Court File and Parties

COURT FILE NO: CV-17-1219-00 DATE: 2022 01 06

SUPERIOR COURT OF JUSTICE – ONTARIO 7755 Hurontario Street, Brampton ON L6W 4T6

RE: JESSICA GILBANK carrying on business as STAR DESIGN v. ADAM COOPER and JODI ENGLISH

BEFORE: Justice Trimble

COUNSEL: NEETA SANDHU, for the Plaintiff Email: nsandhu@pallettvalo.com Sahil Shoor & Erica Johnston, for the Defendant Ssahil.shoor@gowlingwlg.com and Erica.Johnston@gowlingwlg.com

HEARD: January 4, 2022, in writing

Costs Endorsement

[1] On 7 June 2021 I released my Reasons for Judgement following a nine-day trial in which I awarded Ms. Gilbank damages of $54,365.25. I also awarded the Defendants damages of $4,500.00 on their almost $32,000.00 claim for set off. Finally, I awarded the Plaintiff prejudgment interest at the rate set out in the Courts of Justice Act on the net recovery except for the period of 17 April 2015 to 20 December 2016. I said I will decide the issue of costs, based on written submissions.

Positions of the Parties

[2] The Plaintiff seeks costs for the nine-day trial at $59,659.95 comprising $9,249.23 in partial indemnity costs up to the date of her 27 September 2020 offer to settle, and $50,410.72 on a substantial indemnity scale from the date of her offer to the date of my reasons for judgement. She also asks me to fix pre-Judgment Interest at $4,453.72.

[3] The Plaintiff recognizes that the claim for costs exceeds the net award in this simplified rules matter. She says, however, that those costs were driven by the Defendants in this action. The Plaintiff’s action was a straightforward claim for damages in breach of contract comprising money she paid to purchase supplies, money she paid the contractors retained on behalf of the Defendants and who did work for the Defendants, and her fees for construction management and supervision services pursuant to the contract. The Defendants required her to take over the nine days of trial to prove the totality of her case and, in doing so, raised irrelevant issues for “odour”.

[4] Further, the Plaintiff made a Rule 49 offer and the result was more favourable to the Plaintiff than that offer.

[5] The Defendants argue that a reasonably proportionate amount for damages would be $21,633.00 on a partial indemnity scale. They argue that the costs claimed are excessive in that they:

a. fail to acknowledge the discrepancy between the amount awarded in the Reasons and the amount claimed by their own accounting before and at trial;

b. lack proportionality between the amount awarded and the amount claimed for costs, the latter of which is otherwise grossly excessive having regard to the cost principles and case law governing a simplified procedure case;

c. attempt to obtain the majority of costs on a substantial indemnity scale, disregarding the authorities that for simplified procedure actions, costs awards must be proportionate to the amount in dispute; and

d. are unreasonable and otherwise grossly excessive having regard to the general principles of cost assessments and the particulars of the time spent by the billing lawyers in this specific case.

[6] In short, the Defendants say that the costs claimed are disproportionate and are too much.

The Law on Costs

[7] In assessing costs, I must consider the broad principals set out in s. 131 of the Courts of Justice Act, and Rule 57.01 of the Rules of Civil Procedure and the cases thereunder. Section 131 says that costs are discretionary. Rule 57 sets out principles that apply to the exercise of that discretion.

[8] In Doyle v. Zochem Inc. et al., 2017 ONSC 920, in paragraphs 23 to 28, I summarized the law of costs as it then stood. That case was an unjust dismissal claim, but the principles apply equally to commercial litigation such as this. I have updated the statement of law from Zochem for the purposes of this analysis.

[9] Costs awards have a number of purposes, including a) indemnifying (partly) successful litigants, b) encouraging settlement, c) correcting behaviour of the parties, and d) discouraging frivolous or ill-founded litigation (see: 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, at para. 10).

[10] Generally, costs should follow the event (see: Bell v. Olympia & York (1994), 17 O.R. (3d) 135 (C.A.)).

[11] Costs awards must also be proportional to the issues in the action and the outcome, and be reasonable for the losing part to pay, all circumstances considered (see: Boucher v. Public Accountants, (2004), 71 O.R. (3d) 291 (C.A.) and Moon v. Sher et al., [2004] OJ No 4651 (C.A.)). The principle of proportionality is relevant regardless of who is successful (see: Culligan Springs Ltd. v. Dunlop Lift Truck (1994) Inc., at para. 13).

[12] Conduct of the parties is also relevant where it deserves sanction (see: Davies v. Clarington (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.)). One party’s playing “hardball” is a relevant factor to consider (see: 394 Lakeshore, supra.).

[13] A Judge in fixing of costs is engaged in a different exercise than an Assessment Officer assessing costs. The Judge looks at the case holistically and fixes costs in an amount that is reasonable for the unsuccessful party to pay rather than determines the exact costs of the successful litigant (see: Davies, supra at para. 52, Boucher, supra, at para. 26).

[14] Costs, generally, should be proportional to the issues in the action and amount awarded (Elbakhiet v. Palmer, 2014 ONCA 544, at para. 38).

[15] Since the introduction of the simplified procedure, the jurisprudence has expressed concerns about the appropriate awards for costs payable to the successful party by the losing party, in order to provide reasonable compensation while also promoting affordable access to justice. These concerns were amplified when the cost grid was introduced and a mechanical time and docket-based approach to fixing costs became prevalent (see, for example: Trafalgar Industries of Canada Ltd. v. Pharmax Ltd., (2003), 64 O.R. (3d) 288 (S.C.J.); Vokey v. Edwards, [1999] O.J. No. 2304 (Sup. Ct.); Glazman v. Toronto (City), [2002] O.J. No. 2767 (Sup. Ct.); Mclean v. 721244 Ontario Ltd., [2000] O.J. No. 3507 (Sup. Ct.); Neumeyer v. Wawanesa Mutual Insurance Co., [2005] O.J. No. 4004 (Sup. Ct.); Culligan, at para. 16).

[16] Costs in simplified procedure cases have been generally lower than under the general procedure in order to a) prevent crippling costs consequences in low value claims, b) provide an additional incentive to parties to settle the case, and c) encourage counsel to bring only essential issues to trial.

[17] It does not follow, however, that a reasonable amount for costs cannot exceed the award of damage in appropriate circumstances (A & A Steelseal Waterproofing Inc. v. Kaslovski, 2010 ONSC 2652 (S.C.J.) at para. 21). Proportionality should not override other considerations and determining proportionality should not be a purely retrospective inquiry based on the award. It should not be used to undercompensate a litigant for costs legitimately incurred (Aacurate General Contracting Ltd. v. Tarasco, 2015 ONSC 5980 (S.C.J.) at para. 13 to 17). In Aacurate, supra, McCarthy J. said:

I am mindful that the principle of proportionality calls upon the court to consider the amount claimed for costs in relation to the amount recovered in the judgment, as well as the reasonable expectation of the parties. In my view, however, proportionality cannot and should not be routinely invoked to save litigants from the actual costs of proceedings in circumstances where those litigants have put forth a wholly unmeritorious defence to a legitimate claim or have caused the proceeding to become unduly prolonged or complicated. The principle should be applied thoughtfully and in a balanced fashion along with the other factors set out in rule 57.01.

[18] McCarthy J.’s decision has been adopted or approved in Persampieri v. Hobbs, 2018 ONSC 368, at para. 50; New Generation Woodworking Corp. v. Arviv, 2021 ONSC 2184, at para. 10 to 15; Crawford v. Standard Building Contractors Limited, 2021 ONSC 655, at para. 25; Dang v. Anderson, 2017 ONSC 2150, paras. 12-15; McIntyre. v. O’Brien Mooney, 2020 ONSC 7508 at para. 9; 1157391 Ontario Inc v. Ortiz, Tremblay, Meridian Credit Union, 2020 ONSC 6604, at para. 13; Brophy v. Harrison, 2019 ONSC 4377, at para. 25; McNamee v. Oickle, 2020 ONSC 5078, at para. 44; London Eco-Roof Manufacturing Inc. v. Syson, 2020 ONSC 3101, at para, 41 to 43; St. Marthe v. O’Connor, 2019 ONSC 4279, at para. 10.

[19] The principle of proportionality is an overarching consideration in determining the appropriate quantum of costs which requires a judge to consider whether the costs incurred were justified in light of the circumstances of the case. The fact that a costs award exceeds a damages award does not necessarily mean that appellate intervention is warranted. The ultimate question is whether the costs award, in all the circumstances, is fair and reasonable (see: CNH Canada Ltd. v. Chesterman Farm Equipment Ltd., 2018 ONCA 637, at para. 89 and 91). While the proportionality principle is certainly important, it is not always the subject of rigid and formulaic application. It must be applied thoughtfully and in a balanced fashion, along with other factors such as those enumerated in Rule 57.01 (see: Aacurate, para. 15).

[20] An undue focus on proportionality ignores principles of indemnity and access to justice (see: Gardiner v. MacDonald Estate, 2016 ONSC 2770 (S.C.J.) at para. 65). The trial judge must make an award that is fair and appropriate, overall.

[21] Further, the simplified rules cannot be used by one party to force on another by its intransigence legal costs in excess of what might be proportional.

[22] In exercising its discretion on the basis of these legal principles, and in determining what costs are payable, the court should consider the following questions in the following order:

a. Which was the successful party, and in what way?

b. Are there Offers to Settle under Rule 49.10 and what impact do they have?

c. What effect do the enumerated factors in Rule 57.01(1) have?

d. Are there any Offers to Settle that should be considered under Rule 49:13?

e. How does proportionality under R. 1.04(1) affect the analysis?

f. What is fair and reasonable for the paying party to pay?

Analysis

Issue a: Which was the successful party, and in what way?

[23] The Plaintiff was far more successful than the Defendants.

[24] In paragraph 135 of my reasons for judgement I awarded the Plaintiff “… The damages, as claimed.” Based on this phrase, the Defendants argue that the amount claimed was $50,309.30, and not the $54,309.30 as referred to in paragraph 126 of my reasons, nor the $54,365.25 adjusted figure referred to in paragraph 127 of my reasons. Therefore, my Reasons for Judgment should be rectified to reflect that the damages awarded should be $50,309.30.

[25] This argument is incorrect. At the opening of trial, the Plaintiff advised, initially, that her damages as claimed were in error, and should have been $54,309.30. The Defendants agreed to the amendment to the Statement of Claim to reflect this change. In the first few days of the trial, the Plaintiff indicated that she had made a number of arithmetic errors which meant that her total claim was $54,365.25. The defence took no issue with this corrected figure, either.

Issue b: Are there Offers to Settle under Rule 49.10 and what impact do they have?

[26] The Plaintiff is entitled to receive partial indemnity costs up to the date of the Rule 49.10 offer she made on September 27, 2020 and substantial indemnity costs thereafter. The offer to settle was for $45,000.00 plus pre-judgment interest and costs on a partial indemnity basis. The offer was open for acceptance until one minute after the commencement of the trial. It was never withdrawn.

[27] The Defendants argue:

a. The offer is more favourable to the Defendants than the amount of the judgment by a mere $865.25. It is no real compromise;

b. The Plaintiff’s approach to rule 49.10 would not encourage reasonable settlement discussions. Rather, it required the Defendants to abandon their defence and accept an unreasonable offer; and

c. Even where rule 49.10 applies, in simplified cases the quantum of costs should still be adjusted to reflect proportionality and the factors enumerated in R. 57.

[28] This case is not the “squeaker” that the Defendants argue that it is. The Defendants’ argument relies on their incorrect position on damages. The Plaintiff made an offer $45,000.00 that met the formal requirements of R 49. It was sufficiently less than the judgement on the main claim and the net award after the set-off to trigger the cost consequences of R. 49.

Issue c: What effect do the enumerated factors in Rule 57.01(1) have?

[29] Rule 57.01(1) sets out a non-exhaustive list of factors to be considered, as follows;

(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;

(0.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;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(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,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer;

(h.1) whether a party unreasonably objected to proceeding by telephone conference or video conference under rule 1.08; and

(i) any other matter relevant to the question of costs. R.R.O. 1990, Reg. 194, r. 57.01 (1) ; O. Reg. 627/98, s. 6; O. Reg. 42/05, s. 4 (1); O. Reg. 575/07, s. 1; O. Reg. 689/20, s. 37.

[30] The relevant factors in this case are o to e, and g.

[31] Expectation of the parties – The expectations of the parties are difficult to gauge. The Plaintiff seeks costs of $59,659.95 all-inclusive. The Defendants say that the Plaintiff should have costs of $21,633.00. The Plaintiff does not say what cost she should pay had the Defendants succeeded, and the Defendants do not say what costs they would have expected had they succeeded.

[32] The Defendants are both sophisticated businesspeople. Mr. Cooper runs his own security-related company and Ms. English is a senior patent and trademark lawyer. While neither may have great personal experience in litigation, neither should be surprised that the time this litigation consumed would be substantial. The Defendants must be taken to have known and understood that the risk inherent of the lack of success of their positions advanced on this litigation was a substantial legal bill for the Plaintiff.

[33] Amount claimed and recovered – The Plaintiff recovered almost all of her claim as amended at the outset of the proceedings. I dismissed almost all of the defences the Defendants advanced. The Defendants claimed a set-off of $31,272.21, of which I allowed only $4,500.00, finding the balance unproved. Ergo, the defence was successful in recovering about 14% of it set off claim.

[34] The complexity of the proceeding – The action was brought under the simplified procedure because of the dollar value of the claim. It was not, however, a simple proceeding. As is the case with most construction related claims, this action involved a lot of detailed evidence on a number of alleged deficiencies on the Plaintiff’s part and remedial action taken by the Defendants.

[35] The Plaintiff’s affidavit of documents contained 147 documents and the Defendants, 18 documents. In addition, the Plaintiff produced detailed summaries of the claim grouped under various headings for ease of analysis.

[36] I expect that this was the first Zoom trial conducted by any of the parties. It was a learning experience for all. That fact complicated the trial. None of the indices produced were bookmarked to the individual documents. The Court provided most of the screen sharing for the parties during the trial and found documents for the parties in the un-bookmarked compilations of documents.

[37] Apportionment of liability – As indicated above, the Defendants were wholly liable to the Plaintiff on the Plaintiff’s claim but the Plaintiff only liable to the Defendants on the set-off claim in the amount of $4,500.00.

[38] Importance of the issues and amounts – There is no doubt that the issues were important to each of the parties. The Plaintiff is a small contractor who worked on her own. The amount of the claim is significant to her. Likewise, the claim and set off involved the Defendants’ home. Notwithstanding that the Defendants’ employment suggest that they are relatively affluent, a $55,000.00 claim and a $31,000.00 set off are large amounts to anyone.

[39] Further, as is common with construction claims that involve a litigant’s home, the delays in completion of the construction, and the deficiencies in the work, both of which are frequent, was frustrating to the Defendants. The job seemed endless, the deficiencies significant, and the Plaintiff’s lack of responsiveness remarkable for a professional who came so highly recommended.

[40] From the Plaintiff’s standpoint, she took the job on a limited retainer. The clients’ expectations of her, however, were as if she was a general contractor. She was held responsible for all issues regardless of who hired the offending trade. She believed that she went above and beyond what was required of her, but that she could not satisfy customers that would not accept anything but perfection.

[41] Conduct of the parties – Neither party’s conduct was such that costs have to be used as a tool to correct the conduct of either.

[42] The Defendants’ conduct, however, lengthened the trial. The Defendants were entitled to insist that the Plaintiff prove her claim. This is their right. That right, however, is not without cost consequences should it be unsuccessful. Further, the Defendants’ counterclaim, for the most part, was not properly proved, although the evidence was available, as set out in paragraphs 140-160 of my Reasons for Judgement. I estimate of the total time spent on the set-off claim was approximately two days of the nine trial days.

[43] The Plaintiff delayed the proceeding overall by delaying issuing the Statement of Claim. I addressed this issue when addressing pre-judgment interest.

[44] Refusal to admit – It appears that neither party provided missions to the other.

Issue d: Are there any Offers to Settle that should be considered under Rule 49:13?

[45] The Defendants invite me to consider settlement negotiations when awarding and fixing costs. The Defendants submit that they attempted good-faith negotiations to reach a reasonable settlement. The Plaintiff, however, did not. The Defendants offered $10,000.00, to which the Plaintiff countered with $45,000.00. The Defendants made a further offer of $25,000.00, all-inclusive. Defendants argue that they, by the $25,000.00 all-inclusive offer, indicated their interest in continuing negotiations to reach a resolution, thereby avoiding the majority of legal fees.

[46] The Defendants say, also, that Mr. Cooper made an oral offer directly to the Plaintiff of $45,000.00, all-inclusive, during a telephone conversation immediately following the Plaintiff’s refusal of the Defendants written offer of $25,000.00. The Plaintiff rejected this oral offer by text message of 6 October 2020.

[47] I do not view the Plaintiff’s conduct in settlement negotiations as being inappropriate. I accept the Defendants’ argument that the Plaintiff’s statements about the Defendants approach to settlement negotiations are incorrect.

Issue e: How does proportionality under R. 1.04(1) affect the analysis?

[48] The Defendants are correct in that proportionality is always a consideration in assessing costs, even more so in a simplified procedure matter.

[49] The weight of the jurisprudence is that costs in a simplified procedure action should be proportional to the value of the file in order to curb the crippling costs of litigating small claims. Actions under the simplified procedure are meant to be cost effective. Therefore, costs in a simplified case should be fixed by reference to factors enumerated in under R. 57 bearing and the objectives of the simplified procedure.

[50] On the other hand, as indicated above, where the time spent is justified and reasonable in the circumstances of the case, proportionality should not deprive a successful litigant of costs that are justified.

[51] In this case, while proportionality is important, the Defendants’ position on costs would have the effect of undercompensating the Plaintiff when the cost she incurred ought to have been foreseeable by the nature of the case, and the nature of the Defendants’ position and approach during the trial, which was not accepted.

[52] The Defendants are sophisticated businesspeople. Given the time that they spent on this matter, it should have been no surprise to them the time that the Plaintiff would have spent on this matter.

[53] The Defendants’ actions contributed to the time that the Plaintiff had to spend answering unfounded or what turned out to be unproven allegations. For example:

a. Mr. Cooper raised irrelevant issues for “odour”. During his evidence, he raised the spectre that Ms. Gilbank had charged him HST but did not remit it to the government. The implication was that Ms. Gilbank was keeping the HST he paid. He produced no evidence to support this. Ms. Gilbank was required to respond.

b. Mr. Cooper frequently gave his opinion as justification for his opposition to portions of Ms. Gilbank’s claims when expert opinion was required. He was not qualified to give, nor did he call such evidence.

c. Mr. Cooper frequently blamed Ms. Gilbank for deficiencies in the work of contractors that he hired as justification for his opposition to her claims. She was not responsible for the work that his contractors performed. Her involvement was merely to coordinate his contractors’ work.

d. Mr. Cooper took contradictory positions at trial. The Defendants greed that all materials and services listed on Exhibit 3 (the invoice at issue in this matter) were purchased, the price listed was the price charged and paid, and that underlying documents were correct. The only exceptions to admission were with respect to the “ghost hardware” for the en-suite bathroom door from the master bedroom, the claim for drywall, and Ms. Gilbank’s management fee. Notwithstanding his agreement, Mr. Cooper frequently raised questions about the propriety of things he agreed to. For example, with respect to Exhibits 12, 13 and 20, Mr. Cooper raised the unfounded spectre that some contractors charged for deficiency work in their invoices, suggesting that he was being charged twice, once for the work and once for the remedial work. Mr. Cooper never called the trades whose work he was impugning. He persisted in cross-examination with his unfounded concerns and would not concede that there was no evidence to support the question of double charging in face of invoices and Ms. Gilbank’s evidence. Eventually, he conceded that whether there was double charging was a question of trust in Ms. Gilbank and that he had no reason not to trust her.

e. Mr. Cooper raised the unfounded concern that Ms. Gilbank may not have been “flowing through” contractors’ costs without markup. In cross-examination, he was asked whether he believed that Ms. Gilbank had charged trades cost with markup. He answered that he wanted to trust Ms. Gilbank. He added “I hope Julie was still honest.” He eventually conceded that he had no reason not to trust her.

[54] Further, the Defendants’ defences and set off claim were largely unsuccessful.

Issue f: What is fair and reasonable for the paying party to pay?

[55] I fix costs for this 9 day trial at $45,000.00, all inclusive.

[56] Quantifying the costs in this case is difficult given the broad, general descriptions of activities set out in the Plaintiff’s Bill of Costs. It is difficult to determine who did what, and what time those individuals spent on any task.

[57] My job, however, is not to assess costs as would an Assessment Officer. Rather, I must look at the matter holistically, and set an amount for costs which, all things considered, is fair and proportional, and reasonable for the Defendants to pay and the Plaintiff to receive as indemnity for legal costs.

[58] In fixing costs, I have considered the effects of the offers to settle, R. 57.01, and the impact of proportionality. In reviewing the Plaintiff’s Bill of Costs, I have applied the following factors:

a. I allow nothing for the work performed by the assistants who worked on the file. An assistant’s work is normally overhead, not chargeable on a party and party assessment. The work that the assistants performed is not particularized such that their work can be characterized as chargeable.

b. This is a simplified rules case, yet there appear to have been multiple time-keepers on several aspects of the case. The descriptions of work to not allow me to determine who did what, and whether there was duplication of effort.

c. The rates for lawyers called in 2005 of $425.00 and in 2016 of $240.00 seem high and I was not provided with authority for these rates.

Trimble J. Released: January 6, 2022

COURT FILE NO: CV-17-1219-00 DATE: 2022 01 06 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: JESSICA GILBANK carrying on business as STAR DESIGN - and - ADAM COOPER and JODI ENGLISH COSTS ENDORSEMENT Trimble J. Released: January 6, 2022