Campbell v. Desjardins General Insurance Group

[Indexed as: Campbell v. Desjardins]

Ontario Reports

Ontario Superior Court of Justice

Smith J.

January 12, 2021

154 O.R. (3d) 15 | 2021 ONSC 254

Case Summary

Civil procedure — Costs — Motions — Insurer brining two applications and one motion against three sets of insureds — Insureds substantially successful and entitled to costs — Insureds seeking partial indemnity costs of $64,222 — Insureds granted partial indemnity costs of $30,000 — Amount sought by insureds was unreasonable — Issues were important and while not overly complex, were novel and it was reasonable for the insurer to pursue them — Award based on principles of fairness, proportionality and reasonableness — Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 57.01(1).

The insurer brought two separate applications and one motion against three sets of insureds. The insureds brought a cross motion for costs thrown away for a failed examination for discovery. There were three separate counsels acting for the insurer. The issues on the applications were similar on many fronts but required two counsel as a result of a conflict of interest. The motion dealt with the same loss but on a separate claim. The insureds had achieved substantial success but the parties were unable to agree on costs. For the applications, the insurer submitted that it was appropriate for the parties to bear their own costs. With respect to the motion, the insurer submitted that the insureds' costs request was unreasonable because the hourly rate was excessive, it was unreasonable to expect to be awarded costs for two lawyers acting for the insureds when senior counsel for the insurer handled the files with minimal or no additional assistance, and there was no evidence as to what was charged to the insureds. The insureds submitted that the hourly rates charged by their counsel were reasonable and could not have come as a surprise to the insurer. They maintained that their bill of costs was entirely in line with the importance and complexity of the matters. The insureds sought costs on a partial indemnity basis in the amount of $64,222.72 plus $1,500 for the preparation of the costs submissions.

Held, the insureds were awarded $30,000.

There were no reasons to depart from the general rule that the partial indemnity scale applied. There was no doubt that the issues were important in that the property losses were significant and the insurer wanted to finalize the appraisal process. The issues were not overly complex but they were novel and it was not unreasonable for the insurer to pursue them. The quantum of costs sought by the insureds was not in a reasonable range nor reflective of what someone would pay for the matters involved. Based on an hourly rate of $447.49 for lawyers with more than 20 years of experience, and applying the overriding principles of fairness, proportionality and reasonableness, the partial indemnity fees were assessed at $30,000. An appropriate amount for the costs of advancing the costs submissions was $1,000. Disbursements were allowed as charged in the amount of $7,351.97.

Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291, [2004] O.J. No. 2634, 2004 CanLII 14579 (C.A.); Campbell v. Desjardins General Insurance Group, [2020] O.J. No. 4704, 2020 ONSC 6630; Canfield v. Brockville Ontario Speedway, [2018] O.J. No. 2807, 2018 ONSC 3288, 24 C.P.C. (8th) 133, 293 A.C.W.S. (3d) 35; Dia v. Calypso Theme Waterpark, [2020] O.J. No. 3642, 2020 ONSC 5191; Higashi v. Chiarot, [2020] O.J. No. 4121, 2020 ONSC 5700; Nemchin v. Green, [2019] O.J. No. 5517, 2019 ONSC 6245; Wallace v. Campbell, [2017] O.J. No. 2289, 2017 ONSC 2767 [page16]

Statutes referred to

Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1)

Insurance Act, R.S.O. 1990, c. I.8, s. 128(4)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 57.01(1), Tarrif A, Part I

RULING as to costs of two applications and one motion.

Joseph Y. Obagi and Sarah E. Russell, for plaintiffs (Court File No.: CV-19-80411) and respondents (Court File Nos.: CV-19-82139 and CV-20-82568).

Kevin P. Nearing, for defendants (Court File No.: CV-19-80411).

Pat C. Peloso, for applicants (Court File No.: CV-20-82568).

Pasquale Santini, for applicants (Court File No.: CV-19-82139).

[1] M. SMITH J.: — On October 30, 2020, I released my decision in this matter ([2020] O.J. No. 4704, 2020 ONSC 6630). I found that the Insureds had achieved substantial success and were entitled to costs. I invited counsel to resolve the issue of costs of the Applications and the Motion. They were unable to agree on costs and delivered written submissions.

[2] The Insurer Desjardins had brought two separate Applications and one Motion against the Insureds (individually referred to as the "Campbell Family", the "Blazejewski Family" and the "van Gaal Family"). The Insureds brought a cross Motion for costs thrown away from a failed Examination for Discovery.

[3] There were three separate counsels acting for the Insurer Desjardins. The issues on the Applications were similar on many fronts but required two counsel as a result of a conflict of interest. The Insurer's Motion dealt with the same loss but on a separate claim that had been initiated by the Insureds.

The Position of the Insureds

[4] The Insureds seek costs in the amount of $64,222.72 (partial indemnity) and an additional $1,500 for the preparation of the costs submissions.

[5] Given that the Motion and Applications were heard as one and that many of the issues were interwoven, it is submitted that a global approach must be taken in the assessment of the Insureds' costs.

[6] The Insureds confirm that a contingency fee is in place and that there is no rule of law that requires them to produce a copy of the retainer agreement.

[7] The Insureds say that the hourly rates charged by their counsel is reasonable and cannot come as a surprise to the Insurer. The rate has been accepted by the court on numerous [page17] occasions, including two recent decisions (Nemchin v. Green, [2019] O.J. No. 5517, 2019 ONSC 6245; Higashi v. Chiarot, [2020] O.J. No. 4121, 2020 ONSC 5700). The Insureds also argue that pursuant to the Costs Grid, established under Part I of the Tariff A of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the "Rules"), the adjusted rate for lawyers with 20+ years of experience would be $447.49 in 2020. The Insureds do not accept the Insurer's interpretation of Williams J.'s decision in Dia that the rate of $350 per hour is a ceiling for partial indemnity or substantial indemnity rates. The Insureds argue that the hourly rates charged to the Insurer are preferential and negotiated rates.

[8] The Insureds state that it was reasonable and an effective cost saving measure to delegate the work to a junior lawyer, who assisted in the document review, client communication, drafting of the responding materials and assisting with document management and undertakings during the cross-examinations.

[9] The Insureds maintain that their Bill of Costs is entirely in line with the importance and complexity of the matters. It falls entirely within the Insurer's expectations of the costs.

[10] There was significant time spent to review the relevant documentation (including four affidavits prepared by the Insurer) and to communicate with each of the Insureds. Three separate affidavits were drafted and each of the witnesses needed to be prepared for extensive cross-examination.

[11] The Insureds argue that in reviewing the time spent by the Insurer's lawyers, it serves to underscore the importance of the issues, the time required to address the issues and the Insurer's reasonable expectations. The Insurer's Cost Outline that was submitted at the conclusion of the hearing sets out the time spent, and the amount being sought. If successful, they were seeking (collectively) the amount of $70,143.25. The time spent by the Insurer's lawyers amounted to 266 hours and 15 hours of student time. In comparison, the Insureds' lawyers spent 165.7 hours and 16.1 student hours, which represents 40 per cent less time than the Insurer lawyers. The Insureds rely upon Beaudoin J.'s decision in Wallace v. Campbell, [2017] O.J. No. 2289, 2017 ONSC 2767 to say that the Insurer's Cost outline is an important tool to consider in the assessment of costs as it provides the parties' expectation of the costs to be paid by the unsuccessful party.

The Position of the Insurer

Application #1 (CV-19-82139)

[12] The Insurer states that they acted reasonably in the Campbell Family matter, as they had no choice but to bring the [page18] Application because of the Umpire's ruling. They do not believe that they should be punished with costs for the following reasons:

(a) The mandatory appraisal process was requested by the Campbell Family. It was commenced by way of Case Conference;

(b) The parties agreed that the Umpire had the authority to make rulings and directions. The appraisal process was stalled because of the issuance of the bad faith claim;

(c) The Insurer complied with the Umpire's ruling but the Campbell Family refused to do so;

(d) The Application was brought at the request of the Campbell Family; and

(e) The Application was novel, and it was not unreasonable to bring the Application.

[13] The Application was brought against the Blazejewski Family because of their refusal to deliver a Proof of Loss and the Insurer felt that a timeline should be set for its delivery.

[14] In addition, the Insurer says that no costs should be awarded on the basis that I should be following the same principles that exists in the appraisal process, namely that the costs are borne by each party (see s. 128(4) of the Insurance Act, R.S.O. 1990, c. I.8).

[15] Alternatively, costs should be awarded in the range of 50 per cent or reduced to 75-80 per cent of the Insurer's Costs outline. They rely upon Williams J.'s decision in Dia v. Calypso Theme Waterpark, [2020] O.J. No. 3642, 2020 ONSC 5191. They argue that the Insureds' refusal to disclose the fee arrangement should lead to a negative inference and that counsel's rate of $625 per hour is unreasonable and contrary to the principles set out in the Dia decision. It is also suggested that although counsel for the Insureds has not kept separate dockets for each of the Applications and Motion, it is reasonable to expect that less time (in the range of 20-25 per cent) should have been spent in their response.

Application #2 (CV-20-82568)

[16] In respect to the van Gaal Family matter, the Insurer submits that it would be an appropriate case where both parties bear their own costs. They say that it was a novel issue and that the court accepted, in its entirety, the jurisprudence submitted by the Applicants as to the historical and traditional approach of when an insured could be required to deliver a Proof of Loss. [page19]

[17] Similar to the argument advanced in the other Application, the Insurer argues that they had no option but to bring the Application in order to move the matter along to a conclusion.

[18] Alternatively, if the court is inclined to award partial indemnity costs, it should be no more than $7,500. It is submitted that this Application required minimal effort in reply by the Insureds as there was common ground and approach amongst all of the responding Insureds. The materials prepared by the van Gaal Family were short (nine page affidavit) and the cross-examination was limited to four hours. The Insurer is the party that spent the most time and effort in organizing, preparing and pursuing the Application.

[19] Lastly, the Insurer says that the hourly rate charged by counsel to the Insureds is excessive in comparison to what the court has treated as a reasonable rate. It is unsubstantiated because counsel refused to disclose the particulars of the retainer. Also, the Insurer submits that this case did not warrant having two counsels on a relatively uncomplicated Application.

Motion (CV-19-80411)

[20] The Insurer states that the Insureds' costs request is unreasonable on the three grounds enunciated below.

[21] First, the actual hourly rate sought by counsel for the Insureds is excessive. It compares Mr. Obagi's hourly rate ($625 for a 1995 call to the Bar) to the three other counsel (Mr. Nearing at $400 for a 1985 call to the Bar; Mr. Santini at $400 for a 1990 call to the Bar; and Mr. Peloso at $385 for a 1985 call to the Bar). Mr. Nearing has a negotiated rate with the Insurer while the two other counsel do not. The Insurer relies upon Williams J.'s comment in Dia (at para. 37) that the hourly rate of $350 is not an unreasonable rate to charge for a lawyer with 30 years' experience.

[22] The second is that it is unreasonable to expect to be awarded costs for two lawyers acting for the Insureds when senior counsel for the Insurers handled their files with minimal or no additional assistance from another lawyer. The transcripts were being ordered which eliminated the need for a junior lawyer to "take notes".

[23] The third ground is that there is no evidence as to what was charged to the Insureds. Again, relying on Dia, it is submitted that it is necessary for the successful party to disclose their actual or full indemnity costs. It is said that at the cross-examinations of the Insureds, counsel refused to produce the retainer agreement.

[24] The Insurer submits that the court is left with an evidentiary vacuum when it comes to assessing the Insureds' costs. [page20]

Analysis

[25] Costs are at the discretion of the court (s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43).

[26] Rule 57.01(1) of the Rules sets out the factors a court may consider when deciding on a costs award.

[27] The overriding principals of fairness and reasonableness must be applied to each individual case (Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291, [2004] O.J. No. 2634, 2004 CanLII 14579 (C.A.)).

[28] Partial indemnity is commonly awarded unless there are compelling reasons to justify an award at the higher scale.

[29] In Dia, Williams J. provides an excellent review of the jurisprudence and analysis on the determination of partial indemnity. The principles relating to partial indemnity costs are succinctly summarized at para. 29 of the decision and read as follows:

-- 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] There are no reasons to depart from the general rule that the partial indemnity scale applies.

[31] In the circumstances of this case, I find that the relevant factors to consider, as set out in rule 57.01(1) of the Rules are: (1) the complexity and importance of the issues; (2) the reasonable expectation and hours spent; and (3) the experience of counsel and the rates charged.

[32] Before reviewing these factors, I would like to address the Insurer's submission regarding the lack of disclosure pertaining to the Insureds' retainer agreement. I agree that the actual rate must be disclosed.

[33] Counsel for the Insureds has filed a Form 57B and he certifies that the hours claimed have been spent, that the rates shown are correct and that each disbursement has been incurred [page21] as claimed. It has been certified that Mr. Obagi and Ms. Russell's actual hourly rates are $625 and $200, respectively.

[34] The Insureds admit that a contingency fee agreement is in place, which I infer to mean that the Insureds were not sent a bill based on the actual hourly rates that have been certified by counsel. I believe that a lawyer's certification as to counsel's actual rate is sufficient evidence. I do not find that I require a copy of the contingency fee agreement in my determination of costs.

The complexity and importance of the issues

[35] There is no doubt that the issues were important. The property losses were significant, and the Insureds wanted to ensure that a proper valuation take place, based upon the actual costs incurred. For the Insurer, it was also important as they wanted to finalize the appraisal process and obtain some closure.

[36] I do not find that the issues were overly complex, but I do recognize that they were novel. I agree with counsel for the Insurer that given the novelty, it was not unreasonable for the Insurer to pursue them. However, this does not, in my view, mean that no costs should be awarded to the Insureds. The novelty of an issue serves to increase costs by having to research the area of law in greater detail, including looking at other jurisdictions, such as what transpired in this case. It would be unfair and unjust to award no costs to the party that has been successful.

The reasonable expectation and the hours spent

[37] A cost award must be within the reasonable expectation of the parties.

[38] The materials filed on the Applications and the Motion were voluminous and they included several affidavits, lengthy factums and references to numerous decisions on a variety of issues. The parties conducted four days of cross-examination and made oral submissions over the better part of two days.

[39] The Insurer argues that the files were handled primarily by senior counsel, with minimal or no assistance from another lawyer. The time spent by senior counsel for the Insurer ranges approximately from 59 to 121 hours. Senior counsel for the Insureds spent approximately 72 hours while the junior lawyer spent roughly 93 hours. The time spent by the senior lawyers is reasonable.

[40] I acknowledge that the total hours spent by counsel for the Insureds is less than the collective efforts of counsel for the Insurer. Nevertheless, I would expect that there would be some economies of scale in the preparation of responding materials for all three Insureds because the issues were intertwined and similar. Invariably, the costs incurred by the Insureds should be lower. [page22]

[41] This brings me to the issue of the Insurer's objection to paying for a second lawyer. I accept that it is reasonable to delegate work to a junior lawyer. However, if a second lawyer attends at a cross-examination or at the hearing, there must be some discernable value. Here, it is argued that the junior lawyer's participation was needed at these events to assist senior counsel with document management, undertakings and note taking. I agree with the Insurer's submissions that a junior lawyer's attendance at the hearing was not required. In terms of the junior lawyer's participation at the cross-examinations, it is difficult to truly determine the reasonableness of her attendance without further evidence. I can appreciate the value in assisting with document management but there is some merit in the argument that note taking may not have been necessary as the transcripts were being ordered.

The experience of counsel and the rates charged

[42] Despite the year of call to the Bar, each counsel has similar experience and can easily be described as a seasoned lawyer.

[43] The Insurer lawyers were called to the Bar before Mr. Obagi and they all charged their clients less than $400 per hour. It is well known in the industry that Insurers demand a negotiated rate with their counsel.

[44] In this case, it is submitted that Mr. Nearing is the only counsel to have a preferential rate with Desjardins. While that may be true, I find that the hourly rates charged by Mr. Santini and Mr. Peloso are akin to being preferential rates.

[45] I do not doubt that Mr. Obagi's actual rate is $625 but with the existence of a contingency agreement, I believe that it may be notional as his clients may never be charged an hourly rate for the work undertaken in these matters.

[46] I acknowledge that in previous decisions, the court seems to have accepted Mr. Obagi's partial indemnity rate of $375 and $400 per hour. I do not believe that these decisions bind me in my determination of the costs.

[47] I adopt the statement of Mew J. when he said: "In my view, rates used for the purpose of fixing costs should have regard to what clients typically pay. That will vary with the type of work, geographic location and the type of client, among other factors" (Canfield v. Brockville Ontario Speedway, [2018] O.J. No. 2807, 2018 ONSC 3288, at para. 23).

[48] In the case before me, I have a great deal of difficulty in awarding costs in the amount of $64,222.72. I do not find costs in this range to be reasonable or reflective of what someone would pay for the matters that are before me. [page23]

[49] Counsel for the Insureds refers me to the Costs Grid that is established under Part I of Tariff A of the Rules. It is submitted that for lawyers with 20+ years of experience, the hourly rate would be $447.49 adjusted for 2020 dollars, and if counsel has special expertise, the hourly rate may be varied accordingly.

[50] I recognize that the Costs Grid was revoked, effective July 1, 2005, but I find it helpful in determining what may be considered as a reasonable actual rate. In my view, the adjusted rate of $447.49 aligns more closely with what I believe a litigant would pay for a matter that is similar to the case at bar.

Disposition

[51] For the reasons stated above and in applying the overriding principles of fairness, proportionality and reasonableness, I exercise my discretion and assess the partial indemnity fees at $30,000.

[52] I have reviewed the list of disbursements charged ($7,351.97, inclusive of H.S.T.) and find them to be reasonable.

[53] The Insureds seeks additional costs in advancing the costs submissions. I believe that an amount of $1,000 is appropriate in the circumstances.

[54] The Insurer shall therefore pay the Insureds the total costs of $42,381.97 (inclusive of H.S.T.), payable forthwith.

Partial indemnity costs awarded.

End of Document