COURT FILE NO.: CV-17-570060
DATE: March 22, 2021
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF the Construction Act, R.S.O. 1990, c.C.30
BETWEEN:
NEW GENERATION WOODWORKING CORP. Plaintiff
- and -
ADAM ARVIV and CANADIAN IMPERIAL BANK OF COMMERCE. Defendant
Charles W. Skipper for the plaintiff, Tel.: 416-941-8841, Fax: 416-941-8852; Email: cskipper@foglers.com.
Adam Arviv for the Defendant Tel.: 416-930-1221, Fax: Unknown; Email: arvivadam@gmail.com.
DECISION: February 15, 2021.
Master C. Wiebe
COSTS AND INTEREST DECISION
[1] On February 15, 2021 I issued my Reasons for Judgment wherein I ruled that the defendant, Adam Arviv, must pay the plaintiff, New Generation Woodworking Corp. (“NGW”), the full amount of its lien and breach of contract damage claim, $73,767.26. I also ruled that NGW’s lien has priority over the first mortgage to the extent of the basic holdback of $18,376.72 and full priority over the second mortgage. I ordered that the parties to the trial hearing make written submissions on costs and interest. NGW has done so. Mr. Arviv has not.
[2] NGW only seeks costs from Mr. Arviv. The following is my ruling on costs and interest.
[3] As this is a construction lien action, my jurisdiction concerning costs comes from Construction Act, R.S.O. 1990, c. C.30 (“CA”), section 86. Section 86(1) states that costs of an action or motion are in the discretion of the court, and expressly authorizes the court to award costs on a substantial indemnity basis against a party. Section 86(2) states that the court shall not award costs that exceed the costs the party entitled to costs would have incurred from taking the least expensive course of action. It is well established that in exercising its discretion on costs, the court in a lien action takes close guidance from Rule 57 of the Rules of Civil Procedure, the rule that contains the principles to be applied in awarding costs in a civil proceeding. I will do so here.
Result
[4] There is no doubt that NGW is entitled to the costs of the reference. It was entirely successful in getting a judgment for 100% of its claim for lien and contract damage claim.
Offers to settle
[5] On December 3, 2019 NGW served an offer to settle wherein it offered to accept the all-inclusive sum of $55,000, namely 75% of its claim, if the offer was accepted in two weeks. The offer stated that if it was accepted after that two week period Mr. Arviv would have pay NGW the $55,000 plus NGW’s partial indemnity costs to the date of acceptance. This offer remained open for acceptance until trial. Given how poor Mr. Arviv’s case is, it is astounding that Mr. Arviv did not accept this favorable offer.
[6] While there is authority for the proposition that Rule 49.10 is not binding on this court as it is a restriction on the broad costs discretion of CA section 86, there is no doubt that this court can and should pay attention to the rule in the interest of promoting settlements. Although the NGW offer was an ever increasing one, the result of the trial is clearly much more favorable to NGW than this offer. Under Rule 49.10 this means that NGW should get its partial indemnity costs to the date of the offer and its substantial indemnity costs thereafter.
[7] That is in effect what NGW wants, namely partial indemnity costs to the date of the offer, December 3, 2019, and substantial thereafter. NGW broke down its costs outline into these two time periods. It claims a total of $17,974.50 in partial indemnity fees cost for the period prior to December 3, 20219 and a total of $75,848 in substantial indemnity fees cost for the period after December 3, 2019. The period after December 3, 2019 concerns the work of trial preparation and trial and is therefore much greater. The total fees claimed is $93,822.50 + $12,196.25 (HST) = $106,019.42.
[8] In addition there are the expert costs for Travis Walker in the amount of $11,469.50 (HST inclusive) and the other disbursements in the amount of $6,076.10. The total of all these figures is $123,565.03. This figure does not include the costs of the NGW January 7, 2021 motion to strike which I will deal with separately.
[9] Since NGW obtained a result that is more favourable than its Rule 49.10 offer, I will use these figures and the $123,565.03 total as the benchmark for my award of costs to NGW.
Proportionality
[10] Under Rule 1.04(1.1) a court in civil actions is required to make orders that are “proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.” The factors of importance, complexity and the amounts claimed and recovered are expressly mentioned in Rule 57.01(1). I have ruled that the requirement in CA section 86(2) to take the least expensive course of action embodies the concept of proportionality as described in the Rules of Civil Procedure; see Luxterior Design Corp. v. Gelfand, 2014 ONSC 900, at paragraph 16.
[11] The amount of costs claimed by NGW in this case, $123,565.03, is 1.68 times greater than its claim and its judgment, $73,767.26. Indeed, there will be more costs concerning the January 7, 2021 motion. But this principle of proportionality should not be used to cause an injustice. Justice Sanderson in Persampieri v. Hobbs, 2018 ONSC 368 stated in paragraph 50 that an overemphasis on proportionality in awarding costs would amount in that case to a reward for the unreasonable conduct of the insurer for the defendant, who steadfastly refused to engage in any meaningful settlement discussion. I note that the plaintiff in that case obtained a jury award of $20,414,83, and that the judge awarded the plaintiff $237,017.50 in costs.
[12] In paragraph 83, Justice Sanderson quoted from Justice McCarthy in Aaccurate v. Tarasco, 2015 ONSC 5980 as follows: “. . . a pattern of such outcomes [under-compensation due to proportionality] would result in an unintended but nonetheless real denial of access to justice; it would send a message to plaintiffs that it is not worthwhile to pursue legitimate claims in court because no one can possibly make it cost effective to do so. This would be a denial of justice in the most fundamental sense. It would tend to encourage those resisting legitimate but modest claims to take unreasonable positions.”
[13] I echo those comments. I will not allow the doctrine of proportionality to undermine the operation of justice, which in this case turns primarily on the factor of the conduct of the defendant.
Conduct
[14] Rule 57.01(1)(e) expressly states that the court should consider “the conduct of a party that tended to shorten or to lengthen unnecessarily the duration of the proceeding.” CL section 86(1) expressly states that the court may make an award of substantial indemnity costs against a party. I read that subsection as implicitly authorizing a court to consider whether a party has “prejudiced or delayed the conduct of the action” in the same way it expressly authorizes a court to do so in relation to a “person who represented a party.”
[15] The case before me is one where Mr. Arviv clearly and unnecessarily lengthened the duration of this proceeding. Based on my review of the evidence, I found that there was virtually no merit to the defendant’s Scott Schedule position and entire defence. The NGW case was simple, namely a claim for a lien and breach of contract damages claim concerning two unpaid accounts that were rendered on December 7 and 8, 2016 for work that was done. Instead of paying these invoices forthwith as he should have done based on the evidence, Mr. Arviv chose to walk away from the contract.
[16] Eventually when NGW preserved and perfected its lien, Mr. Arviv pleaded that NGW had in effect repudiated the contract on account of a list of deficiencies. He counterclaimed for $385,000 in damages. Eventually, after I became seized of the matter under a judgment of reference and ordered a Scott Schedule, Mr. Arviv outlined 23 items of alleged deficiencies with few particulars. He reduced his set-off and counterclaim to between $76,508.79 and $101,508.79. At trial, I went through the plaintiff’s evidence concerning the items raised by Mr. Arviv and explored by the plaintiff in the ordered site visit. I found that, had Mr. Arviv not repudiated the contract and had he not had his set-off and counterclaim struck, his claims would at most have been valued at less than $1,000. This case should never have taken place.
[17] Instead of trying to settle this case, Mr. Arviv took an obstinate and provocative approach to settlement. Mr. Skipper’s costs submission shows that during the examinations for discovery in December, 2018 counsel had a frank discussion about settlement; but Mr. Middonti, Mr. Arviv’s lawyer at the time, could not get instructions. I ordered two mediations in 2019. In both cases, the mediations did not take place. The first time it was because Mr. Arviv was not available. I was not advised as to the reasons for the second failure.
[18] Then when I convened a teleconference on June 23, 2020 during the suspension of in-person court operation and the total suspension of trial hearings, counsel for both parties requested a settlement conference with Master Short. By this time NGW had served its offer to settle. It was a serious offer. I ordered that the settlement conference with Master Short take place on July 23, 2021. In Mr. Skippers’ costs submission I now discover that at the settlement conference Mr. Arviv offered that NGW “pay him” $25,000 to settle the case. Understandably, the settlement conference went nowhere and ended after 1.5 hours. Given the evidence that was by that point available to both parties, I agree with Mr. Skipper’s characterization of Mr. Arviv’s “offer” as being nothing but a “middle finger salute.”
[19] Then, finally, there was Mr. Arviv’s conduct leading to and at the scheduled trial. This has been adequately reviewed in my decisions dated January 11, January 14 and February 15, 2021. I will not go into detail here. Suffice it say that by not delivering his seven affidavits for the evidence in chief of his trial fact witnesses in gross breach of my trial directions, by saying that he did so because he did not have the time and that this case was a waste of his time, by consenting to the removal of his lawyer of record, by using his dilatory effort at finding a replacement lawyer to try to adjourn the trial, and by bringing a motion at trial to have me recuse myself on the basis of groundless allegations of ethnic and class prejudice against him, Mr. Arviv showed me that he was not interested in litigating the substance of this case, but rather in delay to avoid the consequence of this action. He also showed nothing but disrespect for this case and the court process.
[20] I did not countenance Mr. Arviv’s delay attempts, particularly since NGW had already served and filed its evidence. I struck his set-off and counterclaim on January 7, 2021. I had the trial hearing proceed allowing Mr. Arviv to participate. He did so fleetingly.
[21] Mr. Arviv’s conduct throughout unnecessarily delayed this action and entitled NGW to an award of substantial indemnity costs for the entire reference. That is what he could reasonably have expected. It is a concession to Mr. Arviv that NGW does not seek such an award.
Quantum
[22] There are some potential issues of quantum concerning the NGW costs claim. Mr. Skipper is senior counsel with 29 years of experience. His substantial indemnity hourly rate is shown as being from $460 to $485. His partial indemnity rate is shown as being $375. These rates are reasonable for someone of Mr. Skipper’s vintage. Some might question as to why NGW used someone of Mr. Skipper’s experience and cost given the size of the NGW claim.
[23] I do not fault NGW for using Mr. Skipper. The driver of this action was the set-off and counterclaim, and these claims consistently remained opaque and puzzling. Furthermore, Mr. Arviv’s intimidating conduct justified NGW’s use of someone of Mr. Skipper’s experience as counsel of record.
[24] Most of the NGW legal costs were incurred in preparing for and attending at the trial hearing, namely almost $75,000 (HST inclusive) in substantial indemnity costs not including disbursements, namely over half the claim for costs. Most of these costs were for Mr. Skipper’s time. Was this reasonable?
[25] On reflection, I do not find major fault in this quantum. NGW was facing an eight-day trial hearing with eleven witnesses in total and eight witnesses on Mr. Arviv’s witness list. The NGW affidavits for evidence in chief were exemplary and compelling. Mr. Skipper did an excellent job in helping prepare them. The expert reports were thorough and well done. I commend Mr. Skipper for the way he presented the expert reports using a brief containing the instructional letters as well as the reports and the expert’s credentials. I also found Mr. Skipper’s written submissions for his closing argument and during trial very helpful. The plaintiff witnesses were well-prepared and effective in fielding questions. However, I do find the total for the trial preparation a little excessive.
[26] Some may argue that I should deduct the entirety of the expense concerning Mr. Walker, the expert, as I did not rely heavily on his opinion in my decision. I am not prepared to do so. Again, NGW had to prepare its case with an expert on Mr. Arviv’s witness list. That this witness and the other Arviv evidence did not appear in the end does not render the cost of retaining and using Mr. Walker unreasonable given what NGW was facing.
[27] The quantum of the NGW costs claim for the reference is generally not unreasonable. There were after all nine trial management conferences, a site visit, productions, discovery, a Scott Schedule, a motion and a settlement conference in addition to the four day trial hearing. The action has lasted over four years; the reference three years. The disbursements shown are reasonable.
Costs of the reference
[28] Considering all of these factors, I have decided to award NGW $120,000 in costs for the reference other than the costs of the NGW January 7, 2021 motion to strike.
Costs of the motion to strike
[29] On December 21, 2020 Mr. Wiffen emailed me requesting an attendance to schedule a motion to be removed as lawyer of record for Mr. Arviv. I scheduled a teleconference that took place on December 23, 2020. At that time, I scheduled the NGW motion to strike the pleadings of Arviv given his gross violation of my trial directions. The return date was set to be January 7, 2021. Mr. Skipper prepared his client’s motion material and had it served the next day, December 24, 2020.
[30] On January 7, 2020 NGW succeeded in its motion in part. I struck the Arviv set-off and counterclaim, not the entire Arviv pleading. On January 12, 2021 Mr. Skipper served and filed a costs outline for the motion showing $18,202.27 in actual costs, $16,465.46 in substantial indemnity costs and $11,255.03 in partial indemnity costs.
[31] There is no doubt that this was a very important motion. Mr. Arviv’s pleadings hung in the balance. The motion had a huge impact on the trial hearing the following week. Therefore, it justified the work Mr. Skipper put into this motion, namely the motion record, the memorandum of law, brief of authorities and the detailed oral argument. The prominence of Mr. Skipper in this work was entirely justified given the importance of the motion. The substantial indemnity scale is justified as Mr. Arviv’s unreasonable conduct was entirely at fault for the motion.
[32] I will not grant the entirety of the substantial indemnity costs claimed as a result of NGW’s less than total success. It did not get all of Mr. Arviv’s pleadings struck.
[33] I award NGW substantial indemnity costs of this motion in the amount of $15,000.
Prejudgment and post-judgment interest
[34] In the NGW statement of claim there is a claim for prejudgment interest at 2% per month (ie. 24% per annum) running from 30 days after the invoices were rendered. Frankly, I do not know the evidential basis for this claim. Neither the contract documents nor the subject invoices refer to interest on overdue accounts and timing of payment. That is why I found in my reasons that the invoices were due when rendered.
[35] Given the absence of reference to a contractual interest rate on overdue accounts, I am not prepared to order a rate of 24% per annum. But I will start the running of prejudgment interest on the judgment for both invoices on January 7, 2017, namely thirty days after the date of the last subject invoice. I am doing that only because that is what NGW claims in its pleading.
[36] As to prejudgment interest rate, NGW claimed in its statement of claim in the alternative the interest mandated by the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CLA”) section 128. That interest rate is 0.8% per annum. I have discretion to increase that rate in the interest of fairness. The CLA interest rate increased in 2018, 2019 and early 2020 to as high as 2%, but then sharply declined.
[37] As a result, to be fair to NGW, I have decided to award and do award NGW prejudgment interest at the rate of 1% per annum running from January 7, 2017. This rate will be applied to the judgment amount.
[38] The CLA post-judgment interest for this quarter is 2% per annum. That will be applied to the judgment amount and the costs award.
Conclusion
[39] In conclusion, I award NGW a total of $120,000 + $15,000 = $135,000 in costs for the entire reference to be paid by Mr. Arviv.
[40] I award NGW prejudgment interest on the judgment amount at the rate of 1% per annum running from January 7, 2017 to the date of the report, and post-judgment interest on both the judgment amount and the costs award at 2% per annum.
[41] I enclose a draft form of final report. Please note that it is dated and effective as at March 29, 2021. That is the date on which I intend to sign the report. Also note that I have required that Mr. Arviv not only pay the lien amount but also 25% of same into court within 30 days in order to be entitled to remove the lien. Given the result, NGW should not be prejudiced by Mr. Arviv’s decision not to vacate the lien with security for costs under CLA section 44. The parties are asked to provide me their comments on the report in the meantime. I have also enclosed an instructional sheet concerning the process for confirming the report.
Released: March 22, 2021
MASTER C. WIEBE
COURT FILE NO.: CV-17-570060 DATE: March 22, 2021
ONTARIO SUPERIOR COURT OF JUSTICE In the matter of the Construction Act, R.S.O. 1990, c. C.30
BETWEEN: New Generation Woodworking Corp. Plaintiff
- and -
Adam Arviv and Canadian Imperial Bank of Commerce Defendants
COSTS AND INTEREST DECISION
Master C. Wiebe
Released: March 22, 2021