Court File and Parties

COURT FILE NO.: CV-20-59501

DATE: 20210203

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Mike Slaven, c.o.b. as Benchwood Builders

Lien Claimant

– and –

Mihran Azadian and Ann Azadian

Owners

Counsel:

Harry Korosis, for the Lien Claimant

Joseph Gottli, for the Owners

THE HONOURABLE JUSTICE J. R. HENDERSON

COSTS ENDORSEMENT

[1] The Owners, Mihran Azadian and Ann Azadian (“the Azadians”), request an order that the Lien Claimant (“Benchwood”) pay the costs of their successful motion to vacate the claim for lien that was registered on their residential property by Benchwood. The Azadians submit that they are entitled to their costs on a substantial indemnity basis in the amount of $78,000, all inclusive.

[2] The Azadians had entered into a written contract with Benchwood for the renovation of their property. As of early August 2019, the Azadians had paid to Benchwood a total of $533,302. On October 11, 2019, Benchwood registered a claim for lien against the property in the amount of $201,356. The Azadians brought a motion for a declaration that the lien had expired and for an order that the registration of the claim for lien be vacated.

[3] In my written decision dated December 29, 2020, I agreed with the Azadians’ submission that the parties had terminated the initial renovation contract in June 2019, and I found that any new contract had been abandoned by Benchwood on August 7, 2019. Therefore, the lien had expired prior to the registration of the claim for lien. Thus, I ordered that the registration of the claim for lien be vacated.

[4] Benchwood acknowledges that the Azadians are entitled to a costs award, but Benchwood disputes the amount claimed by the Azadians. Benchwood submits that there is no justification for substantial indemnity costs, that the motion was only moderately complex, that some of the charges set out in the Costs Outline are excessive, and that the amount of costs requested by the Azadians is beyond the reasonable expectations of the parties.

ANALYSIS

[5] Both s.131 of the Courts of Justice Act and s.86 of the Construction Act give the court a wide discretion regarding costs awards. The Azadians were the successful parties on the motion, and as such are prima facie entitled to a costs order in their favour. The broad issues in this decision are the scale of costs to which the Azadians are entitled, and the quantum of those costs.

[6] Regarding the scale of costs, the Azadians submit that they are entitled to substantial indemnity costs because they were entirely successful on the motion, and because Azadians’ counsel wrote a letter dated October 21, 2019, informing Benchwood that the Azadians intended to claim substantial indemnity costs if the court vacated the registration of the claim for lien.

[7] The general rule is that a successful party will be entitled to its costs on a partial indemnity scale. The scale of costs may be increased to substantial indemnity costs if there is some conduct of the unsuccessful party that justifies a higher scale, including that party’s failure to accept a reasonable offer to settle.

[8] In my opinion, the letter from Azadians’ counsel stating the Azadians intended to claim substantial indemnity costs if they were successful on the motion is not sufficient, on its own, to justify an order for substantial indemnity costs. An offer that one party completely capitulate to the position of the other party is not an offer to settle that will affect the scale of costs. Moreover, the fact that Benchwood was unsuccessful on the motion does not necessarily support a finding that Benchwood engaged in misconduct. A party acting in good faith is entitled to seek a legal ruling from the court on a contentious matter.

[9] In the present case, the Azadians brought a motion, and it was unsuccessfully contested by Benchwood. The usual rule applies. The Azadians are entitled to their partial indemnity costs.

[10] Regarding quantum, Azadians’ counsel requests $78,000, all inclusive, on a substantial indemnity basis. This would correspond to approximately $60,000, all inclusive, on a partial indemnity basis. Benchwood submits that the court should award partial indemnity costs fixed at $35,000, all inclusive.

[11] There are several factors that must be considered in exercising the court’s discretion to award costs, as enumerated in rule 57.01 of the Rules of Civil Procedure. In the present case, those factors include the amount claimed in the proceeding, the complexity of the proceeding, the importance of the issues, the conduct of the parties, and the reasonable expectations of the parties.

[12] Regarding the amount claimed, although the amount of Benchwood’s claim is not insignificant, it is not in the range of some construction lien claims that are measured in the millions of dollars. Considering the matter from the perspective of these parties, I find that the amount of the claim is in the modest range.

[13] I acknowledge that the motion was important to both parties. If it had been properly registered, the lien on the residential property would have provided security for Benchwood, and the lien would have encumbered any equity that the Azadians had in the property. Therefore, it was important for both parties to obtain a court ruling on this issue.

[14] However, it must be remembered that regardless of the validity of the registration of the claim for lien, the contractual claim remains outstanding. Therefore, the importance of the motion to vacate the lien cannot be equated with the importance of a motion for complete dismissal or acceptance of the claim. This motion simply dealt with the extent of the security for the contractual claim made by the lien claimant.

[15] I found that the legal issues in the motion were not complex. The legal issues were well defined in certain sections of the Construction Act, and there was no significant dispute as to the interpretation of the Act. I acknowledge that the factual matrix had some complications as there were facts in dispute. For this reason, it was necessary for both counsel to deliver comprehensive affidavits that allowed this court to understand the nature of the dispute.

[16] On this point, I take into account Benchwood’s failure to produce all of the relevant business records. Several undertakings from the cross-examination on the claim for lien remained outstanding at the time of the motion. This may be because Benchwood was not willing to produce its records, or in the alternative because Benchwood did not keep proper records. In either case, I find that Benchwood’s failure contributed to the complexity of the factual issues, and resulted in counsel spending more time preparing material than otherwise would have been necessary.

[17] I am also cognizant of the principle set out in Boucher v. Public Accountants Council, 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291, at para. 26, that “the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.” Rule 57.01 also directs the court to consider “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.”

[18] Considering all these factors, I have reviewed the Costs Outline submitted by counsel for the Azadians. Except as discussed below, I take no issue with the work done or the actions taken by counsel for the Azadians. Further, as I indicated earlier, the voluminous amount of material was caused in part by Benchwood’s failure to produce all of the relevant business records.

[19] I accept that Azadians’ counsel was required to spend time investigating the history of the contractual relationship between the parties, and that this involved obtaining production of documents, interviewing witnesses, and reviewing the issues with the Azadians. The procedural steps related to this motion include two cross-examinations, each of which took approximately half a day, plus two very short court appearances to set a timetable and to discuss procedure for the motion. Azadians’ counsel prepared a detailed Application Record, Factum, and Book of Authorities. Then, Benchwood’s counsel delivered a lengthy Responding Record and Factum which had to be reviewed by Azadians’ counsel. Oral argument on the motion was completed in one day.

[20] I further acknowledge that Azadians’ counsel made some attempts to conduct the litigation in an efficient manner. For example, I note that because Azadians’ counsel had cross-examined Mike Slaven on the claim for lien, counsel declined to repeat that process by cross-examining again on the affidavit material submitted on this motion. This, in my view, was a reasonable and efficient approach.

[21] Benchwood submits that Azadians’ claim for 116.2 hours of senior counsel’s time, plus a counsel fee at the motion, plus another 46.4 hours for the time of students and law clerks is excessive. I accept that there is some merit to this argument when one considers that the Costs Outline includes many references to time spent for legal research and review of the law. I acknowledge that a diligent senior lawyer should direct a student to do some legal research, but as discussed earlier, this was not a legally complex case. Senior counsel would be fully aware of the law in this area, and only a modest amount of legal research should be necessary.

[22] Benchwood also submits that the hourly rate claimed by Azadians’ senior counsel of $600 per hour on a substantial indemnity basis and $400 per hour on a partial indemnity basis is excessive. I agree. I note that in Torbear Contracting Inc. v. Haldimand County, 2006 CanLii 34348, Gordon J. found that a rate of $337.50 per hour was acceptable in 2006 for substantial indemnity costs on a similar, but not identical, motion.

[23] In the present case, I am prepared to allow 100 hours of time for Azadians’ senior counsel for investigating the merits of the motion, obtaining and reviewing productions, preparing and reviewing material, attending court prior to the motion, and preparing for the motion. On a partial indemnity basis, I will allow an hourly rate of $320 per hour. I will add a further amount of $7,000 to cover the work of students, the work of law clerks, the counsel fee at the motion, and the costs submissions.

[24] Therefore, I allow fees in the amount of $39,000, plus HST, for a total of $44,070. I will add the additional amount of $2,765.03 for disbursements as requested, for a total costs award of $46,835.03.

CONCLUSION

[25] For the reasons set out herein, I order that the Lien Clamant pay to the Owners their costs of this motion fixed at $46,835.03, all inclusive, payable within 30 days.

J. R. Henderson J.

Released: February 3, 2021