COURT FILE NO.: CV-17-585106
DATE: July 30, 2021
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF the Construction Act, R.S.O. 1990, c.C.30
BETWEEN:
ARCTIC LAWN, LANDSCAPING & CONSTRUCTION INC.
Plaintiff
Ronald Lachmansingh, for the plaintiff, Tel.: 416-599-8080, Fax: 416-599-3131.
SADAF SHAKORI
Brian Sherman for the defendant Tel.: 416-241-8426, Fax: 416-247-3704.
Defendant
DECISION: May 26, 2021.
Master C. Wiebe
COSTS AND INTEREST DECISION
[1] On May 26, 2021 I released my Reasons for Judgment wherein I found that Arctic Lawn, Landscaping & Construction Inc. (“ALLC”) has a lien and damages judgment against Ms. Shakori in the amount $38,935.84 plus a further damages judgment against Ms. Shakori in the amount of $35,323.48, for a total potential recovery of $74,259.32. ALLC registered a claim for lien in the amount $81,803.84 and in this action at trial asserted a damage claim of $43,902.86, for a total claim of $125,706.70. I dismissed Ms. Shakori counterclaim for damages which at trial was in the amount of $214,160.10.
[2] At the end of the trial hearing, as directed, the parties filed costs outlines. In my Reasons I directed that the parties make written submissions on costs and interest given the result. I have now received these written submissions, and herein make my decision on costs and interest.
COSTS
[3] This court’s jurisdiction to award costs is defined by Construction Act, R.S.O. 1990, c. C.30 (“CL”), section 86. This section gives the court a broad discretion to award costs. The only mandatory provision is in section 86(2) which specifies that “where the least expensive course is not taken by a party, the costs allowed to the party shall not exceed what would have been incurred had the least expensive court been taken.”
[4] In exercising its discretion on costs, the court will be guided by the factors specified by Rule 57.01(1), but must consider as an overarching principle what is generally reasonable in the circumstances; see Boucher v. Public Accountants, 2004 CanLII 14579 (ONCA), [2004] O.J. No. 2634.
[5] ALLC claims costs totaling $186,044.09. It appears from Mr. Sherman’s written submission that Ms. Shakori takes the position that ALLC should be awarded costs of “roughly half” of the amount I awarded to ALLC in my Reasons for Judgment, which would be $74,259.32/2 = $37,129.66.
Result
[6] There is no dispute that ALLC succeeded in this action and reference and deserves to be awarded costs. I agree. The issue is the amount of the costs award. However, the fact that ALLC obtained a result that represents 59% of its lien and damage claim will be taken into consideration.
Settlement efforts
[7] At the request of the parties, I ordered a settlement conference with Master Short that took place on July 16, 2020, five months before the scheduled trial hearing. Mr. Lachmansingh showed me that at this conference Master Short recommended a settlement whereby ALLC would be paid the amount Ms. Shakori had posted as security for the ALLC claim for lien pursuant to the order of Master McGraw dated September 28, 2017, namely $102,254.80. She rejected that recommendation and insisted that she be paid the entirety of the posted money. In my view, this is a quite unreasonable position for her to have taken given the evidence that came out at the trial hearing.
[8] There were then written offers to settle. It is well settled law that the mandatory provisions of Rule 49.10 concerning the consequences of written offers to settle are not binding on this court given its broad discretion under CA section 86. Nevertheless, it is also well settled law that this court will be guided by the rule as it applies to this case as this court has a vital interest in promoting settlement.
[9] On October 4, 2020 ALLC served a written offer to settle offering to accept only $15,000 of the monies in court in settlement of all ALLC claims, including costs, with Ms. Shakori to be paid the remainder of the posted funds in settlement of her counterclaim. This offer remained open for acceptance until trial and therefore qualified as an offer to settle under Rule 49.10. Ms. Shakori did not accept this offer. Given the evidence at trial, it astounds me that she did not do so. Clearly, ALLC obtained a result that is much more favourable to it than this offer.
[10] The unreasonableness of Ms. Shakori’s settlement efforts was only underlined by her own written offer to settle. On December 1, 2020, only three days before the commencement of the trial hearing on December 4, 2020, Ms. Shakori delivered a written offer to settle. She offered to be paid the entirety of the posted money plus $20,000 in costs. ALLC would get nothing out of this. Again, given the evidence at trial and the result, this was a totally unreasonable offer.
[11] Mr. Lachmansingh called for implementation of Rule 49.10 of the Rules of Civil Procedure. Under that rule, ALLC, as the plaintiff, would be entitled to partial indemnity costs to the date of its offer plus substantial indemnity costs thereafter. I agree that the rule has application to this case, particularly given Ms. Shakori’s unreasonable settlement efforts. Rule 49.10 is not binding on this court, but its implementation is appropriate here.
[12] Mr. Lachmansingh provided an updated costs outline that included the costs incurred by ALLC in relation to its previous counsel, Burstein & Greenglass LLP. There was no objection to this updated costs outline, and I accept it as it reflects the full amount of costs incurred by ALLC in this matter. The updated costs outline also breaks down the costs claimed by ALLC in accordance with Rule 49.10. Prior to October 4, 2020, the costs outline shows partial indemnity costs totaling $78,949.54 (HST exclusive). Subsequent to October 4, 2020, the costs outline shows substantial indemnity costs totaling $68,707.35 (HST exclusive).
[13] Adding these two figures plus the HST and disbursements shown in the costs outline produces a grand total of $186,044.09. This is what ALLC claims in costs. I believe this position has merit for the reasons stated, but I will also consider other Rule 57.01(1) factors.
Reasonable expectation of the unsuccessful party
[14] At the conclusion of the trial argument Mr. Sherman filed a costs outline for Ms. Shakori which showed the total of $96,075.19 in full indemnity costs, $82,140.17 in substantial indemnity costs and $54,270.11 in partial indemnity costs. These figures are from 45% to 55% of the figures that appeared in the ALLC costs outline that Mr. Lachmansingh filed that day as well. They are also considerably less that what ALLC now claims.
[15] I required the filing of these costs outlines at the end of the trial argument as they reflect what both parties expected to receive in the event of his or her success. Consequently, these documents form an excellent picture of what the unsuccessful party should reasonably expect to pay in the event of his or her loss.
[16] Should the ALLC cost award be reduced on account of what appears in Ms. Shakori’s costs outline? Only to some extent, in my view. Her conduct must be born in mind. There were her unreasonable settlement efforts, which I have already discussed. But the issues themselves must be born in mind. Ms. Shakori and her expert raised numerous issues of alleged deficiencies that she relied upon to terminate the contract. She maintained these allegations of deficiencies at trial. I found them to be largely groundless or not of great significance. The issues raised by ALLC, namely the unpaid accounts, unpaid management fee and earned profit, were relatively straight-forward. It was the issues raised by Ms. Shakori that complicated this action and the trial. She must reasonably have expected that this high-risk strategy could backfire in a large costs award against her. That must be born in mind.
Proportionality, complexity and importance
[17] Rule 1.04 of the Rules specifies that a court shall make orders “that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.” In my view, proportionality is incorporated into this court’s cost jurisdiction by the obligation in CA section 86(2) to determine the least expensive course of action the party entitled to costs could have taken. Mr. Sherman argued that the ALLC claim in costs is disproportionality large.
[18] There is authority for the proposition that the amount in issue in a case and the amount recovered should not be the sole consideration, particularly where the unsuccessful party’s conduct unreasonably enhances costs. In Interborough Electric Incorporated v. Maple Reinders Constructors Ltd., 2016 ONSC 1115 at paragraph 57 Justice Vallee stated that a “results-based view of proportionality” would create an injustice where an unreasonable unsuccessful party creates costs that exceed the amount in issue and the amount recovered. Her Honour stated that in such cases the “principle of indemnity is important.”
[19] I agree with those comments. ALLC had a meritorious claim and should not be penalized because of the unavoidable costs it incurred to prosecute that claim. Again, the most important factor is Ms. Shakori’s unreasonable settlement efforts. At no time did she make any offer that involved paying ALLC. This left ALLC with no choice but to pursue its meritorious claim with all of the costs that that entailed.
[20] I will reiterate here as well that, in my view, it was Ms. Shakori that unnecessarily complicated this proceeding with the largely groundless or marginal allegations of deficiencies and the groundless contract termination. The other issues – the costs incurred by and owed to ALLC, the unpaid ALLC management fee and the ALLC profit share – where largely accounting issues. They could probably have been resolved without litigation.
[21] Mr. Sherman alluded to the contract interpretation issues being complex and being the fault of ALLC. I did not find that to be the case.
[22] There is also a dimension to this action that gives it a greater degree of importance than is normally the case with breach of contract cases involving one property and two parties. The parties and others had a broader business relationship that concerned the property in question here and two other properties. This relationship resulted in an action on the Commercial List when that broader business relationship broke down. I understand that this other action has remained dormant while the subject action proceeded and that it will be influenced by the result in the subject action. This Commercial List action will now no doubt resume. That means that this case has importance to more people than just the parties to this action.
[23] I have decided to make some adjustment to the award on account of proportionality nevertheless, given the size of the ALLC costs claim as compared to its original lien and damage claim and the amount rewarded. But the adjustment will not be great.
Quantum and indemnity
[24] The question then becomes: what is the reasonable amount to award to ALLC? Mr. Sherman made two comments about the quantum of the ALLC costs claim. He argued that the $8,000 disbursement shown for the cost of ALLC’s expert, Sandro Soscia, should not be compensated as I found Mr. Soscia’ evidence to be of essentially no value. I agree with that assessment and will make an adjustment accordingly.
[25] Mr. Sherman had a more general criticism of the ALLC costs claim. While he did not object to the items of work shown in the updated ALLC costs outline, Mr. Sherman argued that the amount of time spent on each item was excessive. In particular, he asserted that the 15 hours per trial day shown for Mr. Lachmansingh was excessive.
[26] I have examined the ALLC costs outline and do find some areas of concern. I had ordered two days of examinations for discovery. It is not clear from the ALLC updated costs outline as to how much is being claimed for the work of ALLC’s previous lawyer, Mr. Rotenberg, in preparing for and attending on these discoveries. It is also not clear whether there is any claim for what would amount to duplicative work due to the change in lawyers by ALLC, such as the work done in learning the file and revising the Scott Schedule. It is also not clear what time was spent on individual tasks such as the preparation of the witness affidavits, requests to admit and the individual trial management conferences. I agree that the amount of trial time shown for ALLC counsel does seem somewhat excessive. Given these concerns and this uncertainty, I believe that some adjustment in the costs award needs to be made.
[27] There was some discussion of a distributive order as to costs given the number of issues, some of which ALLC was more successful on than others. The Court of Appeal has frowned on such costs orders and I will not countenance it here.
Conclusion
[28] Considering all of these factors, I have concluded that the amount of $135,000 is a reasonable amount of costs that Ms. Shakori should pay.
[29] This is just under 75% of the $186,044.09 being claimed. That amount exceeds all of the figures in the Shakori costs outline. But I believe that ALLC deserves such a high figure given the groundless issues Ms. Shakori raised and her quite unreasonable settlement efforts. On the other hand, it also reflects the fact that ALLC was not entirely successful and incorporates the concerns I have expressed. This amount is reasonable in the circumstances of this case.
INTEREST
[30] Mr. Lachmansingh submitted that there should be three prejudgment interest amounts:
• The rate of 0.5% per annum concerning the $38,935.84 lien amount, which represents the unpaid costs incurred by ALLC, running from October 1, 2020. This is the date, according to Mr. Lachmansingh, on which these amounts were billed to Ms. Shakori. This represents per diem amount of $0.5333. As of today, this prejudgment covers 303 days and totals $161.59.
• The rate of 1.5% per annum concerning the $8,805.60 of outstanding management fee, running from June 30, 2018. This is date on which I found that the project was completed. This represents a per diem amount of $0.362. As of today, this prejudgment interest covers 1,126 days and totals $407.61.
• The rate of 1.5% per annum concerning the $26,517.86 of earned profit, running from June 30, 2018, the date of project completion. This represents a per diem amount of $1.089. As of today, this prejudgment interest covers 1,126 days and totals $1,226.21.
[31] The total of these three amounts is $1,795.41. There was no dispute about the claimed prejudgment interest. I, therefore, find that these are the rates and calculations to be applied.
[32] Concerning post-judgment interest, the rate of 2% is mandated by the Courts of Justice Act, R.S.O. 1990, c. C. 43 section 129. That is what will be applied.
CONCLUSION
[33] I, therefore, order that Ms. Shakori pay costs to ALLC in the amount of $135,000 plus prejudgment interest in the amount of $1,795.41 calculated as of today (see above) and ongoing to the date of the report, plus post-judgment interest at 2% on the judgment amounts running from the date of the report.
[34] I enclose a draft of my report for consideration and comment by the parties. As you can see, I have dated the report August 9, 2021, as I intend to release the report that day.
Released: July 30, 2021 __________________________
MASTER C. WIEBE
COURT FILE NO.: CV-17-585106
DATE: July 30, 2021
ONTARIO
SUPERIOR COURT OF JUSTICE
In the matter of the Construction Act, R.S.O. 1990, c. C.30
BETWEEN:
Arctic Lawn, Landscaping & Construction Inc.
Plaintiff
- and -
Sadaf Shakori
Defendants
COSTS AND INTEREST DECISION
Master C. Wiebe
Released: July 30, 2021