COURT FILE NO.: CV-13-492414
DATE: 20210602
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JEFFREY HALL and JENNIFER KERR
Plaintiffs
– and –
ZHONG-ZHI LOU, THE CORPORATION OF THE CITY OF TORONTO, FCT TITLE INSURANCE LTD., NOVEX INSURANCE COMPANY, INTACT INSURANCE COMPANY, AND QI LOU
Defendants
– and –
RAYMOND LIU and HANG JIE CONSTRUCTION AND RENOVATIONS INC.
Third Parties
John Bruggeman, for the Plaintiffs
Christopher G.T. Tan, for the Defendant, Qi Lou
Kristen Franz, for the Defendant, City of Toronto
Adam Zasada, for the Defendant, FCT Title Insurance Ltd.
W. Colin Empke, for the Defendants, Intact Insurance Company and Novex Insurance Company
Theresa Hartley, for the Third Parties, Raymond Liu and Ramondo Engineering
Josiah MacQuarrie, for the Third Parties, Hongjie Construction & Renovation Inc. and the Fourth Party, Ming Jie Jang
– and –
MING JIE JANG and HANG JIE CONSTRUCTION AND RENOVATIONS INC.
Fourth Parties
HEARD: In writing
Papageorgiou j.
Costs decision
[1] This action relates to matters that took place in 2011. Specifically, the plaintiffs purchased real property located at 504 Concord Avenue (the “Property”) from the defendant Zhong-Zhi Lou (“Zhong-Zhi”) on or about October 20, 2011. The transaction closed on November 10, 2011. They commenced this action against Zhong-Zhi in 2013.
[2] In January 2019, the plaintiffs brought a motion to add Ms. Lou as a party. She consented without prejudice to her right to bring a summary judgment motion dismissing the action against her. The parties agreed that the costs of the motion to add a party would be addressed by the judge who heard Ms. Lou’s anticipated summary judgment motion.
[3] I dismissed the action against Ms. Lou.
[4] Ms. Lou seeks costs in the amount of $112,505.01 on a substantial indemnity basis or in the alternative, $108,225.13 also on a substantial indemnity basis, although she has set out a breakdown on fees charged on various bases at various stages.
[5] The following chart summarizes Ms. Lou’s costs claim on various bases. Within the chart, I have put in bold the amounts which Ms. Lou claims in the alternative and which add up to $108,225.13.
| Partial Indemnity (60 %) | Substantial Indemnity (90 %) | Actual Fees | |
|---|---|---|---|
| Fees for the plaintiffs’ motion to add (Before rule 49 offer) | $2,823.87 | $4,235.81 | $4,706.45 |
| Fees for plaintiffs’ motion to add (After Rule 49 offer) | $10,192.04 | $15,288.05 | $16,986.73 |
| Fees for the plaintiffs’ motion to add (After Rule 49) | $5,735.88 | $8,603.82 | $9,559.80 |
| Fees after Ms. Lou was added to the Action (After the Rule 49 Offer) | $52,775.52 | $79,163.28 | $87,959.20 |
| Disbursements | $5,214.05 | $5,214.05 | $5,214.05 |
| Total | $76,741.36 | $112,505.01 | $124,426.23 |
[6] The plaintiffs argue that had they been successful, they would have sought $23,979.34 all in on a partial indemnity basis and that the appropriate and reasonable costs award is something in the range of what they would have sought.
[7] For the reasons that follow, I am awarding Ms. Lou $45,000 in costs on a substantial indemnity basis, inclusive of disbursements. I note that this award is in respect of two motions and that it is 20 % higher than grossing up the plaintiffs’ costs claim to what it would be on a substantial indemnity basis.
Analysis
The Court’s discretion
[8] Pursuant to s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, costs are in the discretion of the court. Rule 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, sets out the factors which courts should have regard to when awarding costs. The overall objective is “to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant”: Boucher v. Public Accountants for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.), at para. 26; see also Zesta Engineering Ltd. v. Cloutier, 2002 CanLII 25577 (Ont. C.A.), at para. 4; Davies v. Clarington (Municipality) et al., 2009 ONCA 722, 100 O.R. (3d) 66 (“Davies”), at para. 52; G.C. v. Ontario (Attorney General), 2014 ONSC 1191.
[9] Judges have a duty to fix or assess costs in reasonable amounts and have a duty to make sure that the hours spent are reasonably justified: Pagnotta v. Brown, [2002] O.J. No. 3033 (Ont. S.C.), at para. 25.
[10] Further, there must be practical and reasonable limits to the amounts awarded for costs and those amounts should bear some reasonable connection to the amount that should reasonably have been contemplated: Toronto (City) v. First Ontario Realty Corp. (2002), 2002 CanLII 49482 (ON SC), 59 O.R. (3d) 568 (Ont. S.C.), at para. 26; Gratton-Masuy Environmental Technologies Inc. v. Building Materials Evaluation Commission, 2003 ONSC 8279.
[11] Rule 57 directs that the Court may have reference to the following factors:
57.01 (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;
(h.1) whether a party unreasonably objected to proceeding by telephone conference or video conference under rule 1.08; and
(i) any other matter relevant to the question of costs.
[12] Substantial indemnity costs awards are rare, even after trial. There is a high bar for an award of substantial indemnity costs which are “normally resorted to when the court wishes to express its disapproval of the conduct of a party to the litigation” or where the court determines that the party’s conduct was “reprehensible, scandalous or outrageous”: Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766, at para. 8; Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 26
Ms. Lou’s position
[13] In support of substantial indemnity costs, the plaintiffs argue::
a. The plaintiffs made unsubstantiated allegations of fraud;
b. The plaintiffs knowingly advanced contradictory positions throughout the proceeding and made deliberate misrepresentations to the Court;
c. They failed r. 49 offers.
Unsubstantiated claims
[14] It is well-established that making unsubstantiated allegations of fraud is sufficiently reprehensible to warrant awarding substantial indemnity costs. Allegations of fraud have far-reaching and serious consequences, even when they are ultimately debunked: Unisys Canada Inc. v. York Three Associates, 2001 CanLII 7276 (Ont. C.A.), at para. 15; Pichelli et al. v Vuletic et al, 2019 ONSC 3178, at paras. 22-32; Kaynes v. BP p.l.c., 2021 ONCA 36, at para 63. I note that the cases referred to me involve actions where there has been a final determination on the merits in against the party alleging fraud. Ms. Lou did not refer me to cases where unsubstantiated allegations of fraudulent concealment resulted in substantial indemnity costs.
[15] The basis for the addition of Ms. Lou beyond the limitation period was that she fraudulently concealed her involvement and ownership of the property in question and impersonated her mother to hide her involvement in the property, its renovation, sale and ownership. The evidence for this concealment was that “it was unlikely that Qi Lou’s mother, Shi Zhi Chen would have spoken English well enough” to communicate with the inspector. I concluded “there is absolutely no evidence that [Qi] was impersonating her mother” and “there is no evidence of any fraudulent concealment of anything by Ms. Lou.” Indeed, concurrent inspector’s notes demonstrated that at the time he knew who Ms. Lou was and communicated with her in her own right.
[16] Further, when the plaintiff Mr. Hall was cross-examined for this motion he confirmed that as of early 2012 he knew that Ms. Lou was involved in the renovations of the Property and there was an email from 2013 whereby the plaintiffs acknowledged that Zhong Zhi did not speak English “and his daughter, who ran the renovation, acted as his translator” (emphasis added).
The fraudulent concealment claims were fully unsubstantiated. I would add that the bulk of the reasons why the asserted their claim against Ms. Lou had to do with their assumption that Ms. Lou’s mother could not possibly have spoken English well enough to converse with the inspector. They had no evidence regarding Ms. Lou’s mother’s ability to speak English and this assumption, which appears to be based upon her ethnic background is troubling. They said “It is unlikely that Qui Lou’s mother, Shi Zhi Chen, would have spoken English well enough to have had the detailed conversations with the building inspectors in which they were actively misled.” To base a claim of fraud on the basis of this kind of assumption is worthy of sanction.
Conflicting claims
[17] The plaintiffs also made several conflicting claims as to when the limitation period commenced and made the discoverability date a moving target, relying on the following different dates: August 12, 2018, August 16, 2016, March 13, 2019 and October 7, 2020. This complicated the proceeding unnecessarily.
[18] I agree that when one selected date for the limitation period commencing no longer worked, the plaintiffs devised an alternate theory and selected an alternate date, even arguing that the action was not discoverable until after they had actually sought to add Ms. Lou as a defendant. After they made this final argument, they submitted that the claim against Ms. Lou had been initially commenced on the basis of bare suspicion. The said, “In fact, the motion to add Qi Lou was arguably premature given that it was based on their lawyer’s bare suspicion” and “The motion to add, in this particular case, was brought on the bare suspicion of the plaintiffs’ lawyer, Mr. Kostyniuk.”
Offers to settle
[19] Ms. Lou relies upon r. 49.10(2) which provides that:
Defendant’s Offer
(2) Where an offer to settle,
(a) is made by a defendant at least seven days before the commencement of the hearing;
(b) is not withdrawn and does not expire before the commencement of the hearing; and
(c) is not accepted by the plaintiff,
and the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless the court orders otherwise.
[20] The above rule does not entitle Ms. Lou to costs on a substantial indemnity basis because the plaintiff did not obtain any judgment: Dermann v. Baker, 2019 ONCA 584.
[21] However, r. 49.13 provides:
Notwithstanding rules 49.03, 49.10 and 49.11, the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date of the offer and the terms of the offer.
[22] In S & A Strasser Ltd. v. Richmond Hill (Town) (1990), 1990 CanLII 6856 (ON CA), 1 O.R. (3d) 243 (Ont. C.A.), the Court held that in the exercise of its general discretion, the lower court was entitled to take into account offers to settle made by the defendant which it had beat. In that case, the Court concluded that the defendant was entitled to solicitor-and-client costs from the date of an offer to settle.
[23] Ms. Lou made offers to settle both the motion to add brought the plaintiffs and the motion for summary judgment brought by her as follows:
a. On February 19, 2019, she made an offer to settle in respect of the motion to add that it be dismissed without costs and that she would pay the plaintiffs’ costs in the amount of $1,000.
b. On April 10, 2019, she made an offer to settle a motion to compel her to attend for examination under oath on the basis that the motion would be dismissed and she would pay costs in the amount of $500.
c. On March 5, 2020, she made an offer to settle on the basis that the action would be dismissed against her and she would pay costs to the plaintiff in the amount of $1000.
d. On August 26, 2020, she made an offer to settle on the basis that the action be dismissed against her and the plaintiffs pay her costs calculated at 50 percent of legal fees and 90 percent of the costs of disbursements.
[24] While these offers demonstrate how hard Ms. Lou worked to settle, the plaintiffs point out that the first three offers were all revoked by August 26, 2020. Further, the plaintiffs made a Rule 49 offer to settle on November 25, 2020 whereby the action against Ms. Lou would be dismissed on a “without costs” basis, which Ms. Lou did not accept.
The plaintiffs’ position
[25] The plaintiffs argue that the decision dated February 12, 2021 does not include any clear findings of reprehensible conduct which would form the basis for an award of costs on a substantial indemnity scale. Pursuing claims, even when the party’s position is weak, does not in itself justify an elevated scale of costs. There is a distinction between hard-fought litigation that turns out to have been misguided, and malicious counterproductive conduct which would justify an elevated scale of costs. The result achieved by Ms. Lou in this case does not mean that the allegations of deceit made as against her in the underlying action are baseless. It only means that the plaintiffs will not be able to obtain damages based on the expiry of a limitation period. At trial, the trial judge will still be able to make findings relating to Ms. Lou’s full involvement after hearing viva voce evidence from Ms. Lou, her parents, the contractors and the building inspectors: Davies, at paras. 39-49.
Analysis
[26] In the exercise of my discretion, I am taking into account the combination of the unproven allegation of fraudulent concealment, the shifting positions taken by the plaintiffs as to when the limitation period began which unnecessarily complicated this matter, as well as the offers to settle made above and in particular the offer to settle made on August 26, 2020. As well, on the plaintiffs’ own admission, they commenced the proceeding against Ms. Lou on the basis of bare suspicion.
[27] Further, by the time of the August 26, 2020 offer, the merits of the motion must have been clear to the plaintiffs, as further evidenced by their counter-offer to settle made subsequently that the action against Ms. Lou be dismissed without costs. But they persisted, in my view, because they did not wish to pay any costs. By that time, the record was clear, and the plaintiffs were scrambling to find alternate theories as to when the limitation period commenced; hence the conflicting positions taken before me. And the bulk of the plaintiffs’ costs were incurred during the fall of 2020 and could have thus been avoided.
[28] In my view the plaintiffs persisted with unsubstantiated allegations of fraud to establish fraudulent concealment. The allegations made impugned the integrity of Ms. Lou, who works for the Government of Ontario in the field of economics. This would have been very damaging to her reputation and it is not surprising that she expended great effort to defend herself.
[29] Therefore, in all the circumstances, in my view, the plaintiffs should be entitled to substantial indemnity costs.
[30] In so finding, I am mindful of the very high test for substantial indemnity cost with courts referencing terms like “egregious” “reprehensible” “worthy of sanction” and that they are to be awarded only “rarely”: Davies, at para. 28. In my view, it is worthy of sanction to commence a case on the basis of bare suspicion, make unfounded allegations of fraudulent concealment, and then persist in such claims when it is clear they are no longer tenable. This results in additional costs to all parties and could have been avoided by settling the motion and reserving the issue of costs to the motion judge who would have heard it instead of scrambling to develop alternate incredulous theories.
Quantum
[31] The plaintiffs assert that the quantum of costs claimed by Ms. Lou, on any basis is outrageous and far in excess of the reasonable expectations of an unsuccessful parties who would have sought $23,979.34. Ms. Lou says this is disingenuous as no breakdown has been provided which contains sufficient details.
[32] The plaintiffs assert there is evidence of over-lawyering and unjustified duplication giving as examples the following: 14.8 hours to prepare the statement of defence which was after multiple motions and the case was well defined; charging counsel fees for lawyers who did not argue the motion; 62.30 hours for multiple counsel preparing facta in respect of a single-issue motion; as well as 18 hours to prepare a chronology and compendium.
[33] The plaintiffs say that Ms. Lou has failed to take into consideration the effect of r. 39.02(4)(b) which provides that on motions other than summary judgment a party who cross-examines on the affidavit is liable for the costs of all other adverse parties regardless of the outcome, subject to the court’s discretion. They claim the costs of Ms. Lou’s cross-examination in respect of the motion to add her.
[34] As well, the plaintiffs argue that Ms. Lou lengthened unnecessarily this proceeding by initially refusing to swear her own affidavit in response to the motion to add her as a party but relied upon the evidence of a law student sworn on information and belief which necessitated a motion where Ms. Lou ultimately consented to be examined by written questions. They claim these costs.
[35] They question the fact that no dockets have been provided or receipts in respect of the disbursements sought although plaintiffs’ counsel say the request was too late. They question why there is a claim for $872.80 in printing and $537.48 in postage given that the materials were served and filed electronically. They also say Ms. Lou is not entitled to the $2,1266.66 for cross-examination transcripts because of r. 39.02(4)(a) which provides that where a person who cross-examines on an affidavit, that party shall provide a copy to adverse parties free of charge. In my view this rule does not preclude the successful party in the action from claiming the costs for such transcripts at the end of the day, if successful.
[36] I agree that the plaintiffs have raised some valid concerns and I add that the amount sought by Ms. Lou is out of proportion to costs awarded in other cases referred to me, and based upon my knowledge and understanding of the complexity of the case, the volume of material, and the amount claimed by the plaintiffs. This was a one-day hearing. There were fewer than 25 pages of affidavit material, not including exhibits. While there were cross-examinations, they were not extensive. In my view the amount sought is not proportional or reasonable in the circumstances.
Conclusion
[37] Although this matter was obviously important to Ms. Lou, and she was entitled to expend as many resources as she wished to defend this matter, the costs and resources that she has expended are well out of proportion to the motion which I heard (and the motion to add) and would not have been within the reasonable expectation of the plaintiffs. It is difficult for me to parse out any and all of the many issues which the parties have raised regarding costs, as well as my own concerns about the lack of proportionality, and I am not certain that in the end, undertaking such a detailed exercise would actually result in the appropriate costs award.
[38] As such, I am taking into account and balancing all of the above concerns and awarding costs as follows:
a) Cost in the amount of $45,000 on a substantial indemnity basis inclusive of disbursements; and
b) This judgment bears interest at the rates in the Courts of Justice Act.
Papageorgiou J.
Released: June 2, 2021
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JEFFREY HALL and JENNIFER KERR
Plaintiffs
– and –
ZHONG-ZHI LOU, THE CORPORATION OF THE CITY OF TORONTO, FCT TITLE INSURANCE LTD., NOVEX INSURANCE COMPANY, INTACT INSURANCE COMPANY, AND QI LOU
Defendants
- and -
RAYMOND LIU and HANG JIE CONSTRUCTION AND RENOVATIONS INC.
Third Parties
- and –
MING JIE JANG and HANG JIE CONSTRUCTION AND RENOVATIONS INC.
Fourth Parties
COSTS DECISION
Papageorgiou J.
Released: June 2, 2021