Santorelli and Rogers

2021 ONSC7565

COURT FILE NO.: CV-19-1648

DATE: 20211116

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

CLEARWATER STRUCTURES INC

Plaintiff

– and –

614128 ONTARIO LTD. o/a TRISAN CONSTRUCTION, ANGELO SANTORELLI and COLLEEN ROGERS

Defendants

Kevin L. MacDonald and Jason R. Allingham for the Plaintiffs

Krista J. McKenzie for the Defendants

HEARD: In writing

McCARTHY J.

COSTS AND INTEREST ENDORSEMENT

Summary Judgment Mini-Trial

[1] Following a 3 day mini trial under rule 20.04 of the Rules of Civil Procedure, the Plaintiff was granted judgment against the Defendants for the sum of $559,926.18. The court’s reasons for judgment are dated September 3, 2021.

[2] The court invited written submissions on the issue of costs and pre-judgment interest if the parties were unable to resolve those issues. I have now reviewed and considered those written submissions.

The Plaintiff’s Position

[3] The Plaintiff seeks its costs, either on a full indemnity basis in the amount of $145,405.15 or, alternatively, on a substantial indemnity basis in the amount of $131,771.36. It has served and filed a detailed bill of costs in support of its claim.

[4] The Plaintiff also seeks both pre-judgment and post-judgment interest at the rate of 5% per annum commencing on September 13, 2018. It has calculated pre-judgment interest to be in the amount of $74,555.37.

The Defendants’ Position

[5] The Defendants contend that no costs should be payable since the Plaintiff obtained judgment based upon the novel finding that the Defendants’ retention of trust funds constituted a breach of trust under the Construction Act. The Defendants argue that, in any event, both their reasonable conduct and their offer to settle should be considered in awarding costs. The Defendants did not file a bill of costs or suggest a range within which costs should be awarded to the Plaintiff should the court see fit to do so.

[6] In respect of pre-judgment interest, the Defendants argue that the Plaintiff ought to be limited to recovering the amount generated on the trust funds in the interest-bearing account. In the alternative, there is no basis for the court to allow anything above the rates set out in the Courts of Justice Act.

Costs

[7] Pursuant to s. 131(1) of the Courts of Justice Act, costs of a proceeding are in the discretion of the court. Rule 57.01 of the Rules of Civil Procedure sets out the factors which a court may consider in exercising that discretion.

[8] The Plaintiff is presumptively entitled to costs. I am not satisfied that the Defendants’ offer to settle should weigh upon my consideration of costs. The Plaintiff was awarded more than the net amount offered; the Defendants’ own motion for summary judgment was dismissed. I cannot see that Rule 49.10 would apply.

[9] It is true that the Defendants did place the trust monies into an interest bearing account pending resolution of the dispute; however, it was the Defendants’ refusal to disgorge those funds within a reasonable period of time (when it should have been obvious that most, if not all, of the funds in trust were due and owing to Plaintiff) which provoked the litigation, the accompanying payment into court, the subsequent summary judgment motion and the ultimate judgment awarded.

[10] I am persuaded that the Defendant’s failure to release the trust funds (subject perhaps to a timely, legitimate, and transparent claim for set-off) was unnecessary, unwarranted, and unreasonable. The evidence established that the Defendants withheld payment to the Plaintiff, even though they were in receipt of funds from the project owner, in reaction to the Plaintiff protecting its position by placing a lien on the project property. That was not a proper basis for the withholding of trust funds. Moreover, the Defendants failed to put forth any detailed and substantiated claim for set-off until well into the litigation. The Defendants could have paid the undisputed amounts to the Plaintiff and held back on funds which may have been subject to set-off or until the extras issue was clarified. They chose instead to deny the Plaintiff the trust funds to which it was entitled. Given that unreasonable position, the Plaintiff was entirely justified in bringing the action and seeking the declarations and remedies it did. I can find nothing in the conduct of the Plaintiff which was unreasonable.

[11] The mini trial itself lasted 3 days but there were several appearances leading up to it including a case conference. The Plaintiff was put to the preparation of motion materials; cross-examinations were conducted. The mini trial featured viva voce evidence with cross-examinations. There were volumes of documents which required scrutiny and handling. Although moderately complex, the Plaintiff’s claim was put before the court in a straightforward and logical fashion. The issues were of great importance to the Plaintiff who was out the cost of labour and materials for several years. The breach of trust argument may have been unconventional, but it was clearly grounded in the facts and was ultimately accepted by the court. Quite how the Defendants believed themselves to be legally, commercially or otherwise justified in holding on to trust monies which they had been paid on account of the work conducted by the Plaintiff on the project for several years while it dallied and delayed remains beyond the comprehension of the court.

[12] The amount claimed by the Plaintiff for substantial indemnity fees ($108,578.70) is entirely proportionate to the amount claimed and the importance of the issues. As a percentage of the judgment, that figure represents less than 20% of the amount awarded. Plaintiff’s counsel is a seasoned litigator who presented his client’s claim in a digestible and coherent fashion and whose cross-examinations of persons adverse in interest was efficient, focused, and thorough.

[13] It is difficult to know what amount the Defendants would have expected to pay for costs if they were unsuccessful in resisting the claim. As stated above, the Defendants did not file a bill of costs and there is no evidence before me of what the Defendants’ experience with similar litigation has been. As competent and experienced counsel, I have no doubt that Ms. Mackenzie would have fully canvassed with her clients the potential costs consequences associated with this type of litigation.

[14] I would stop short of awarding full indemnity costs. While the conduct of the Defendants in retaining the trust funds for no good reason was unjustified and is certainly deserving of an award of substantial indemnity costs against them, there was no evidence that the Defendants diverted any of the trust funds. The funds were available for payment into court when ordered.

[15] The Plaintiff’s claimed disbursements of $8,111.19 appear to be entirely justified and reasonable. I would therefore allow costs to the Plaintiff on a substantial indemnity basis for the claimed amount of 131,776.36 which includes fees, disbursements and HST. Those costs are fixed and payable forthwith.

Pre-judgment Interest (PJI)

[16] I am not prepared to allow PJI to the Plaintiff at the rate of 5% per annum. One, the fact that the Defendant made a claim at that rate as part of its set-off claim means nothing to the court; two, there is no contractual basis for a 5% rate; and finally, as part of the judgment in its favour, the Plaintiff will receive the accumulated interest in the BMO segregated trust account. Tacking on a further 5% rate would result in a windfall.

[17] The Plaintiff is entitled to PJI at the rate of 1.5% from September 13, 2018 which is 45 days after the positing of the certificate of substantial completion. I accept the Plaintiff’s calculation that PJI should be $16,248.03 from that date to the date of judgment. The Plaintiff is also entitled to post-judgment interest at the prescribed rate under the CJA until the judgment is paid.

Draft Judgment

[18] The Plaintiff is entitled to judgment for the amount awarded plus the costs and PJI allowed above. The parties should now be able to present to the court a draft proposed judgment approved as to form and content by both sides. Should the parties be unable to arrive at a proposed draft judgment for the court’s review they make take out an appointment before me to settle the judgment through the trial coordinator at Barrie.

Justice J. R. McCarthy

Released: November 16, 2021