ONSC 3197
COURT FILE NO.: CV-17-0068-00
DATE: 2021-04-29
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
HEWITSON HOLDINGS INC.
Mr. Popescu, for the Plaintiff
Plaintiff
- and -
BUR-MET CONTRACTING AND CONCRETE WALLS
Ms. R. Clinker, for Bur-Met Contracting,
Mr A. Demeo, for Concrete Walls (Lakehead) “1983” Limited
Defendants
HEARD: April 12, 2021, by Zoom
at Thunder Bay, Ontario
Madam Justice H. M Pierce
Reasons on Motion to Amend a Statement of Claim
Introduction
[1] The plaintiff, Hewitson Holdings Inc., moves for an order amending its statement of claim pursuant to rules 26.01 and 76.02 of the Rules of Civil Procedure, O. Reg. 575/07, reducing its claim from ordinary to simplified procedure. The plaintiff originally claimed damages exceeding $500,000.00. It now claims damages of $60,461.87.
[2] The plaintiff submits that it did not know the extent of its damages when the statement of claim was drawn invoking ordinary procedure. It contends that the claim for damages did not crystallize until late fall of 2019, when examinations for discovery were complete.
[3] The plaintiff also argues that the defendants incurred no costs that would not have been incurred in simplified procedure. Alternatively, it submits that if any costs were needlessly incurred, they should be argued before the trial judge in accordance with r. 76.13(1).
[4] The defendants counter that the plaintiff knew its claim fell within the jurisdiction for simplified procedure when the statement of claim was drawn. They contend that because the case was pleaded under the ordinary procedure, they incurred needless costs, which they now claim. They argue that had they known that the claim was modest, they would have adopted a litigation strategy that was proportional to the damages claimed.
[5] The defendants submit that, pursuant to r. 76.13(1) and (3), they should be compensated with substantial indemnity costs incurred by the late-stage amendment without waiting until the conclusion of trial.
[6] In addition, the defendants submit that they should not be limited from seeking the application of costs consequences at the end of trial, pursuant to rule 76.13(3).
[7] To summarize, Bur-Met consents to the amendment of the statement of claim provided:
the plaintiff pays its substantial indemnity costs unnecessarily incurred in the amount of $7,500.00 plus HST;
the issue of whether the plaintiff is subject to the cost consequences of rule 76.13(3) is deferred to the trial judge due to the late stage of the amendment; or
alternatively, if the issue of the applicability of rule 76.13(3) is not deferred to the trial judge, that Bur-Met’s unnecessarily incurred costs be increased to accommodate the additional prejudice sustained by Bur-Met as a result of the amendment.
[8] Concrete Walls consents to the amendment of the statement of claim provided:
the plaintiff forthwith pays substantial indemnity costs unnecessarily incurred in the amount of $40,000.00 plus HST;
the plaintiff is not allowed to recover its disbursements for the Arcon expert reports; and
the plaintiff pays the cost of its responding expert report in the amount of $22,836.74.
[9] Both defendants seek their costs of this motion.
Chronology
[10] In 2013, the plaintiff contracted with Concrete Walls to lay a foundation slab for two commercial self-storage units. It also contracted with Bur-Met to erect two prefabricated steel buildings on the slabs.
[11] The buildings were erected on a slab foundation in 2013. Water was discovered in some units in 2014 and 2015. At issue are the cause of the leaks and their rectification.
[12] Bur-Met and the plaintiff investigated the cause of the leaks. In 2015, Bur-Met repaired four units in accordance with the recommendations of the plaintiff’s engineer, Mr. Nalezyty. These repairs cost about $700.00 per unit. However, the plaintiff did not pay in full and Bur-Met stopped the repairs. In total, 25 units leaked. Had the work been completed, total repair costs would have been about $17,500.00, falling within the Small Claims Court jurisdiction.
[13] In November 2015, Bur-Met estimated to the plaintiff that the cost of re-roofing the units would be $56,458.00.
[14] The plaintiff commissioned Mr. Nalezyty to prepare an engineering report about the repairs. This report was delivered in August 2016. Mr. Nalezyty recommended a further repair option be undertaken before more expensive repairs were tried.
[15] In 2017, the plaintiff obtained two more estimates for roof replacement; these ranged between $66,600.00 and $72,835.00.
[16] In 2017, the plaintiff sued both companies under the ordinary procedure, claiming $500,000.00 in damages plus unspecified loss of profits. At that time, the ceiling for simplified procedure was $100,000.00. Now, the plaintiff moves to reduce its claim to $60,461.87.
[17] The plaintiff secured an expert report from Arcon Forensic Engineers in October 2018, identifying four repair options. In the spring of 2019, Tom Jones Corporation estimated one of these options at $146,350.00.
[18] In September 2019, the plaintiff contracted with an American firm for roof repair materials costing about $29,000.00. When insulation and installation costs were included, the cost for repair of the leaks rose to $56,637.00.
[19] The plaintiffs resisted disclosing the Nalezyty report until forced to do so by court order late in 2020. In his report, Mr. Nalezyty concluded that the expense of new roofs was not justified and recommended a cheaper repair.
[20] Bur-Met asked another firm to estimate Mr. Nalezyty’s recommended repair. In November 2020, the firm priced the repairs at $18,762.00 plus tax. Repairs on this scale were also within the jurisdiction of the Small Claims Court.
Status of Proceeding
[21] In this case, amendment is not in issue. Rule 26.01 requires the court to grant leave to amend a pleading at any stage in a proceeding unless prejudice results that is not compensable by an adjournment or costs.
[22] The defendants agree that the claim should be amended to apply simplified procedure to this case, even though it is on the eve of trial. However, they contend that when the claim was issued, the plaintiff knew that potential damages were less than $100,000.00, the ceiling for simplified rules at the time.
[23] An order will issue granting the plaintiff leave to amend its statement of claim as proposed.
[24] The real issue is the cost consequences of “amending down” from ordinary procedure to simplified rules.
[25] The statement of claim was issued in February 2017. Since then, the plaintiff produced four versions of affidavits of documents. Examinations for discovery were completed in December 2017. The plaintiff’s Arcon expert report was produced in October 2018.
[26] The trial record was served in 2019. The first pretrial was conducted in February 2020. It was followed by a case conference in September 2020.
[27] In November 2020, the defence moved for an order requiring the plaintiff to disclose the Nalezyty report. The motion was granted, and total costs of $10,000.00 were awarded against the plaintiff. In February 2021, a second pretrial was conducted.
[28] To date, the plaintiff incurred $32,000.00 for expert reports while Concrete Walls spent about $22,800.00.
[29] With respect to legal fees, Bur-Met alleges that it incurred unnecessary substantial indemnity costs of $7,500.00. It claims total costs of $35,438.20. Concrete Walls summarized its total costs at $83,712.27. It claims substantial indemnity costs needlessly incurred of $40,000.00 plus HST.
[30] The plaintiff has not disclosed its costs.
Simplified Procedure
[31] The Rules of Civil Procedure created a simplified procedure to foster access to justice for parties bringing or defending modest claims, recognizing that simple cases may not require the same due process as complex claims. For cases commenced before January 1, 2020, the ceiling for simplified procedure claims was $100,000.00. The ceiling has now been adjusted to $200,000.00.
[32] Rule 76.02 (1) makes simplified procedure mandatory if the plaintiff’s claim is exclusively for money, real property, or personal property. The rule applies to damages claimed at the date the action is commenced.
[33] Simplified procedure expedites proceedings and provides a suitable process for modest claims, up to and including trial. These limitations are designed to contain costs, provide a speedy trial, and make litigation of simple issues more affordable. For example: with limited exceptions, a jury trial is not available under simplified procedure (rule 76.02.1).
[34] Under simplified procedure, affidavits of documents disclosing the names of potential witnesses must be delivered within ten days of the close of pleadings. Failure to identify witnesses precludes them from being called at trial without leave of the court (rule 76.03).
[35] Examination for discovery is not permitted in writing; nor is cross-examination of a deponent on an affidavit, or examination of a witness on a motion (rule 76.04 (1)). Under the previous rule that applied to this case, oral discovery was limited to two hours for the plaintiff and two hours for the defendants.
[36] Time limits apply to simplified procedure. For example, the action must be set down for trial within 180 days after the first statement of defence or notice of intent to defend is filed (rule 76.09(1)). Pretrial submissions are limited to three pages (rule 76.10(4) (b) (i)). Trial management plans must also be prepared and filed at the pretrial conference (rule 76.10 (2)).
[37] At trial, evidence is presented by affidavit, and witnesses attend for cross-examination (rule 76.12(1)). There is a ceiling on costs and disbursements claimable (rule 76.12.1(1)).
[38] For the simplified procedure to achieve its purpose, it must be engaged from the onset of litigation. The plaintiff must evaluate the extent of its claim before issuing a statement of claim in order to avoid the cost consequences of invoking ordinary procedure for a claim that falls within the simplified range. See: Leo (Litigation Guardian of) v. Hamilton-Wentworth Roman Catholic Separate School Board, 2000 CarswellOnt 1761 (S.C.J.) at para. 4. There is also an obligation on the plaintiff to continue evaluating the extent of its damages to ensure that the procedure remains appropriate.
[39] Rule 76.13(1) deals with cost consequences of “amending down” from ordinary procedure into simplified procedure. It states:
76.13(1) Regardless of the outcome of the action, if this Rule applies as the result of the amendment of the pleadings under subrule 76.02 (7), the party whose pleadings are amended shall pay, on a substantial indemnity basis, the costs incurred by the opposing party up to the date of the amendment that would not have been incurred had the claim originally complied with subrule 76.02 (1), (2) or (2.1) unless the court orders otherwise.
[40] Rule 76.13(3) deals with the denial of a plaintiff’s costs for a judgment that falls below the simplified procedure limit in a case that was not pleaded in simplified procedure. It states:
76.13(3) The plaintiff shall not recover any costs unless,
(a) the action was proceeding under this Rule at the commencement of the trial; or
(b) the court is satisfied that it was reasonable for the plaintiff,
(i) to have commenced and continued the action under the ordinary procedure, or
(ii) to have allowed the action to be continued under the ordinary procedure but not abandoning claims or parts of claims that do not comply with subrule 76.02(1), (2) or (2.1).
Discussion
[41] The plaintiff argues that the full extent of damages did not crystallize until after examinations for discovery were completed in fall of 2019. The plaintiff submits that it did not know potential damages were within the range dictated by simplified procedure.
[42] I do not agree. Before the plaintiff drafted its statement of claim, it had been billed for repair work completed in 2015 by Bur-Met at a cost of $700.00 per unit, for a projected total of $17,500.00. That should have been a signal that this was a modest claim.
[43] Next, in November of 2015, Bur-Met estimated roof repair at a cost of $56,458.00. That, too, was a signal of the scope of damages.
[44] The plaintiff commissioned the Nalezyty report delivered in August 2016, describing methods of repair and recommending against an expensive fix. Then in 2017, the plaintiff obtained two further estimates for roof repairs which came in between $66,600.00 and $72,835.00.
[45] Even allowing for contingencies, all of these estimates were well below the simplified procedure ceiling of $100,000.00 then in effect. Ultimately, the plaintiff spent $56,637.00 to do the repairs, demonstrating that all the estimates in the plaintiff’s possession before the statement of claim was drawn fell within simplified procedure. Interestingly, the Bur-Met estimate was almost exactly the same cost as the work that was eventually performed.
[46] I find that a reasonable range of damages crystallized before the statement of claim was drawn in 2017, selecting ordinary procedure.
[47] This case is distinguishable from the unique circumstances cited in Crawford. v. Standard Building Contractors Limited, 2020 ONSC 5767. In that case, the action was at an early stage, with only pleadings exchanged and minimal costs incurred. On the motion to “amend down” to simplified procedure, the defendant objected on the grounds that its time for examinations for discovery would be reduced. The court reserved the issue of costs unnecessarily incurred to the trial judge.
[48] Here, there were no unexpected circumstances that altered the plaintiff’s position after the statement of claim was drawn, as occurred in Leo, at para. 5.
[49] I also conclude that whether costs were unnecessarily incurred to date should not be deferred to the trial judge. The trial judge will be in no better position than the motions judge to assess damages of costs unnecessarily incurred. Deferring the matter to the trial judge would require the issue to be re-argued, a waste of the court’s resources and forcing the parties to incur duplicate costs. It would also prolong prejudice to the defendants.
[50] It is evident that the plaintiff knew or should have known that damages would fall within the simplified procedure range before claiming damages under ordinary procedure.
Have Costs Been Needlessly Incurred?
[51] In this case, the defendants argue that their litigation strategy was affected by not knowing the true scale of the damages claimed. For example, they contend that a more junior lawyer would have been assigned to the case, with economies for the clients. They also argue that they would not have commissioned expensive expert reports, in keeping with the scale of the damages claimed.
[52] In this case, I am satisfied that the litigation strategy of the defendants was affected by the plaintiff’s over-estimate of damages when the claim was drawn. I also conclude that all parties’ approach to the litigation was driven by this error, resulting in costs unnecessarily incurred.
[53] Furthermore, under the simplified rules, the parties would have reached trial in February 2017. Implicit in delay is extra cost for the parties.
[54] Rule 1.04 (1) of the Rules of Civil Procedure provides:
1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.
[55] This rule is followed by rule 1.04 (1.1) which emphasizes proportionality. The rule directs courts to make orders that are proportionate to the importance and complexity of the issues, and to the amount involved in the proceeding.
[56] This pragmatic approach reflects the goals of most litigants: to achieve a timely and cost-effective resolution of disputes in proportion to what is in issue. The usefulness of the legal profession to litigants with simple disputes turns on achieving these goals.
[57] Bur-Met submits that resort to the simplified procedure would have avoided or shortened the following unnecessary steps and expedited a trial. It points to the following unnecessary work:
review of four affidavits of documents, instead of one;
10.7 hours in preparation for examinations for discovery instead of reduced preparation time;
11.7 hours at examination for discovery instead of the four-hour limit then in effect;
more undertakings to process as a result of less focussed discoveries;
two unnecessary motions argued;
two unnecessary and costly expert reports filed, (the 48-page Arcon report obtained by the plaintiff had 173 pages of appendices and a CD of photographs at a cost of $27,640.00 Concrete Walls responded with a $22,836.00 expert report);
time spent reviewing expert reports;
preparation for and attendance at two pretrial conferences instead of one;
review of the plaintiff’s 369-page pretrial brief, instead of the three-page limit allowed;
preparation for and attendance at a case conference; and
attendance at a trial management conference, yet to be convened.
[58] I agree with the defendants’ submissions that costs have been unnecessarily incurred to date. The question is: to what extent?
[59] With respect to Bur-Met’s bill of costs, I find that unnecessary time has been spent in all of the foregoing activities.
[60] Accordingly, the plaintiff shall forthwith pay Bur-Met’s substantial indemnity costs fixed at $7,500.00 plus HST.
[61] Concrete Walls’ factum claims substantial indemnity costs needlessly incurred of $40,000.00 plus HST. In oral argument, Mr. Demeo sought substantial indemnity costs of $25,000.00.
[62] Unhelpfully, instead of producing a succinct bill of costs documenting unnecessary attendances, counsel filed a summary of the dates accounts were sent to his client, with 89 pages of invoices attached.
[63] This is not a proper bill of costs. Furthermore, it is not reasonable to expect the court to comb through this electronic shoe box of invoices to assess costs.
[64] The summary named four individuals under the heading, “Name of Lawyer.” These individuals are not known to the court as lawyers. If they are in fact lawyers, their years of call should be indicated. The rates claimed for these individuals are the same as those claimed for Mr. Demeo. If these individuals are law clerks, the rate claimed of $205.00 per hour is excessive.
[65] Mr. Demeo is a senior litigator, as was Mr. Hacio who was counsel for Bur-Met in the early days of this litigation. In the absence of a proper bill of costs, I infer that Concrete Walls has expended similar needless costs as Bur-Met. Additional costs to reflect preparation for obtaining an expert report are also allowed. Therefore the plaintiff is ordered to forthwith pay Concrete Walls its costs fixed at $8,500.00 plus HST.
[66] In addition to its costs, I conclude that Concrete Walls is entitled to its disbursement for a responding expert report needlessly commissioned, in the amount of $22,836.74. Had the defendant known the true range of damages claimed by the plaintiff, it is unlikely that it would have obtained a costly expert report out of proportion to the damages claimed.
[67] An order will issue that the plaintiff forthwith pay to Concrete Walls the sum of $22,836.74 on account of its disbursement for an expert report.
Should the Plaintiff be Subject to the Cost Consequences of Rule 76.13(3)?
[68] Bur-Met submits that the issue of whether the plaintiff should be subject to the cost consequences of rule 76.13(3) should be reserved to the trial judge, given the late stage of the amendment. I agree with this submission. The trial judge will have the opportunity to assess how the trial unfolds, consider any offers to settle, and craft the appropriate order. In the interim, the defendants have been awarded costs unnecessarily incurred, including disbursements.
[69] Concrete Walls submits that this court should order that the plaintiff not be permitted to recover its disbursement for the Arcon expert reports. In my view, that issue is also best left to the trial judge, for the reasons above.
Costs of the Motion
[70] The defendants have been successful in responding to the plaintiff’s motion to amend and are entitled to their costs. If the parties are unable to agree on the costs of this motion, they may apply to the trial coordinator within 30 days of the release of these reasons to argue costs, failing which costs will be deemed settled. Costs submissions are not to exceed five pages.
“original signed by”
The Hon. Madam Justice H.M. Pierce
Released: April 29, 2021
ONSC 3197
COURT FILE NO.: CV-17-0068-00
DATE: 2021-04-29
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
HEWITSON HOLDINGS INC.
Plaintiff
- and –
BUR-MET CONTRACTING AND CONCRETE WALLS
Defendants
REASONS ON MOTION TO AMEND A STATEMENT OF CLAIM
Pierce J.
Released: April 29, 2021
/CJJ