ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
VINAY NAGPAL
Plaintiff
– and –
IBM CANADA LTD.
Defendant
Michael N. Freeman for the Plaintiff
Jennifer Dolman for the Defendant
HEARD: October 12, 2021
SCHABAS J.
COSTS ENDORSEMENT
1On July 30, 2019, I dismissed a summary judgment motion in this matter brought by the defendant IBM Canada Ltd. (“IBM”). IBM had sought a dismissal of the action on the grounds that the plaintiff, Vinay Nagpal, had either resigned or abandoned his employment, or that the plaintiff’s illness and refusal or inability to return to work frustrated the contract of employment. The plaintiff did not object to IBM’s use of Rule 20 seeking summary judgment. Further, IBM agreed that if I was to dismiss its motion then it would be open to me to conclude that Mr. Nagpal had been wrongfully dismissed and to grant summary judgment in his favour, which was in fact my conclusion. See my Reasons for Judgment in Nagpal v. IBM Canada Ltd., 2019 ONSC 4547.
2IBM’s appeal of my decision was dismissed by the Court of Appeal on April 30, 2021: Nagpal v. IBM Canada Ltd., 2021 ONCA 274.
3On October 12, 2021 the matter came back to me to address damages. Following a hearing, in reasons released on October 14, 2021, I awarded Mr. Nagpal damages totalling $283,790.80, plus pre-judgment interest which, I am advised by counsel for Mr. Nagpal, brings the total amount owing to be approximately $310,497.00. See my Reasons in Nagpal v. IBM Canada Ltd., 2021 ONSC 6853.
4The plaintiff now seeks his costs of the action on a substantial indemnity basis, requesting that costs be fixed at $250,000 plus HST and disbursements.
5The defendant submits that costs on a substantial indemnity basis are not warranted and that costs of $75,000 plus HST and disbursements would be appropriate and reasonable.
General principles
6The Court's determination of costs is governed by s. 131 of the Courts of Justice Act, and Rule 57.01 of the Rules of Civil Procedure. Section 131 provides for the general discretion to fix costs. Rule 57.01 provides guidance as to the exercise of that discretion by enumerating certain factors that the court may consider when assessing costs. These factors include:
(i) the amount claimed and recovered;
(ii) the complexity of the proceeding;
(ii) the importance of the issues; and
(iii) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding.
7Other factors to consider include:
(i) any offers to settle;
(ii) the principle of indemnity;
(iii) the concept of proportionality, which includes at least two factors:
(a) the amount claimed and the amount recovered in the proceeding; and
(b) 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.
8The overall objective is to fix costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Counsel for Ontario, 2004 14579 (ON CA), 2004 14579 (Ont. C.A.). In determining costs, the court should not engage in a mechanical exercise but, rather, take a contextual approach, applying the relevant principles and factors listed above. At the end of the day, the costs awarded should be proportional to the amount of money and other interests at stake in the proceeding, including access to justice.
9As the Court of Appeal stated in Davies v. Clarington Municipality, 2009 ONCA 722, 2009 CarswellOnt 6185, 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".
Application
10Applying these factors a number of issues are relevant. First, this was a very important action for Mr. Nagpal. He was terminated in mid-career after many years of dedicated service to IBM. His life was dramatically and irreparably altered by his termination, which appeared to arise from stresses in the workplace which ought to have been addressed by his employer.
11The litigation was also complex, including the involvement of Manulife, and legal issues asserted by IBM including the terms of the policies and what it treated as Mr. Nagpal’s abandonment of employment.
12The litigation also took a long time, causing more stress to Mr. Nagpal. While I cannot lay blame for this directly with IBM, the offers to settle are a relevant factor. Although Mr. Nagpal was terminated in 2013, eight years have now passed to bring the action to a resolution (absent any further appeals). In August 2014 IBM offered a mere $20,000, inclusive of costs to settle the action. Litigation dragged on and a mandatory mediation was a waste of time due, in part, to IBM’s hard line. So far as I can tell, this remained IBM’s offer until after my decision on liability in 2019.
13In 2016, on the other hand, Mr. Nagpal offered to settle for $225,000 plus costs, an offer which remained open until after my decision on liability when, in August, 2020, Mr. Nagpal increased his offer to settle to $310,000. It would have been to IBM’s advantage to have accepted the 2016 offer. Instead, in October 2020, IBM made a conditional offer to settle for $225,000 and an additional $10,000 in general damages, but nothing else, and this was characterized as a “final offer” – with the final bolded. Of course, this was virtually the same as what Mr. Nagpal had offered in 2016; indeed, it was lower in light of Mr. Nagpal’s request for costs in the 2016 offer.
14In December 2020, Mr. Nagpal increased his offer to settle to $350,000. IBM changed its offer slightly before the Court of Appeal heard the appeal from my judgment on liability in February 2021, increasing it to $233,573.52 less a range of deductions, although it also included moral damages of $10,000.
15In any event, Mr. Nagpal was successful in the Court of Appeal and I then awarded damages that were still higher than anything IBM had offered, though lower than Mr. Nagpal’s more emboldened offers made following my finding on liability.
16Although I awarded moral, or aggravated, damages, that does not mean that substantial indemnity costs follow. However, IBM took a tough stance against Mr. Nagpal which, while not necessarily “hardball tactics”, made the litigation against him, an ill and vulnerable individual facing a “David and Goliath” battle, very challenging. Although IBM felt it could rely on Betts v IBM Canada Ltd., 2015 ONSC 5298, 2016 ONSC 2496, it did not consider sufficiently the ways in which Betts differed from this case, and the hardship that caused Mr. Nagpal. The long period of time in which IBM only offered $20,000, and during which it could have accepted an offer for an amount lower than what was ultimately awarded, is a factor in making an award on the generous side to Mr. Nagpal.
17On the other hand, Mr. Nagpal’s counsel could also have handled some issues differently, as I have noted in my previous decisions. IBM also brought a summary judgment motion which brought some efficiency to the proceeding, although not bringing the result IBM sought.
18In my view, substantial indemnity costs are not justified. However, that does not mean that the amount proposed by IBM is appropriate. In reviewing a claim for costs, the Court does not undertake a line by line analysis, and should not second-guess the amount claimed, unless it is clearly excessive or overreaching. I must consider what is reasonable in the circumstances taking into account all the relevant factors.
19Here, Mr. Nagpal’s counsel has made a range of claims, including for junior counsel and counsel of similar seniority to him in part due to the concern that new counsel might need to step in. On the other hand, IBM claims that some of these issues are of Mr. Nagpal’s, or his counsel’s making and they should not bear those costs. Mr. Nagpal’s counsel also seeks pre-litigation costs which are rarely considered.
20In my view, having regard to all these factors, the most appropriate indicator is to look at Mr. Freeman’s hours, and those of his junior, and consider the reasonableness of them, applying an appropriate partial indemnity rate. Overall, Mr. Freeman claims 418 hours over eight years. This is not unreasonable, given the seriousness of the matter to Mr. Nagpal, the complexity of the issues, and the various steps in the action, including mediations, discoveries, and two lengthy motions before me. Discounting these hours to recognize pre-litigation matters and other matters not typically recognized in a partial indemnity claim, I find that 350 hours of his time on this matter is reasonable for a costs calculation. Mr. Freeman’s actual rate is $550/hour, which I would reduce, on a partial indemnity scale, to $350/hour. Doing the math, this results in an award for legal fees of $122,500.00. I would also recognize 50 hours of junior counsel at $200/hour for an additional $10,000.
21I find the disbursements claimed to be reasonable.
22Awards of costs are never perfect and costs are not intended, absent unusual circumstances, to provide full, or even substantial, indemnification. In the framework I must work within, however, I have done my best to make an award, based on factors relevant to this case, that is fair and reasonable in all the circumstances.
23Accordingly, I award costs on a partial indemnity basis to Mr. Nagpal of $132,500.00, plus HST on those fees and disbursements as claimed in the Bill of Costs of $12,009.00.
Paul B. Schabas J.
Date: December 2, 2021