Court File and Parties

COURT FILE NO.: 14-757-SR

DATE: 20210924

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

SYBIL GORUK Plaintiff

– and –

GREATER BARRIE CHAMBER OF COMMERCE Defendant

COUNSEL:

Ronald S. Minken, Kyle D. Burgis and Tejpreet Sambi for the Plaintiff

Eric Gionet and Jonathan De Biasi for the Defendant

HEARD: Cost Submissions in Writing

Ruling on costs

C. BOSWELL J.

[1] Sybil Goruk was hired by the Greater Barrie Chamber of Commerce as an office manager in 1997. She was promoted to the position of executive director less than a year later. She continued in that position until she was terminated, allegedly for cause, on April 29, 2014.

[2] Ms. Goruk sued for damages for wrongful dismissal. She sought an award equal to two years’ wages and benefits plus aggravated and punitive damages.

[3] On July 19, 2021 I dismissed Ms. Goruk’s claim, finding that the Chamber had just cause to terminate her position. My reasons for doing so are reported at 2021 ONSC 5005. I invited the parties to make written submissions on costs and established a timetable for them to do so.

[4] I have received and considered those written submissions and I dispose of the costs issue in accordance with the reasons that follow.

THE GOVERNING PRINCIPLES

[5] The court’s discretion to award costs is grounded in section 131 of the Courts of Justice Act, R.S.O. 1990 c. C.43 and is guided by Rule 57.01 of the Rules of Civil Procedure.

[6] Rule 57.01 lists a number of factors for the court to consider in the assessment of costs which include, but are not limited to the following:

(a) the result in the proceeding;

(b) any offer to settle;

(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 improper, vexatious or unnecessary or taken through negligence, mistake or excessive caution;

(g) the principle of indemnity; and,

(h) the concept of proportionality, which includes at least two factors:

i. the amount claimed and the amount recovered in the proceeding; and,

ii. 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.

See Elbakhiet v. Palmer, 2014 ONCA 544.

[7] The weight to be applied to any of the enumerated, or other, factors in any given assessment may vary. It is, however, now well-settled that the overarching principles to be observed in the exercise of the court’s discretion to fix costs are fairness, proportionality and reasonableness: see Beaver v. Hill, 2018 ONCA 840; Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.); and Moon v. Sher (2004), 246 D.L.R. (4th) 440 (C.A.).

[8] By convention, costs will be awarded to a successful party and will generally be measured on a partial indemnity basis: Bell Canada v. Olympia & York Developments Limited et. al. (1994), 17 O.R. (3d) 135 (C.A.). This general rule accords with common sense and serves a number of purposes, identified by Perrell J. in 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (S.C.J.), at para. 10 including: (1) the indemnification, at least to some extent, of successful litigants; (2) the facilitation of access to justice; (3) the discouragement of frivolous positions and/or inappropriate behaviour; and (4) the encouragement of settlements.

[9] Appellate courts have directed that there are two circumstances in which elevated costs may be justified: (1) where they are triggered by the cost consequences of an offer to settle under Rule 49.10; and, (2) where the losing party has engaged in reprehensible, scandalous or outrageous conduct: see Davies v. Clarington (Municipality), 2009 ONCA 722, at para. 28.

[10] In rare circumstances, costs may be denied to a successful party based on a demonstrated impecuniosity on the part of the losing party. See for instance, Walsh v. 1124660 Ontario Limited, 2007 (S.C.J.) and the cases cited therein. In Walsh the plaintiff, a Tim Horton’s employee, sued for wrongful dismissal. She lost. The trial judge concluded that she had no means to pay any costs award. He expressed concern that a costs order would have no practical utility and would serve only to dissuade others, who may have more compelling cases, from pursuing a remedy for fear of a crushing costs order in the event of a loss. The trial decision in Walsh was upheld at the Court of Appeal in a decision reported as 2008 ONCA 432. A unanimous panel referred to the trial judge’s decision not to award costs against an unsuccessful plaintiff on the grounds of impecuniosity as “appropriate but generous”. Leave to appeal to the Supreme Court was refused, with costs: see [2008] S.C.C.A. No. 387.

THE PARTIES’ POSITIONS

[11] The defendant seeks total costs, inclusive of disbursements and taxes, of $210,000. This figure is comprised of two main components. First, the costs incurred prior to an offer to settle served March 2, 2020. The gross amount of those costs is, according to the defendant, $66,478.01. Partial indemnity recovery is sought on that sum in the amount of $45,000. Second, the costs incurred following the offer to settle. The gross amount of those costs is, according to the defendant, $190,835.68. Substantial indemnity recovery is sought on that sum in the amount of $165,000. In the alternative, partial indemnity recovery on that sum is sought in the amount of $137,750.

[12] The defendant offered to settle these proceedings in March 2020 for $25,000. The plaintiff was subsequently denied any recovery following a trial. There is no question that the defendant bettered its offer.

[13] The defendant acknowledges that Rule 49.10(2) does not establish a presumption that substantial indemnity costs will follow when a defendant beats its offer to settle. In this respect, it differs from Rule 49.10(1) which provides that a plaintiff who beats its offer to settle is entitled to partial indemnity costs to the date of the offer and substantial indemnity costs thereafter, unless the court orders otherwise.

[14] The defendant relies, however, on Court of Appeal authority in support of its position that substantial indemnity costs are appropriate in the circumstances of this case, including the recent case of Oz Merchandising Inc. v. Canadian Professional Soccer League, 2021 ONCA 520 as well as S & A Strasser Ltd. v. Richmond Hill (Town), (1990), 1 O.R. (3d) 243. I will discuss these authorities in some detail below.

[15] The plaintiff submits that the amount sought by the defendant is excessive. She asks that no costs be awarded, or alternatively, that a more modest amount in the range of $25,000 to $30,000 be awarded in the all the circumstances. Her position is grounded in a number of assertions that fall into the following 5 categories: (1) there was divided success on the issue of just cause; (2) the defendant caused the needless accrual of costs as a result of advancing a counterclaim and abandoning it only at the outset of the trial and by asserting that the plaintiff failed to mitigate her damages, only to drop that assertion at the outset of trial; (3) the file was over-lawyered and the fees sought are disproportionate; (4) the plaintiff’s claim, while unsuccessful, was nevertheless reasonable; and (5) the plaintiff is impecunious.

DISCUSSION

[16] This case highlights two related issues. The first is the oppressive cost of civil litigation and its chilling impact on access to justice. The second is the importance of risk management in the course of civil proceedings.

[17] Ms. Goruk was terminated after 17 years at the Chamber. She was given no notice and paid no severance or other amounts in lieu of notice. She sued for more than $2 million in damages, most of which fell under the categories of aggravated and punitive damages. It was my understanding at trial that the amounts she was actually seeking totaled about $840,000. The trial took thirteen days to complete. The Chamber was represented by two counsel throughout the trial; Ms. Goruk by three. The loss is undoubtedly devastating for Ms. Goruk. The action took some seven years to reach its conclusion. She has surely incurred significant costs in prosecuting it. She lost at trial and is now facing a costs award in excess of $200,000.

[18] This case was a close call. Apart from the knowledge that the defendant offered $25,000 to settle it in March 2020, I have no information about what efforts were made by one or another of the parties to reach a resolution short of a trial. If the defendant’s best offer was $25,000, I can understand why the case did not settle. Both sides had reasons to believe they could prevail at trial. Unfortunately, this is the sort of case, like the vast majority of others, where only one side could prevail.

The Assertion of Impecuniosity

[19] The defendant is the party who prevailed on this occasion. There is no reason here to depart from the usual convention that entitles the defendant to its costs. Ms. Goruk’s counsel urged the court to take Ms. Goruk’s impecuniosity into account and exercise the discretion to award no costs, or otherwise a markedly reduced amount from what otherwise might be fair and reasonable in the circumstances.

[20] I do not have any evidence, however, of Ms. Goruk’s financial circumstances. Her counsel submitted that she had to sell her modest home to fund the litigation and that she is without assets. But there is no evidence before the court regarding the specifics of her circumstances. Absent that evidence I am not in a position to reach the conclusion urged upon me – that she is impecunious. I am certainly sympathetic to Ms. Goruk’s position, but I am required to exercise my discretion according to settled principles of law and not on the basis of sympathy or prejudice.

The Appropriate Scale

[21] Having determined that the defendant is entitled to its costs, the next question is whether those costs ought to be awarded on the usual partial indemnity basis or on an elevated basis in whole or in part.

[22] The defendant’s position, as I noted, is that it should be awarded its partial indemnity costs to March 2, 2020 and its substantial indemnity costs thereafter. The sole basis for that assertion is the offer to settle delivered to the plaintiff on March 2, 2020

[23] Rule 49.10(2) addresses the costs consequences of a failure to accept an offer to settle. It provides as follows:

(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.

[24] The Court of Appeal held, in Strasser, as above, that r. 49(10)(2) does not address the situation where the plaintiff’s claim is dismissed. It only applies where the plaintiff has had some success, but less than an offer made by a defendant. The court retains a discretion, however, to award elevated costs having regard to the factors enumerated in r. 57.01(1) which specifically direct the court to consider any written offer to settle. See also r. 49.13 which provides that the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing.

[25] The decision in Strasser has remained good law for 30 years. Its correct interpretation of r. 49(10)(2) was recently confirmed in the Oz case, as above.

[26] In Strasser the plaintiff sued for $1 million but reduced the claim to $70,000 just prior to trial. The defendant made an offer to settle for $30,000 prior to trial. The plaintiff rejected the offer and went on to trial, where her claim was dismissed. The trial judge awarded costs on a solicitor-client basis (roughly equivalent to substantial indemnity costs in today’s parlance) from the commencement of the action. The plaintiff’s appeal was allowed in part. The award was adjusted to provide that the costs awarded would be assessed on a party-and-party basis (the rough equivalent to partial indemnity costs) to the date of the offer and on a solicitor-client basis thereafter.

[27] In Oz, the plaintiff sought $2 million against a variety of defendants involved in the operation of competitive soccer leagues in Ontario, including the Canadian Professional Soccer League, the Eastern Ontario District Soccer Association, the Ontario Soccer Association, the Canadian Soccer Association and others. The alleged basis for the claim is extremely complicated and the details unimportant to this ruling. Suffice it to say that significant offers to settle were made by some of the defendants. The CSA offered to settle its part of the claim for $150,000. The EODSA and OSA made a combined offer to settle for $326,790. Both offers were rejected. The plaintiff’s claim was dismissed at trial.

[28] The trial judge found that she had the general discretion to award costs on an elevated scale in accordance with the principles enunciated in Strasser. She held that the defendants had made significant offers to settle which could have avoided the trial of a claim that was ultimately dismissed. She awarded the defendants partial indemnity costs to the dates of their respective offers and substantial indemnity costs thereafter. She considered her approach consistent with one of the principal purposes of cost awards: to encourage the making and acceptance of reasonable offers to settle. Her decision was upheld by the Court of Appeal.

[29] What I take from the cases referred to me is that I have the discretion to award elevated costs to a defendant who has made a reasonable offer to settle, which has not been accepted, and where the plaintiff’s claim is dismissed at trial. I do not read the jurisprudence to say that a defendant is presumptively entitled to elevated costs in such circumstances.

[30] In the case at bar, the offer to settle was made six years into the litigation. I have no evidence to explain the significance, if any, of that timing. It was for $25,000. The defendant noted, in its cost submissions, that the amount claimed in the statement of claim totaled about $2.5 million. The defendant’s offer accordingly represented about 1% of the amount claimed. If my math is correct, the plaintiff reduced the amount sought to about $840,000 by the time of trial. Even so, the defendant’s offer represented about 3% of that amount.

[31] Again, this case was a close call. The amount offered by the defendant, in hindsight, looks like something the plaintiff should perhaps have taken more seriously. Having said that, it was never an amount that was likely to result in a resolution in all the circumstances. Given the time at which it was made it would have left the plaintiff with nothing other than a modest reduction in the bill owed to her own counsel. It is unsurprising that she rejected it.

[32] This case can be readily distinguished from Strasser and Oz. In both of those cases, significant and meaningful offers to settle were made and rejected. Here, an offer slightly above nuisance value was made.

[33] Elevated cost consequences are, in large part, meant to promote resolution, through the rewarding of the maker of a reasonable offer and the punishment of a party who fails to take such an offer seriously.

[34] In my view the offer to settle here, while better than the result ultimately achieved by the plaintiff, was not an offer worthy of rewarding by way of elevated costs. Given the slim margin between success and failure in this case, the plaintiff ought not, in my view, to be punished for rejecting such a modest offer.

[35] In the result, I find that the defendant is entitled to its costs, assessed on the usual partial indemnity scale.

The Appropriate Quantum

[36] In terms of quantum, the defendant seeks $182,750 in partial indemnity costs, inclusive of fees, disbursements and HST. According to the defendant’ costs outline it incurred disbursements of $2,728.67. Backing the disbursements out of the total sought, leaves $180,021.33. Of that sum, $159,310.91 would be fees, with the balance being HST. The question therefore, is whether $160,000 in fees is a fair, proportionate and reasonable amount for costs in all of the prevailing circumstances.

[37] I confess that, in my view, in today’s litigation environment, partial indemnity fees of $160,000 do not immediately strike me as unreasonable for a million dollar case that took thirteen days to try. That said, the plaintiff has raised a number of issues challenging the reasonableness of that sum and I will address them one-by-one. I note that I have already addressed one of those challenges, which was based on the plaintiff’s purported impecuniosity.

Divided Success

[38] The plaintiff submits that there were numerous grounds raised in the statement of defence that purportedly amounted to just cause. She put that number at 26. She says the defendant succeeded on only two, which means that there was divided success.

[39] I am not persuaded by this argument. There was no divided success in the outcome. I am not familiar with any jurisprudence that supports the assertion that costs should be reduced on the basis of a mixed success in terms of factual findings. The defendant asserted that it had just cause for dismissal. I found that, in all the circumstances, it did.

The Defendant Unnecessarily Lengthened the Proceedings

[40] The plaintiff again submits that the defendant raised some 26 grounds that supported dismissal. She says she was obliged to respond, with evidence, to each of them. Most of them had little, if any, impact on the outcome of the case. In other words, a good deal of time was wasted litigating issues that did not matter in the end.

[41] There is some merit to what the plaintiff submits. That said, the trial really focused on a half dozen or so issues that informed the plaintiff’s termination. In my view, time was not wasted during the trial chasing issues that were not relevant. I acknowledge that the defendant withdrew its counterclaim at the 11th hour and perhaps that resulted in some needless preparation. I do not have a sense, however, about how much time might have been wasted in preparing to defend a counterclaim that never proceeded.

[42] I further acknowledge that the defendant withdrew, again at the 11th hour, its claim that the plaintiff failed to mitigate her losses. Costs incurred in preparing to advance or meet that claim were arguably thrown away. I make two comments. First, I again do not have a good sense about how much time was dedicated strictly to the mitigation issue. Second, both sides did their best to narrow the issues as much as possible for trial. I commend them for doing so. I am reluctant to punish one side for taking issues off the table that were not “worth the candle”.

The Costs Sought are Disproportionate

[43] The plaintiff asserts that the defendant’s costs are excessive given the amount involved and the modest complexity of the claim.

[44] I do not accept the plaintiff’s position in this respect.

[45] The plaintiff valued her claim anywhere from $840,000 to $2.5 million. The assertions advanced in the action impugned the integrity of the Chamber and its executive members. The assertions advanced by the defendant impugned Ms. Goruk’s integrity. This was an important case to both sides. I was impressed by the care and attention to detail that counsel on both sides demonstrated. Each was prepared, thorough and appropriately zealous in representing their clients. Each exhibited the best qualities that are expected of barristers who practice before Her Majesty’s courts.

[46] It is not the function of the court to parse a solicitor’s account on a line-by-line basis. Looking at the big picture, I do not consider this case to have been “over lawyered”. The time spent and the fees incurred appear to be reasonable to me and proportionate to the value of the case, the importance and complexity of the issues and the amount of time required to prepare and try it.

[47] I note that I do not have the dockets of counsel to the plaintiff to compare to those of the defendant. I expect that there isn’t a marked difference between them. I believe that, had she succeeded at trial, Ms. Goruk would have been seeking costs in the same range as those now sought by the defendant.

The Plaintiff’s Claim was Reasonable

[48] The plaintiff advances, in mitigation of the quantum of any costs awarded, the argument that her claim, while unsuccessful, was nevertheless reasonable. I agree. As I have said, this was a close call. Her case, though unsuccessful in the end, was a reasonably compelling one.

[49] The plaintiff did not provide the court with any case law to support the position that the reasonableness of a losing party’s position can or should be taken into account in the exercise of the court’s discretion to fix costs, or how such a consideration might be factored in.

[50] The court’s discretion to award and fix costs is a broad one, certainly wide enough to take into account a range of relevant factors. In my view, the reasonableness of the plaintiff’s position in this case is a relevant factor, because it touches on access to justice issues.

[51] This was a wrongful dismissal action. There is almost always a power imbalance in employment cases in favour of the employer. That was the case here, even though Ms. Goruk was represented by skilled and experienced counsel. The inherent power imbalance in these types of cases raises a heightened concern about access to justice. Future dismissed employees may look to cases like this one and be scared away from advancing legitimate claims due to the risk of facing a crushing costs award in the event of a loss.

[52] Having said that, it remains a difficult reality that litigation is an expensive business. It is not for the risk-averse or the faint of heart. There are winners and there are losers. And it is a well-established convention in our civil justice system that losers pay the winners a significant portion of their costs. Ms. Goruk knew that going into this case. She would have had a good sense, I am sure, of what costs were at stake.

[53] The defendant was successful and is entitled to an award of costs. The defendant ought not to have to pay the price for any under-estimation of risk on the part of the plaintiff. At the same time, I am prepared to take into consideration the negative impact that crushing costs awards may have on access to justice. The balance is not an easy one. There is no getting around the fact that the defendant is entitled to a significant costs award in its favour. Factoring in the reasonableness of the plaintiff’s claim results, in my view, in a modest reduction in the amount to be awarded in all the circumstances of this case.

[54] There is no “perfect” number to be fixed in this case. All things considered, I am of the view that a fair, reasonable and proportionate costs award in favour of the defendant is $125,000 for fees, plus HST of $16,250 and disbursements of $2,728.67 for a total of $143,978.67.

C. Boswell J.

Released: September 24, 2021