Court File and Parties

COURT FILE NOS.: CV-19-00000419, CV-20-00000111 DATE: 20210125 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Philip William Crawford and Hailey Brooke Crawford, Plaintiffs AND Standard Building Contractors Limited (Federal Corporation 1115109-6), Standard Paving Limited (Nova Scotia Registry ID #3223128) and Shane Ross, Defendants

AND RE: Standard Building Contractors Limited AND Philip William Crawford, Hailey Brooke Crawford and CIBC Mortgages Inc.

AND Standard Building Contractors Limited, Standard Paving Limited and Shane Culloden Ross also known as Shane Ross

BEFORE: Mew J.

COUNSEL: Matthew E. Taft, for the Plaintiffs Paul Portman, for the Defendants

HEARD: In writing

COSTS ENDORSEMENT

[1] These two actions were tried together from 23-26 November 2020. A form of summary trial was used, based on the simplified procedure provided for by Rule 76. One of the actions was started in December 2019 as a simplified procedure matter. The other, a construction lien claim, was started in 2020. A third party claim in the 2019 action was settled on the eve of trial.

[2] The 2019 action claimed damages in an amount exceeding the then applicable limit of $100,000 for simplified procedure matters. The limit went up to $200,000 on 1 January 2020.

[3] The defendants objected to the plaintiffs’ original designation of the simplified procedure, as a result of which the action continued under the ordinary procedure. The plaintiffs then brought a motion in September 2020, seeking to limit their damages to the new $200,000 upper limit for simplified procedure matters and for an order returning the action to the simplified procedure. The defendants, who had counterclaimed for total damages of $195,668.80 opposed the motion. For reasons reported at 2020 ONSC 5767, I ruled that the 2019 action should proceed under the simplified procedure. I reserved the costs of the motion to amend, including any wasted costs incurred as a result of the case proceeding under the ordinary procedure between January and September 2020, to the discretion of the trial judge.

[4] The parties subsequently agreed to an expedited process in which the construction lien claim was to be tried concurrently with the 2019 action. It was also agreed that a pending motion for contempt arising from the alleged noncompliance of the defendants with respect to a Mareva injunction order made by MacLeod-Beliveau J. should be dealt with at the same time as the trial. The trial was heard on an expedited basis. With the consent of the parties, I was the trial judge.

[5] The Crawfords (plaintiffs in the 2019 action and defendants in the construction lien action) were completely successful in both actions: reasons for decision reported at 2021 ONSC 166.

[6] Given my conclusions at trial, which included a finding that Mr. Ross had engaged in deceptive and fraudulent conduct both personally and through his companies, an award of damages totalling $177,690.75 in the 2019 action and $7,500 in the construction lien action, as well as findings of contempt and that it would be appropriate to continue the Mareva injunction pending satisfaction of the Crawfords’ judgment, I concluded that the court was justified in awarding costs in favour of the Crawfords on a substantial indemnity basis unless there were offers to settle that would displace that presumptive outcome.

[7] Both sides have made costs submissions and provided the court with either a bill of costs or a costs summary.

[8] The Crawfords ask the court to award costs on a full indemnity basis, unconstrained by Rule 76.12.1, which places an upper limit for recovery of costs by any party of $50,000 plus $25,000 for disbursements. A total of $105,677.04 inclusive of disbursements and taxes is claimed in the 2019 action, and $29,433.29 (all inclusive) is claimed in the construction lien action.

[9] The defendants assert that the upper limit on costs and disbursements provided for in Rule 76.12.1(1) should apply, notwithstanding subrule (2) which provides that the upper limits do not apply to actions commenced before 1 January 2020. Even if the limit does not apply, they argue that the hours and hourly rates claimed are excessive and disproportionate the value and nature of the dispute, that the plaintiffs have included costs related to the settled third party action, and that the reasonable expectations of the defendants warrant a lower award.

[10] Had they been successful, the defendants’ costs of both actions, on a substantial indemnity scale, would have been $92,348.77 (although this figure appears to only include fees and disbursements incurred from July 2020 onwards).

[11] Rule 76.12.1 provides:

(1) Except as provided for under rule 76.13 or an Act, no party to an action under this Rule may recover costs exceeding $50,000 or disbursements exceeding $25,000, exclusive of harmonized sales tax (HST).

(2) Subrule (1) does not apply in the case of an action that was commenced before January 1, 2020.

[12] In my view, Rule 76.12.1(1) does not apply to these proceedings. The 2019 action was commenced by a statement of claim on 2 December 2019, before the rule became applicable. The defendants opposed the plaintiffs’ selection of the simplified procedure, as a result of which the action was continued under the ordinary procedure until 23 September 2020, when, in the face of the defendants’ continued opposition to the application of the simplified procedure, I allowed the plaintiffs to amend their pleadings to limit their claim to the new $200,000 upper limit and to continue the action under rule 76.

[13] I am not wholly unsympathetic to the defendants’ suggestion that the plaintiffs are essentially attempting to have their cake and eat it by electing, by way of their motion in September 2020, to proceed under Rule 76, but then seeking to avoid at least some of the costs consequences of doing so. However, the defendants’ argument is premised in part on an interpretation of Rule 76.12.1(2) that I should regard the date on which the Crawfords amended their claim as being the date that the “action was commenced”.

[14] The difficulty with this argument is that Rule 1.03(1) defines “action” as a proceeding that is not an application commenced by, inter alia, the filing of a statement of claim. Once commenced, amendments to a statement of claim can be made at any time during the course of an action (although leave may be required). The phrase “action was commenced” is clear and unequivocal. It means, in this case, the date that the original statement of claim was filed with the court. I am therefore unable to accede to the submission that it would be permissible to contort the clear language of Rule 76.12.1(2) to achieve the outcome desired by the defendants.

[15] Furthermore, the construction lien action, although tried on consent using an adaptation of the summary trial procedure contained in Rule 76.12, is expressly excluded from the application of Rule 76 by virtue of Rule 76.01(b) 10.

[16] The plaintiffs’ request that costs be fixed on a full indemnity basis invites me to re-evaluate my conclusion that costs on a substantial indemnity scale were appropriate. That was a conclusion reached without the benefit of specific submissions on this issue of costs, but which was nevertheless responsive to paragraph 8(j) of the Crawfords’ factum.[^1] The defendants did not address the plaintiffs’ request for full indemnity costs in their costs submissions, beyond noting that in my reasons for decision following trial, I had already deemed substantial indemnity costs to be appropriate.

[17] I am not inclined to change my decision on the applicable scale of costs. Furthermore, the Court of Appeal has held in Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766, at para. 8, that:

Substantial indemnity costs is the elevated scale of costs normally resorted to when the court wishes to express its disapproval of the conduct of a party to the litigation. It follows that conduct worthy of sanction would have to be especially egregious to justify the highest scale of full indemnity costs.

While the defendants’ conduct has indeed been egregious, the plaintiffs’ conduct was not entirely beyond reproach in all respects either.

[18] I turn then to the fixing of costs.

[19] With the exception of the costs of the 23 January 2020 attendance before MacLeod-Beliveau J. and a motion before me to adjourn the trial and permit the commencement of third party proceedings, all of the other costs in these actions – the costs of the Mareva injunction, contempt motion, the motion to amend the statement of claim and move the 2019 action into the simplified procedure – fall to be determined by me in addition to the other costs of the action.

[20] It is to the credit of both sides that instead of separate and potentially expensive hearings of motions for summary judgment and contempt, as well as a separate process to address the construction lien claim, all of the disputes between the parties were, by agreement, consolidated into one summary trial process. The trial itself took up only four days of court time. But there were a number of case conferences and the parties were required to prepare comprehensive witness statements and exhibit bundles prior to trial.

[21] The plaintiffs’ claim for their costs on a partial indemnity scale is calculated on the basis of 90% of their solicitor and own client (or full indemnity) costs. A breakdown is as follows:

Main Action

• Fees: $85,455.00
• HST on Fees: $11,109.15
• Disbursements: $5,744.25
• HST on taxable disbursements: $542.78
• TOTAL: $102,308.40

Mareva Motion

• Fees: $18,450.00
• HST on Fees: $2,398.50
• Less: Costs previously paid: -$5,610.71
• TOTAL: $15,237.79

Contempt Motion

• Fees: $11,925.00
• HST on Fees: $1,550.25
• TOTAL: $13,475.25

Lien Action

• Fees: $21,996.00
• HST on Fees: $2,859.48
• Disbursements: $1,739.11
• HST on taxable disbursements: $192.73
• TOTAL: $26,787.32

TOTAL FEES, DISBURSEMENTS AND TAXES: $157,808.76

[22] The approach to fixing substantial indemnity costs is succinctly stated by Spies J. in Fram Elgin Mills 90 Inc. v. Romandale Farms Limited, 2020 ONSC 1621 at para. 52:

Rule 1.03(1) defines “substantial indemnity costs” as costs awarded in an amount that is 1.5 times partial indemnity costs. Given the reference to partial indemnity costs, the Rule 57.01 factors still apply – the costs awarded on a substantial indemnity scale are to be determined on the basis of applying a factor of 1.5 to the amount of the partial indemnity costs as determined to be fair and reasonable: see Akagi v. Synergy Group (2000) Inc., 2015 ONCA 771, 128 O.R. (3d) 64, at paras. 56-57. Furthermore, the reference to full indemnity in Rule 57.01(4) indicates that there is a difference between full and substantial indemnity costs. Therefore, substantial indemnity costs do not result in full indemnity to the winning party.

[23] Fixing of costs is not merely a mechanical exercise in reviewing the receiving party’s cost outline. In Andersen v. St. Jude Medical Inc. (2006), 2006 CanLII 85158 (ON SCDC), 264 D.L.R. (4th) 557, the Divisional Court set out several principles to be considered in making an award of costs:

1. The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in rule 57.01(1): Boucher [Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.)], Moon [Moon v. Sher (2004), 2004 CanLII 39005 (ON CA), 246 D.L.R. (4th) 440 (Ont. C.A.)], and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 2005 CanLII 1042 (ON CA), 75 O.R. (3d) 638 (C.A.).

2. A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case: Boucher. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 119 A.C.W.S. (3d) 341 (Ont. C.A.), at para. 4.

3. The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: rule 57.01(1)(0.b).

4. The court should seek to avoid inconsistency with comparable awards in other cases. “Like cases, [if they can be found], should conclude with like substantive results”: Murano v. Bank of Montreal (1998), 1998 CanLII 5633 (ON CA), 41 O.R. (3d) 222 (C.A.), at p. 249.

5. The court should seek to balance the indemnity principle with the fundamental objective of access to justice: Boucher.

[24] The Court of Appeal has identified the overriding principle to be that the amount of costs awarded be reasonable in the circumstances. In Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 Epstein J.A. stated at paras. 51-52:

As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding at para. 37, where Armstrong J.A. said “[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice.”

[25] The principle of proportionality is one of general application to the interpretation of the Rules of Civil Procedure: rule 1.04(1.1) and therefore applies to the application of the rules governing costs. However, as a general proposition: (i) proportionality does not override other considerations when determining costs; and (ii) proportionality should not be used as a sword to undercompensate a litigant for costs legitimately incurred: Aacurate General Contracting Ltd. v. Tarasco, 2015 ONSC 5980, at paras. 13-17; Dang v. Anderson, 2017 ONSC 2150, paras. 12-15.

[26] That said, proportionality is of particular importance when fixing costs under the simplified procedure, which was introduced to promote affordable access to justice: Trafalgar Industries of Canada Ltd. v. Pharmax Ltd. (2003), 2003 CanLII 40313 (ON SC), 64 O.R. (3d) 288 (S.C.J.).

[27] Having regard to the foregoing principles including the non-exhaustive factors listed in Rule 57.01, I make the following brief observations:

a. While offers to settle were made, none of them engage special consideration for the purposes of fixing costs.

b. The lawyer who acted for the defendants between December 2019 and early July 2020 obtained a default judgment for fees and disbursements incurred during that time period for $86,097.62. In their costs submissions, the defendants’ current lawyers estimated their fees and disbursements to be $102,411.71.

c. The Crawfords were awarded damages of $191,429.88 whereas the defendants’ counterclaim for $195,668.80 and their lien claim were dismissed.

d. On a number of occasions, the defendants failed to agreed-upon and/or court imposed deadlines, necessitating case conferences and the imposition of revised timetables.

e. The Crawfords have been living in a trailer on their property for most of the time since their house burnt down. The objective of this litigation was to recover from the defendants damages arising from the defendants’ retention of insurance monies that should have been used on the reconstruction of that home and their failure to complete the reconstruction themselves. The proceeding was therefore one of profound importance to the Crawfords.

f. The defendants’ pursuit of a third party claim against Christopher Meisner was devoid of any merit. It was an additional and improper complication that affected the main action. The costs of the third party action should not, however, form part of the costs award in the main action, save an except for costs incurred by the plaintiffs due to the third party’s involvement in the main action.

[28] I am mindful that the general misconduct of the defendants – including the apparent fabrication of evidence, the conduct which I have found amounted to contempt, the lack of full and candid disclosure, the disparagement of witnesses called by the Crawfords and the widespread lack of truthfulness – drove my initial determination that it was appropriate to fix costs on a substantial indemnity basis. I have therefore not revisited these transgressions for the purposes of considering the application of the factors listed in Rule 57.01.

[29] While the lawyers’ hours claimed by the Crawfords are significant, they are not surprising given the intensity of the litigation and the need to response to the frequent tactical gyrations of the defendants, including their failure to meet deadlines and their non-compliance with the Mareva injunction. The hourly rates claimed are reasonable.

[30] All of that having been said, and aside and apart from the cap that applies to simplified procedure actions commenced after 1 January 2020, as recorded by J. Wilson J. in Trafalgar Industries of Canada Ltd. v. Pharmax Ltd. (2003), 2003 CanLII 40313 (ON SC), 64 O.R. (3d) 288 (S.C.J.), at para. 11:

When fixing costs in a simplified trial, one must bear in mind the objectives of the Simplified Procedures. In Rakoon Impex v. Nasr Foods Inc., [1999] O.J. No. 3360 (Ont. S.C.J.) at para. 9, Lamek J. confirmed that one of the objectives of the simplified procedures was "to curb the crippling cost of litigating small claims." In McLean v. 721244 Ontario Ltd., [2000] O.J. No. 3507 (Ont. S.C.J.), Hill J. observed at para. 2 that "an action conducted under the Simplified Procedure is meant to be cost effective. As a general rule, this straightforward and streamlined process is not intended to be as expensive as trial by ordinary procedure."

[31] I agree that consideration has to be given to the objectives articulated by Wilson J. in Trafalgar Industries. I therefore fix the costs of the 2019 action, including the costs of the contempt motion to date and the Mareva motion, in the all-inclusive amount of $95,000. The costs of the construction lien action are fixed in the all-inclusive amount of $25,000.

Mew J.

Date: 25 January 2021

[^1]: “The appropriate remedy is rescission of the contract and restitution plus damages, fixed at the total sum of $200,000.00 plus interest, plus costs on a substantial indemnity basis (having regard to the defendants’ conduct in this proceeding), payable jointly and severally by the defendants within 30 days.”