[CITATION](http://intra.judicialsecurity.jus.gov.on.ca/NeutralCitation/): Crosslinx v. Ontario Infrastructure 2021 ONSC 4364

COURT FILE NO.: CV-20-00649072-00CL

DATE: 20210617

SUPERIOR COURT OF JUSTICE – ONTARIO

(Commercial List)

RE: CROSSLINX TRANSIT SOLUTIONS GENERAL PARTNERSHIP and CROSSLINX TRANSIT SOLUTIONS CONSTRUCTORS

Applicants

AND:

ONTARIO INFRASTRUCTURE AND LANDS CORPORATION, as representative of the Minister of Economic Development, Employment and Infrastructure, as representative of Her Majesty the Queen in Right of Ontario

and

METROLINX

Respondents

BEFORE: Koehnen J.

COUNSEL: Matthew P. Sammon, Andrea Wheeler, Jacqueline Chan for the Applicants

Peter Wardle, Sharon C. Vogel and Jesse Gardner, for the Respondents

HEARD: In writing.

Costs ENDORSEMENT

[1] The applicants seek costs of $430,000 in respect of a two day application which was heard in February, 2021 and which is indexed as 2021 ONSC 3567. The respondents submit that they made a settlement offer which disentitles the applicants from obtaining costs after the date the settlement offer was made. In addition, they submit that the applicants’ disbursement for online legal research in the amount of $4,600 is not compensable.

[2] For the reasons set out below, I fix the applicants costs at $92,119.92 plus HST, being the costs they incurred before the settlement offer was delivered and disallow costs for online legal research. Other disbursements are also limited to those incurred before the date of the settlement offer.

The Settlement Offers

[3] To understand the settlement offer and to determine whether it attracts the cost consequences the respondents assert, requires a brief summary of the underlying applications.

[4] The dispute arises out of a long, complex agreement for the construction of the Eglinton Crosstown Light Rapid Transit line in Toronto. The agreement contains a tiered dispute resolution mechanism. After one party notifies the other of a dispute, each party is required to give the other disclosure of relevant facts, information and documents; that is followed by tiered negotiations, culminating in negotiations between senior officers. If the senior officers cannot resolve the dispute, it is referred to an Independent Certifier for resolution. If either party disagrees with the decision of the Independent Certifier, it can proceed to litigation or, if the parties agree, arbitration. The Independent Certifier’s decision must, however, be complied with unless and until it is overturned in a subsequent proceeding. In addition, subject to certain exceptions, any litigation or arbitration is postponed until after the project has been substantially completed.

[5] Here, the parties never got to the negotiation between senior officers because the respondents made a long list of information and production demands as a pre-condition to negotiating. The respondents took the position that the dispute could not proceed to the Independent Certifier because the requirements for disclosure and negotiation had not been met. In response to the application, the respondents took the position that the application should be stayed because of the provisions that deferred litigation until after substantial completion.

[6] The respondents delivered a settlement offer on December 16, 2020. It provided that, if the respondents discontinued their application, the respondents would:

(i) withdraw their request for information and production;

(ii) proceed with senior officer negotiations;

(iii) waive the Independent Certifier procedure;

(iv) waive the requirement that determination of the underlying dispute be stayed until after substantial completion; and

(v) consent to an expedited determination of the dispute by a single arbitrator selected under the mechanism contained in the Project Agreement.

[7] Under Rule 49.10(2), where a respondent makes an offer to settle that is not accepted, and the applicant recovers judgment “as favourable or less favourable” than the terms of the offer, the applicant is entitled to its partial indemnity costs up to the date of the offer, and the respondent is entitled to its partial indemnity costs from the date of the offer forward, unless the Court orders otherwise.

[8] The respondents submit that the result on the applications was as or less favourable to the applicants than the offer to settle. The respondents do not claim their own costs for the period following the offer but seek only to limit the applicants’ costs to the period preceding the offer. That would come to $92,119.92 rather than the $430,000 the applicants seek.

[9] The applicants submit that:

(i) To attract cost consequences under Rule 49, an offer should be fixed, certain and understandable.[^1]

(ii) The respondents have the burden of proving that the applicants obtained a judgment as favourable or less favourable than the terms of the offers to settle.[^2]

(iii) The respondents were entirely unsuccessful in the proceeding and bear the burden under Rule 49.10(3) of demonstrating that result on the application was as or less favourable to the applicants than the settlement offer.

[10] The respondents have met their burden and have satisfied me that the result on the application was as favourable or less favourable to the applicants than the settlement offer.

[11] The offer was fixed, certain and understandable. The applicants have not submitted otherwise. I accept that it can be difficult to compare a non-monetary settlement offer against a court order to determine which is more favourable. Whether such a determination is possible depends on the circumstances of the case. In this case, the comparison is not overly difficult.

[12] The issue in the application was whether the applicants were entitled to initiate a negotiation procedure under the Project Agreement. If the negotiations were not successful, the next step in the dispute resolution process was to have the dispute assessed by an Independent Certifier. The Independent Certifier’s decision would be binding only on an interim basis until the issue was finally determined by either arbitration or litigation.

[13] In this case, access to the negotiation procedure was stymied because the respondents took the position that they could not proceed to negotiation before the applicants satisfied a long list of information and production requests from the respondents. The applicants sought declarations that would initiate the negotiations and the Independent Certifier procedure. It is important to note in this regard that what the applicants sought and what I granted was merely initiation of the process. I did not grant any substantive underlying relief.

[14] The substantive issue that underlies the application and that remains to be determined is whether or not the work processes required because of the Covid-19 pandemic are ones that create a sufficient delay to the construction of the project so as to require an extension of the Substantial Completion dates under the Project Agreement.

[15] The respondents offer was one that, in effect, initiated the negotiations among senior officers without any pre-conditions, just as the applicants requested and just as I granted. However, the respondents offer went further than that and went further than what the applicants requested or than what I granted. The offer eliminated the Independent Certifier procedure and moved directly to resolve the substantive underlying dispute by way of an expedited arbitration.

[16] Although the respondents may have been unsuccessful in the proceeding before me, all the court order does is initiate a negotiation which, if unsuccessful would lead to an Independent Certifier who would not make a final determination. The respondents’ offer would have led to both a negotiation and a final determination of the issues in a much faster timeframe than is possible under my order.

[17] I am satisfied that the outcome under the respondents’ settlement offer was more favourable than what the applicants achieved or, indeed, sought on the application.

[18] In those circumstances I am satisfied that the applicants’ costs should be limited to the $92,119.92 they incurred before the settlement offer was delivered.

[19] It is unclear from the materials I have how much of the sum the applicants seek for disbursements was incurred before delivery of the settlement offer. Their disbursements should be limited to those incurred before December 16, 2020.

Disbursements for Legal Research

[20] The applicants claim $4,060.18 for online research. The respondents submit that such costs are not compensable. The applicants submit they are compensable.

[21] The applicants rely on Moon v. Sher[^3] where the Court of Appeal stated at para. 39:

It would seem, therefore, that amounts disbursed for Quicklaw services, courier services, stationery and postage may be recoverable under Tariff item 35 if the service or expense is “reasonably necessary for the conduct of the proceeding”, the amount is reasonable and has been charged to the client, and the disbursement does not fall within standard office overhead. Indeed, as Quicklaw and similar search vehicles have become convenient aids to research, although not found in the Tariff, their costs should be recoverable as disbursements provided they are not excessive and have been charged to the client. It is for the party seeking recovery of the disbursements to satisfy these criteria.

[22] The respondents rely on Lloyd v. Bush[^4], a Superior Court decision where Mew J. held:

[101] In my view, it has become increasingly harder as time has gone by, to satisfy a court that computerised legal research is not part and parcel of the ordinary overhead expense of a law practice. The law reports, loose-leaf services and texts that traditionally lined the shelves of law firm and courthouse law libraries have been increasingly replaced by online resources.

[102] The point has been reached where disbursements for computerised legal research are generally no longer recoverable in the absence of special circumstances: see Mark Orkin, The Law of Costs, 2nd ed. (Toronto: Thomson Reuters, 2018) (loose-leaf) at §219.6(9).

[23] I am inclined to agree with the sentiments expressed in Lloyd v. Bush. Those sentiments do not, however, contradict those of the Court of Appeal in Moon v. Sher.

[24] The key language in Moon is that such fees are recoverable if they do “not fall within standard office overhead”. The Court of Appeal added that it was for the party claiming reimbursement to satisfy this criterion. The applicants have failed to satisfy me that their online searches do not fall within standard office overhead.

[25] There is no particularization to support the search fees. The complete evidence supporting the search fee is the following entry in the applicants’ costs outline:

Online searches $4,060.18

There is no description of how that sum is determined, no invoice(s) from a third party service provider(s) and no description of the billing arrangements that the applicants’ law firm has entered into with the service provider(s).

[26] In this regard, I note that the website for the successor to Quicklaw, LexisNexis states:

Note that most Lexis Advance Quicklaw subscribers are subscription-based and therefore pay a flat rate for unlimited access to the service.

[27] A flat rate would fall into general overhead rather than a recoverable disbursement. In that respect, use of online searches for which the law firm pays a flat fee is no different than a lawyer or student referring to a text book or a hard copy law reporter in the firm’s library. The firm absorbs those costs as general overhead and does not attempt to recover use of the text as a disbursement from opposing parties to litigation.

[28] In the absence of concrete evidence that online searches are not part of overhead, the applicant has failed to meet the burden required by Moon v. Sher.

[29] For the reasons set out above I award the applicants costs of $92,119.92, plus HST, plus disbursement incurred before December 16, 2020 provided that such disbursements do not include costs for online searches.

Koehnen J.

Date: June 17, 2021

[^1]: The Corporation of the Township of South Stormont v The Kraft Heinz Company, 2021 ONSC 1217 at paras 7-8. [^2]: Pankerichan v Djokic, 2012 ONSC 3768 at para 16; and Haitas v Haitas, 2017 ONSC 7172 at para 11, where the courts held that the offerees had failed to meet the burden under rule 49.10(3) in cases involving non-monetary Offers. [^3]: 2004 CanLII 39005 (ON CA); most recently adopted in Shaver-Kudell Manufacturing Inc. v. Knight Manufacturing Inc., 2018 ONSC 6895. [^4]: 2020 ONSC 2892