been conducted.

[17] Overall, I agree with counsel for the plaintiffs that a starting point for the costs would be in the range of $180,000, after making appropriate reductions for duplication and excessive time, and having regard to the lack of detail in support of the time claimed. I do not agree, however, that it should be reduced further, as argued by the plaintiff. The hourly rates are low, due to the fact that the defendants were represented by salaried lawyers in the Department of Justice who billed their time to another branch of the federal government, the Canada Revenue Agency. The plaintiffs are beneficiaries of these low rates and it is not appropriate to further reduce them.

[18] As to disbursements, the defendants claim over $136,000 for two experts. However, the damages expert, who billed $32,750, did not testify and her report was essentially a critique of the plaintiff’s damages report which was addressed in cross-examination. In the circumstances, I would reduce that sum by approximately 50% to $16,000. Mr. Perron, the defendant’s expert on the standard of care, billed $103,711.81. However, about one-third of his report was struck out on consent and, as I noted in my Reasons (para. 136), the expert evidence of both sides had shortcomings and strayed beyond their expertise in opining on the “integrity” of the investigation. I would therefore reduce Mr. Perron’s amount by 50% as well, to $52,000 which is still more than the plaintiff’s expert, Mr. Gard, charged.

[19] As to the balance of the disbursements, the plaintiffs again complain of a lack of detail and overcharging for photocopying and reporting costs as well as other disbursements such as for travel expenses. Neither party has provided me with enough information to sort this out between the parties. Of the approximately $37,000 claimed, I agree that some reduction is warranted and find that the defendants are entitled to $25,000.

[20] Accordingly, the plaintiffs shall pay to the defendants’ costs on a partial indemnity basis of $273,000, inclusive of disbursements and taxes. This consists of $180,000 for fees and $93,000 for disbursements.

[21] I recognize that in fixing these costs there is a degree of rough justice, but that is frequently the case. At the end of the day, having regard to the principles and factors discussed earlier in these Reasons, the final sum reflects an amount that is fair and reasonable and which the unsuccessful parties should expect to pay.

Schabas J.

Date: 2020-09-08