COURT FILE NO.: CV-18-00602566-0000 DATE: 2022 03 30 ONTARIO
SUPERIOR COURT OF JUSTICE
AZZ GALVANIZING CANADA LIMITED Plaintiff (Defendant by Counterclaim)
And
1340614 ONTARIO INC. O/A INNOVATIVE BLAST TECHNOLOGIES and EMPIRE STEEL INC. Defendants (Plaintiffs by Counterclaim)
BEFORE: Associate Justice Ilchenko
COUNSEL: Daniel S. Murdoch and Michael Ng for the Plaintiff AZZ Galvanizing Canada Limited (“ AZZ ” or the “ Plaintiff ”) Sam Gebrael for Defendant Empire Steel Inc. (“ Empire ”) No one appearing for Defendant 1340614 Ontario Inc. O/A Innovative Blast Technologies (“ IBT ”)
HEARD: October 4, 2021
RELEASED: Endorsement on Motion released December 6th, 2021 (the “ Endorsement ”) - exchange of written costs submissions completed on February 8, 2022 – This costs endorsement released on March 30th, 2022
ENDORSEMENT ON COSTS
I) Nature of Relief Sought by Plaintiff
[1] The Plaintiff brought a motion (the “ Motion ”) to compel responses to Undertakings, Under Advisements and Refusals given at the Examination for Discovery of Sherif Khalifa (“ Khalifa ”) on behalf of the Defendant Empire conducted on March 6, 2020 (the “ Discovery ”). For the purposes of this Costs Endorsement, unless otherwise defined herein, I will utilize the same defined terms as my Endorsement.
[2] The specific relief that had been sought before me by the Plaintiff on the Motion heard by me was an Order to compel the Defendant Empire to provide answers to certain Undertakings, Under Advisements and Refusals given at the Discovery within 30 days of the issuance of my Order and that Empire reattend to answer the outstanding undertakings and refusals.
[3] Originally the Motion brought by the Plaintiff was far more expansive and also involved requests for similar relief from the Defendant IBT, and dealt with 10 Questions refused by IBT at the discovery of it’s witness James Wilson, 96 allegedly outstanding undertakings and a further 19 Under Advisements that required adjudication. Counsel for IBT was unavailable for the motion so counsel for the Plaintiff advised that this portion of the Motion was being adjourned.
[4] With respect to the Motion regarding the Discovery of Empire, originally the Plaintiff sought adjudication of 10 Refusals, 29 allegedly outstanding Undertakings and 75 Under Advisements. As I stated in my Endorsement, prior to the hearing, commendably , counsel were able to reduce the number of questions to be adjudicated by me to two series of questions.
[5] I was advised at the hearing of the Motion, by counsel for the Plaintiff, and for Empire, that they had agreed that the other questions listed on the Refusals, Undertakings and Under Advisements Charts in the Motion Record of the Plaintiff and the Supplementary Motion Record of the Plaintiff were not to be determined by me. Accordingly, they were not the subject of Motion.
[6] At the commencement of the hearing counsel for Empire advised that he had come to an agreement with counsel for the Plaintiff on Issue 1, and that Empire would produce all of Empire’s hydro invoices that Empire paid with respect to the Premises (as defined in my Endorsement) throughout the length of the Plaintiff’s sublease going back to 2013. and that this issue would also not have to be adjudicated at the hearing by me.
[7] As a result, the sole Issue (“ Issue 14 ”) that was determined by me on the Motion is whether the Defendant should be compelled to answer the questions dealing with this Issue 14 and provide the following documentation, and to be compelled to reappear to answer questions relating to this undertaking request:
- For every subtenant during the period of the AZZ sublease, to provide a copy of their sublease, a copy of their monthly invoicing, the square footage that they occupied, the terms of any agreement on hydro payments, and how that amount was determined. To advise of the specific periods they occupied the premises.
[8] I dealt with a fundamental issue of relevance in the Pleadings in this action, namely evidence relating to the actual hydro costs charged to Empire in the Premises, and how the Sub-Landlord Empire allocated those hydro costs amongst the Plaintiff Sub-Tenant, and the Sub-Sub-Tenant IBT, as there was no sub-metering, as set out in some detail in my 45 page Endorsement.
[9] The Pleadings in this Action filed by AZZ, Empire and IBT totaled almost 150 pages.
[10] The Plaintiffs alleged in their Statement of Claim that the Plaintiff commenced this action against Empire to recover alleged overpayments for hydro and TMI (taxes, maintenance and insurance) during the period of time it subleased a portion of the Premises from Empire.
[11] Empire as head tenant leased the entirety of the Premises from Siemens Canada Limited, under the terms of a Head Lease dated December 21, 2012.
[12] AZZ commenced this Action against both Empire and IBT to recover, inter alia , alleged late payments, hydro charges and overholding rent during both the period that AZZ sublet the premises and the period of time AZZ sub-subleased the Subleased Premises to IBT. Empire and IBT have both asserted extensive counterclaims and crossclaims against all of the other respective Parties.
[13] The Plaintiff alleged that the Sublease provides that the Plaintiff was required to pay to Empire all amounts that Empire is required to pay to Siemens under the Head Lease, including “all utilities consumed in respect of the Subpremises”.
[14] The Plaintiff alleged that that the Sublease also provided that hydro would be determined by use of the check meters, while water and gas would be based on a proportionate share of the Premises based on the formula contained in section 3(1) of the Sublease.
[15] It is the Plaintiff’s allegation that AZZ paid this rate for electricity in reliance upon Empire’s representations that this represented AZZ’s “proportionate share” of the total hydro charges for the Premises.
[16] The Plaintiff alleges in the Statement of Claim that in 2016, AZZ wound down its operations and IBT occupied the Subleased Premises.
[17] The Plaintiff alleged Empire received overpayments from AZZ with respect to, inter alia, hydro, and that AZZ has suffered a loss corresponding to the benefits received by Empire.
[18] The Defendant Empire disagreed. With respect to the electricity charges, Empire denied that it overcharged AZZ for electricity and stated that at all times it charged AZZ for electricity (hydro) in accordance with the express, and/or implied terms, of the Sublease, Head lease and/or Consent Agreement, as applicable.
[19] Empire alleged it made reasonable efforts to install a Check Meter System, that system had to be abandoned, and in early 2014 Empire advised its tenants that due to the failure of the Check Meter System, an alternative arrangement would have to be reached.
[20] Empire alleged that after some discussions with AZZ, Empire and AZZ arrived at an agreement whereby they would pay a fixed amount for electricity per sf / per shift, which shielded AZZ from fluctuations in electricity rates.
[21] When AZZ ceased operations in the Premises and sought to further sub-let the Premises Empire alleges that it consented to AZZ further sub-letting the Premises to IBT on the condition that IBT not move in until it has produced to AZZ and Empire its electricity bills from a prior location.
[22] Counsel for IBT did not appear on the Motion as he was unavailable, so that issues relating to IBT were not dealt with on the Motion.
[23] I found in favour of the Plaintiff and made the following ruling as requested by the Plaintiff:
“[156] The following Refusals and Under Advisements shall be answered within 90 days of the date of the issuance of these Reasons:
Q355 & 366; p. 93-94 and 96:
- For every subtenant during the period of the AZZ sublease, to provide a copy of their sublease, a copy of their monthly invoicing, the square footage that they occupied, the terms of any agreement on hydro payments, and how that amount was determined. To advise of the specific periods they occupied the premises.”
III) Law and Analysis
[24] Subject to the provisions of an Act or the Rules , the costs incurred during a proceeding or a step in a proceeding are in the discretion of the Court. The Court must determine by whom and to what extent costs shall be paid ( s. 131(1) , Courts of Justice Act (Ontario)).
[25] In exercising its discretion, in addition to considering the result and any offer to settle made in writing, the court may consider the other factors set out in Rule 57.01(1), which reads:
General Principles
Factors in Discretion
57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,
(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.
Costs Against Successful Party
(2) The fact that a party is successful in a proceeding or a step in a proceeding does not prevent the court from awarding costs against the party in a proper case. R.R.O. 1990, Reg. 194, r. 57.01 (2) .
Fixing Costs: Tariffs
(3) When the court awards costs, it shall fix them in accordance with subrule (1) and the Tariffs. O. Reg. 284/01, s. 15 (1).
Assessment in Exceptional Cases
(3.1) Despite subrule (3), in an exceptional case the court may refer costs for assessment under Rule 58. O. Reg. 284/01, s. 15 (1).
Authority of Court
(4) Nothing in this rule or rules 57.02 to 57.07 affects the authority of the court under section 131 of the Courts of Justice Act,
(a) to award or refuse costs in respect of a particular issue or part of a proceeding;
(b) to award a percentage of assessed costs or award assessed costs up to or from a particular stage of a proceeding;
(c) to award all or part of the costs on a substantial indemnity basis;
(d) to award costs in an amount that represents full indemnity; or
(e) to award costs to a party acting in person. R.R.O. 1990, Reg. 194, r. 57.01 (4) ; O. Reg. 284/01, s. 15 (2); O. Reg. 42/05, s. 4 (2); O. Reg. 8/07, s. 3.
Bill of Costs
(5) After a trial, the hearing of a motion that disposes of a proceeding or the hearing of an application, a party who is awarded costs shall serve a bill of costs (Form 57A) on the other parties and shall file it, with proof of service. O. Reg. 284/01, s. 15 (3).
Costs Outline
(6) Unless the parties have agreed on the costs that it would be appropriate to award for a step in a proceeding, every party who intends to seek costs for that step shall give to every other party involved in the same step, and bring to the hearing, a costs outline (Form 57B) not exceeding three pages in length. O. Reg. 42/05, s. 4 (3).
Process for Fixing Costs
(7) The court shall devise and adopt the simplest, least expensive and most expeditious process for fixing costs and, without limiting the generality of the foregoing, costs may be fixed after receiving written submissions, without the attendance of the parties. O. Reg. 42/05, s. 4 (3).
[26] Fairness and reasonableness are the overriding principles in a Court determining costs (Boucher v. Public Accountants Council for the Province of Ontario, (2004), 71 O.R. (3d) 291 (C.A.) and Deonath v. Iqbal, 2017 ONSC 3672 at paras. 20-21 )( “ Deonath ”).
[27] Generally, costs on a partial indemnity scale should follow the event, and this principle should only be departed from for very good reasons such as findings of misconduct by a party, where there has been a miscarriage in procedure or where there is oppressive or vexatious conduct (1318706 Ontario Ltd. v. Niagara (Regional Municipality) (2005), 75 O.R. (3d) 405 (C.A.); 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238 at paras. 10 , 12-14).
[28] In order to make its determination as to costs, Rule 1.04(1) must also be considered, to ensure that the Court makes a just, expeditious and least expensive determination of every civil proceeding on its merits and under Rule 1.04(1.1) so that costs orders are made which are proportionate to the importance and complexity of the issues and to the amount in dispute in the proceeding between the parties ( Deonath at para. 21 ).
[29] In Davies v. Clarington (Municipality), 2009 ONCA 722 the Court of Appeal stated as follows (at paragraph 52):
“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.”
[30] I have set out the legal arguments made by Empire and AZZ with respect to relevance and proportionality in detail in my Endorsement and will not restate them here except as to incorporate them in the reasoning.
a) Position of the Plaintiff on Costs
[31] The Plaintiff seeks an award of $16,094.69 for its partial indemnity costs on the refusals motion against Empire, as set out in the Plaintiff’s Cost Outline (the “ Plaintiff’s Costs Outline ”). The Plaintiff takes the position that the amount sought is what Empire could reasonably expect to pay in relation to the motion, based on the cost outline delivered by Empire in advance of the hearing of the Motion showing partial indemnity costs claimed of $16,652.71, however, the Costs Outline attached to Empire’s Responding Costs Submissions uses the figure of $16,071.00, so I will utilize that figure and that Costs Outline for these reasons (the “ Empire Costs Outline ”).
[32] The Plaintiff takes the position that the Motion was initially made necessary by the failure of both Empire and the co-defendant IBT to provide any answers to undertakings, refusals and questions taken under advisement despite request and the passage of 14 months from their respective examinations for discovery.
Calculation of Partial Indemnity Claim amount by Plaintiff
[33] As shown in its outline, the Plaintiff’s partial indemnity costs for preparing this motion were $2,934.00. Because half of the motion pertained to IBT, which was not dealt with on the Motion, the Plaintiff claims 50%, or $1,467.00, for preparation of the motion record, which the Plaintiff claims was necessitated by Empire’s failure to provide answers on discovery within a reasonable period of time.
[34] The Plaintiff’s position is that only after delivery of its motion record in May of 2021, returnable on October 4, 2021, relating to undertakings and refusals given at the Khalifa Examination on March 6, 2020, that both Empire and IBT delivered partial answers to undertakings, refusals and questions taken under advisement, and the Plaintiff was forced to prepare supplemental motion records to address these answers and prepared a factum on the motion.
[35] The Plaintiff’s partial indemnity costs for the supplemental record and factum were $7,875.00 and setting aside portions of these supplementary materials dealing with IBT, the Plaintiff claims from Empire 2/3rds of these costs, or $5,250.00 .
[36] The Plaintiff claims that it was required to incur further costs because Empire delayed in making reasonable concessions to answering certain of the questions, waiting until the day of the hearing to produce its own hydro invoices for the period of the Plaintiff’s subtenancy in Empire’s premises.
[37] The Plaintiff submits that all of its counsel’s time preparing for and attending at the hearing of the motion related to these questions and to the production of Empire’s hydro bills, which Empire allegedly conceded the morning of the hearing, reducing the issues to be decided to only Issue 14. As a result, the Plaintiff claims all of its time preparing for and attending the hearing of the motion, or $5,595.00 on a partial indemnity basis.
[38] The Plaintiff also claims partial indemnity costs of $1,647.9 for the preparation of its costs submissions and $320 in disbursements.
[39] The Plaintiff takes the position that the Motion was of substantial importance to it, as. Empire refused to produce documents and provide answers that directly address how much AZZ was overcharged for the lease period prior to IBT’s occupancy and how, if at all, Empire misrepresented the electricity charges to AZZ and IBT.
b) Position of Empire on Costs
[40] Surprisingly, despite my findings in favour of the Plaintiff in my 45 page Endorsement as set out above, ordering Empire to answer Issue 14, Empire takes the position the Plaintiff should not be entitled to any costs, and that that Empire, not the Plaintiff, is entitled to costs payable to Empire by the Plaintiff in the amount of $12,652.71 on a partial indemnity basis.
[41] Empire is seeking it’s costs in relation to the alleged 26 questions not pursued by the Plaintiff, in the amounts mentioned above, under Rule 57.01(2) which allows the Court to award costs against a party regardless of whether such party was successful at the motion.
[42] Empire’s position is that because Empire expended $22,710.00 (actual) in preparing for the 28-question-motion, which figure is comprised of $8,825.00 in review of motion materials, the pursued questions and the relevant law, plus $13,885.00 in drafting the responding record, the Refusals and Advisements Chart and the responding factum, but the Motion was only argued with respect to Issue 14, that it should be entitled to costs.
[43] According to Empire’s version of events in its Responding Costs Submissions, unsupported by any reference to affidavit evidence:
“4. Nevertheless, on Wednesday, September 29, 2021, only three business days before the hearing (what could be described as the eve of the hearing scheduled for October 4, 2021), AZZ's counsel called Empire's counsel to advise him that, due to AZZ's counsel's oversight, the motion hearing was not properly booked with the Court, and therefore, AZZ will be booking a shorter hearing and pursuing only 2 out of the 28 questions.”
While Empire was surprised to hear about this oversight (especially given the storied reputation of AZZ's counsel) and has no way of knowing for certain why it occurred, Empire should not be made to bear the costs of AZZ's counsel's faults.
Since AZZ decided not to pursue 26 out of the 28 questions on the eve of the hearing, Empire should be awarded the fraction of 26 over 28 of the costs it incurred before AZZ's said decision at the eve of the hearing, which fraction equals to about 93%. Thus, Empire should be awarded 93% of the $22,710.00 (actual) it spent. The partial indemnity rate of such figure is $12,652.71.
Further, the 26 unpursued questions were wrongfully pursed in the supplementary motion record. Had Empire been afforded the chance to argue for its responses/refusals in relation to the 26 unpursued questions, it would have been successful. In fact, the main reason that AZZ chose the 2 questions which they ended up pursing at the hearing, is because the said 2 questions were the only ones where AZZ had a viable chance of success.”
[44] These submissions are based on no actual evidence before the Court, and paragraph 7 is pure speculation. Some of the statements made in the Empire Responding Costs Submissions may relate to without prejudice discussions between counsel.
[45] Both counsel before me at the hearing of the Motion specifically advised me that questions relating to IBT were not being dealt with due to the non-availability of counsel for IBT, and the remaining issues in the motion materials were not being dealt with ON AGREEMENT OF COUNSEL and they would not be subject to Res Judicata .
[46] In fact, I stated the following in my reasons on this issue to ensure that these issues would NOT be subject to Res Judicata , so it could be argued at a future date if necessary, ON THE SUBMISSIONS AND APPARENT AGREEMENT OF BOTH COUNSEL:
“[5] I am advised by counsel for the Plaintiff and for Empire that the other questions listed on the Refusals, Undertakings and Under Advisements Charts in the Motion Record of the Plaintiff and the Supplementary Motion Record of the Plaintiff are not to be determined by me. Accordingly, they will not be the subject of these reasons, and will not be subject to Res Judicata .”
[47] I find these submissions by Empire in the Responding Costs Submissions to be utterly improper.
[48] In addition, Empire argues with respect to the actual costs submissions of the Plaintiff that:
Out of the 2 pursued questions, only one was dealt with at the hearing (the other Empire agreed to provide before the hearing commenced). The remaining question dealt with disclosure of various information and documents of other tenants.
The remaining question was a novel complex question, the existing caselaw did not provide a proper expectation of failure/success which led the Court to deliver an extensive 45-page endorsement only on the issue of the information regarding other tenants, evidencing the novelty and complexity of the issue with competing rights and interests that required balancing including: (i) the rights of the parties in litigation to fulsome discovery, (ii) the rights of Empire's other tenants to privacy of their agreements and arrangements with Empire, and (iii) Empire's rights and obligations to protect such privacy and to run its business in the way it seems fit;
the hydro invoices produced as a result of my Order did not actually evidence any overcharges;
a chart provided in the Plaintiff’s Costs Submissions alleges that the plaintiff was required to pay hydro based on a completely different formula, and as a result the Plaintiff's submissions on this issue, are misleading and should bear no weight on the cost submissions;
the Plaintiff’s supplemental motion record dealt mostly with IBT’s 41 undertakings and under- advisements as opposed to Empire's 28 undertakings refusals and under-advisements. Being only 41% of the questions in the supplemental record instead of 2/3 of the questions.
c) Reply Position of Empire on Costs claim against it by Empire
[49] Given the surprising position of Empire regarding its entitlement to Costs, rather than the Plaintiff, the Plaintiff submitted reply submissions. I will allow the Plaintiff to do so, given the surprising turn of events.
[50] In its reply submissions, the Plaintiff argues that Empire's contention that there were 26 unpursued questions from the Refusals and Advisements Chart is false because Issue 14 was an umbrella question that incorporated most of the outstanding questions from both Category 2 and Category 4, and that my Order with respect to Issue 14 required Empire to answer to answer 18 of the 28 questions in the Refusals and Advisements Chart, with only the remaining 10 questions were deferred and were not before the Court.
[51] As I have noted above, I have found Empire’s submissions on this issue to be improper, contradicting what counsel advised the Court, and what I found in my reasons, that on the agreement of Counsel that questions other than those relating to Issue 14 were deferred, on consent, and were not subject to Res Judicata .
[52] These costs reasons do not require me to answer any issue other than costs, and I will not be mediating between the parties as to how many possible questions my reasons forced Empire to answer, other than as specifically stated in my reasons, and as quoted above.
[53] The Plaintiff also argues that the scope of relevance in discovery is not a “novel” issue and that Empire's reliance on Justice Perell's decision in the Mancinelli case is misplaced, and there is nothing novel about a determination that Empire must produce documents and information that fall within the scope of the pleadings for the Plaintiff to properly make out its case on liability and damages.
[54] The Plaintiff also takes the position that claims that the hydro invoices, produced by Empire following the hearing, do not evidence overcharges, is an issue that will be addressed on the merits of the action and that the Plaintiff is entitled to its costs on that issue.
[55] Finally with respect to Empire’s argument that 41% of the questions in the Amended Refusals and Advisements Chart relate to Empire as opposed to IBT, and therefore the Plaintiff should not be entitled to 67% of its costs relating to the supplemental motion record and factum, the Plaintiff responded that this claimed adjustment would have a $2,000 impact and that the proper determination was the time spent actually addressing the questions and that the bulk of the Plaintiff’s factum was focused on the Empire refusals that were actually addressed at the hearing.
DISPOSITION
[56] To avoid any further revisionist history, I will remind counsel that on this Motion Counsel for Empire took the position that the documentary productions and answers to the questions under just Issue 14 requested by the Plaintiff were unduly onerous given the context of hundreds of questions having been already asked and documents already produced, and he stated clearly, and repeatedly, that he was “drawing the line” on this Motion with respect to the requests made by the Plaintiff on Issue 14.
[57] For the reasons set out in the Endorsement, I did not find the requests made by the Plaintiff under Issue 14 to be unduly onerous, and Empire’s attempts at “drawing the line” with respect to the requests made by the Plaintiff on Issue 14, failed.
[58] I do not know how that “drawing the line” position by Empire on Issue 14 can accord with the statements I have quoted above that somehow “…Had Empire been afforded the chance to argue for its responses/refusals in relation to the 26 unpursued questions, it would have been successful. In fact, the main reason that AZZ chose the 2 questions which they ended up pursing at the hearing, is because the said 2 questions were the only ones where AZZ had a viable chance of success.”
[59] Again, to avoid further revisionist history, Empire made the following arguments in its factum with respect to Issue #14 that was before the Court:
“33. Questions in Group 3 are irrelevant to the claim as plead and are all in relation to other tenants/leases/properties.
This action is in relation to disputes around and under the AZZ/IBT lease. This action is not brought by Empire's other tenants (other than AZZ/IBT), nor is it brought by a regulator. Therefore, AZZ has no standing to ask for leases of other tenants.
AZZ in its Supplementary Record, claims that the questions in this group are relevant to the paragraphs 14-16, 40-41 & 45-45 of the Statement of Claim, reproduced below. This assertion is simply not true. As you can see from the below, the pleading is not in relation to the other tenants/leases of Empire, rather only with the AZZ/IBT lease. None of the below paragraphs mention or refer to other tenants or leases .
The Subleased Premises is approximately 78,154 sf, which represents approximately 15% of the Leased Premises.
Pursuant to section 3(1) of the Sublease: [AZZ] agrees to pay to [Empire] all amounts in respect of the Subpremises which [Empire] is required to pay to [Siemens] under the Head Lease as Additional Rent including, without limiting the generality of the foregoing, all utilities consumed in respect of the Subpremises and [AZZ's] proportionate share of [Empire's] share of Taxes and [Empire's] proportionate share of operating costs, all as defined in the Head Lease. [AZZ's] Proportionate Share shall be the faction the numerator of which is the area of the Subpremises and the denominator of which is the area of the Premises.
Schedule "A" attached to the Sublease states that "Utilities for Production Area: Check meters shall be installed for Hydro at [Empire's] expense, water to be based on proportionate share, gas to be based on proportionate share"
Pursuant to section 7 of the Sub-sublease, IBT agreed to pay AZZ 100% of its costs for water, gas, security, hydro, cleaning and all applicable taxes. Section 7 states, in part "It is agreed that [IBT]'s proportionate share of all of the aforesaid costs shall be one-hundred percent (100%) of [AZZ's] costs for water, gas, security, hydro, cleaning and all applicable taxes, provided to the Subleased Premises ."
IBT has failed to pay any hydro from August 2016 to December 2017, AZZ is entitled to hydro payments in the aggregate amount of at least $621,699.05.
AZZ has upheld its obligations under both the Sublease and the Sub-sublease with Empire and IBT, respectively.
AZZ has paid rent and additional rent, as demanded by Empire, each month in a timely manner to prevent more damages caused by IBT's refusal to pay amounts due and Empire's refusal to provide valid and accurate hydro invoices and invoices for other required proportionate assessment charges. However, Empire has overcharged for, inter alia, rent, hydro, and TMI as outlined above in breach of the Sublease.
IBT has failed to pay rent on time and to pay for hydro from August 2016 to December 2017 (inclusive). IBT is in breach of the Sub-sublease as a result of its failure to pay its rent and hydro in a timely manner .
In the alternative, even if the Court deems that the above are relevant, then Empire pleads that they are only marginally relevant at most, and therefore still not answerable pursuant to L'Abbe , where the Court, as explained above, expressed that discovery questions should focus on "information necessary for resolution of the case on the merits and not on unearthing every stray piece of evidence that might have marginal relevance",
As the paragraphs above only refer to the AZZ/IBT lease, then the boundaries of the pleadings make all questions regarding other tenants or leases irrelevant and unanswerable pursuant to, inter alia , Blais and Rothmans , where it was held that the pleadings define the boundaries of what constitutes a relevant question.
Admittingly, the parties have a live dispute when it comes to what constitutes AZZ/IBT proportionate share of the Leased Premises. In paragraph 14 of the SOC, AZZ takes the view that it's only 15%. Empire's position is that this figure is closer to 26% based on the agreement between the parties. The formula to determine the proportionate share is simple:
Size of AZZ's Leased Space (Numerator)
The Property (Denominator)
The parties are not disputing the nominator in the above equation since the size of AZZ's leased space (78,154) is spelled out in the AZZ's lease. The disagreement involves the denominator. AZZ takes the view that the denominator is closer to 500,000 square feet based on news articles, promotion materials and a figure that was deleted from the Head Lease before it was signed. Empire takes the view that the denominator is "302,281", based on, among other things, an email explicitly discussing and agreeing to that figure. Regardless of whether the denominator is 300,000 or 500,000 square feet, the "right" number will definitely not be based or found in the leases of other tenants or what other tenants where paying for various operating costs at that time.
Finally, as set out by the Court in Metrolinx and Karten , this Court should deny questions that deal with other tenants because they are not relevant. Further, even if the leases of other tenants was found to be vaguely relevant in an indirect manner (they are not), that should not be enough for the Court to order their production. In Metrolinx it was argued that the other properties were relevant because they were also intended to be developed for the same train station/tracks. Similarly, AZZ might argue that the other tenants/leases are relevant because they also had to pay hydro based on an arrangement that they arrived at with Empire. As plead, Empire's agreement with other tenants cannot be relevant to the current dispute.
As such, all questions dealing with other tenants/leases/properties are irrelevant to the claim as plead and should be denied.”
[60] Determining the merit of these arguments by Empire regarding the relevance of the documents requested to the issues plead by any party, required me to slog through the 150 or so pages of pleadings, to determine, in applying the Blais and Rothmans tests, whether the documents requested by the Plaintiff under Issue 14 were “relevant to any matter in issue ,” as defined in ANY OF the pleadings, and what those “matters in issue” were.
[61] Again, to avoid further revisionist history, I found that the “matters in issue” for the purposes of these particular paragraphs of the Statement of Claim that Empire has quoted that are relevant to Issue 14 are: (from paragraph 106 of the Endorsement):
what are “all utilities consumed in respect of the Sub premises” under s.3(1) of the Sub-lease.” that AZZ agreed to pay to Empire, plead in paragraph 15 of the Statement of Claim;
what were the “…one-hundred percent (100%) of [AZZ's] costs for…hydro…provided to the Subleased Premises” under the terms of the Sub-Sublease that were to be paid by IBT, plead in paragraph 40 of the Statement of Claim;
was the amount that Empire instead asked AZZ to pay as an "average amount" per month, which AZZ states that it agreed to pay on the understanding that the average amount was a reasonable approximation of AZZ's proportionate share plead in paragraph 5 of the Statement of Claim;
Did AZZ incur damages from having paid rent and additional rent, including hydro costs, as demanded by Empire, to prevent more damages caused by IBT's alleged refusal to pay amounts due and Empire's alleged refusal to provide valid and accurate hydro invoices and invoices for other required proportionate assessment charges, as plead in paragraph 44 of the Statement of Claim;.
Did Empire “overcharge…for hydro…in breach of the Sublease”, as plead in paragraph 44 of the Statement of Claim
Did IBT fail to pay for hydro from August 2016 to December 2017, breaching the Sub-sublease as a result., as lead in Paragraph 45 of the Statement of Claim.
[62] As I also found at Para 114 of the Endorsement:
“Mr. Khalifa is correct in his testimony- the key issue is whether Empire needs to “credit back” AZZ or whether Empire is “owed money” by AZZ. The documentation requested by AZZ in Issue 14 is very relevant to the determination of this issue as distilled by Mr. Khalifa himself during the Discovery.”
[63] In my view, AZZ was largely successful on the Motion with respect to Issue 14, and is entitled to costs. Empire, despite its spirited defence of the motion, and attempts at evidentiary line-drawing, was not successful and is not entitled to costs.
Scale of Costs
[64] There is no evidence before me that justifies an award of costs on other that a partial indemnity scale, and the Plaintiff does not request costs calculated on other than a partial indemnity scale. Accordingly, I will be determining costs on a partial indemnity scale.
Claim for Costs by Empire
[65] I decline to exercise my discretion under Rule 57.01(2) to grant Empire costs, despite Empire not having been successful in opposing the Motion, particularly based on:
i) the arguments raised on the Responding Costs Submissions that appear to contradict Empire’s actual submissions at the hearing, that counsel had agree that the other questions were being deferred and not to be decided; and
ii) the snide insinuations of incompetence made in the Responding Costs Submissions relating to counsel for the Plaintiff, without any proper evidence, which I find unseemly, and which allegations appear to be “factually” refuted in the Plaintiff’s reply submissions.
Importance of issues
[66] For the purposes of the various aspects of the tests under R.57.01, as I noted above, in the Endorsement, the documentation produced by my Order was very important to the disposition of the key “matters in issue” with respect to the hydro costs claim made by the Plaintiff, and frankly important for the defences made by Empire, and acknowledged in Khalifa’s own discovery testimony, namely, how were the hydro costs allocated amongst ALL of the sub-tenants and sub-subtenants by Empire, including, the Plaintiff and IBT.
Complexity of Motion
[67] The complexity of the issues is obvious, as set out, and described in my 45 page Endorsement. As noted previously, there were almost 150 pages of pleadings, 1100 pages of documents on this Motion, 900+ questions asked at the Khalifa Discovery, 756 questions asked of the Plaintiff’s discovery witness, and 1000’s of documents have been produced by the parties. Counsel argued this motion before me for almost 3 hours. This was a complex motion for the purposes of the R.57.01 tests.
The conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding
[68] Until the filing of the Empire costs submissions, it appeared that parties were cooperating to deal with just Issue 14 before me at the hearing of the motion. Now it appears there is some dissension as to whether there was an agreement. As there no actual evidence before me on the issue, I cannot determine whether the distilling down of the issues to Issue 14 was or was not tending to shorten the proceeding. Accordingly, I will determine solely on the basis of the Motion actually heard before me regarding Issue 14.
Novelty of Issue
[69] Empire makes the substantive argument that the novelty of the legal issues raised on the Motion absolved Empire of liability for costs, based on the reasoning of Perrell, J. in Mancinelli v. Royal Bank of Canada, 2018 ONSC 797, 289 A.C.W.S. (3d) 489, with the operative quote being (“ Mancinelli ”):
“9 For an issue to be novel in the legally significant way that would justify the court in ordering no costs against the party who unsuccessfully advanced the issue, it is not enough that the issue is unprecedented or that the issue has not been decided before . The legally significant novelty of a legal issue is found in the circumstance that the existing case law is inadequate to resolve the issue and there would be no proper reason for the party advancing the issue to expect to fail . If a litigant submits that a case is novel because there is no decided case directly on point, he or she may be met with the argument that although there are no decided cases, the law is clearly against the case, so the litigant should reasonably expect to lose and thus the case is not novel in the requisite sense that would justify making no order as to costs.”
[70] I do not see how Mancinelli is applicable to this case. The complexity of this Motion resulted from the insistence of Empire, as excerpted from its factum above, that the documents requested by the Plaintiff under Issue 14 were in no way relevant to the “matters at issue” in this proceeding. This required a review by me of the almost 150 pages of pleadings to obtain the factual background to apply the tests of relevancy and proportionality in Rothmans, Blais, CIBC v. D&T, Inco v. McGrath, R. v. Arp, Warman, and Sycor , and factually distinguishing L’Abbe, Cineplex, Karten and Metrolinx, cited by Empire.
[71] This is clearly not a case where “…the existing case law is inadequate to resolve the issue and there would be no proper reason for the party advancing the issue to expect to fail.” The existing case law on the topic is voluminous.
[72] The length of my Endorsement was necessitated by:
i) the arguments made by Empire that the documents requested were entirely irrelevant to any of the matters in issue, and a disproportionate request, and
ii) by the mass of documentation filed on this Motion, and
iii) the application of the tests, and balancing of interests required in the above mentioned Jurisprudence and under the Rules,
and not because new legal ground needed to be broken.
[73] I do not find this to be a case where the determination of the legal issues on the Motion could be determined as “novel” on the Mancinelli test, and therefore Empire is not absolved of liability to the pay the Plaintiff’s costs.
Quantum of costs
[74] As noted above, the Plaintiff in its Costs Outline for the entirety of the Motion, including the IBT aspects, claims Partial Indemnity Costs in the amount of $20,156.59, including disbursements of $320. Mr. Murdoch’s partial indemnity rate is $570/hr (2006 call) Lauren Ray is $360/hr (2016 call) and Michael Ng is $315/hr (2021 call).
[75] The Plaintiff expended a total of approximately 50 hours, of which Mr. Ng accounted for 36.1 hours and Mr. Murdoch expended 5.7 hours including to argue the motion. I do not find this to be an inappropriate spread of responsibilities and rates.
[76] As noted above, the Plaintiff is not allocating the whole of the costs of the motion to Empire, given that the Motion also involved compelling answers from IBT. The Plaintiff has allocated these costs as follows (the “ Costs Allocation ”):
50%, or $1,467.00, for preparation of the motion record (factoring in IBT time)
2/3rds, or $5,250.00 for preparation of supplemental record and factum
all of its counsel’s time or $5,595.00 preparing for and attending at the hearing of the motion on the basis of Empire allegedly conceding on the issue of the hydro bills on the morning of the Motion
$1,647.90 for the preparation of its costs submissions.
Combined, $16,094.69 on a partial indemnity basis with HST and $320 in disbursements.
[77] Empire submitted the Empire Costs Outline in support of its claim for costs against the Plaintiff. On a partial indemnity basis, the total claim is $16,071.00 although the actual claim made in the Costs Outline is $12,652.71 on the basis that 93% of the time charged was incurred prior to the Plaintiff allegedly deciding not to pursue 26 of the 28 questions at the hearing. In the Empire Costs outline Mr. Gebreal’s partial indemnity rate is $210/hr (2012 call) and Yousef Kamal’s rate was $114/hr (student at law).
[78] Empire expended a total of approximately 131.5 hours, of which Mr. Kamal accounted for 120 hours and Mr. Gebreal expended 11.5 hours, including to argue the motion. I do not find this to be an inappropriate spread of responsibilities and rates, given that Mr. Kamal was an articling student, who would require more time to complete materials, given his experience level. In any event, given the sheer volume of materials filed on this motion by both sides, the amount of time spent in total to prepare them is not unexpected.
[79] With respect to the quantification of the costs claimed by the Plaintiff, and whether they would have been expected by Empire, I believe the following paragraph from Mancinelli is applicable, and is instructive:
“12 With the Plaintiffs having disclosed that they would have claimed $91,496.99 had they been the successful party, there is not a great deal of traction to their submission that BMO's claim for $99,724.96 and TD's claim for $95,908.69 are excessive and not within the reasonable expectations of the unsuccessful party.”
[80] I agree. As noted above, Empire claimed its costs payable by the Plaintiff amounted to $12,652.71 on the basis of being 93% of the $16,071.00 calculated on a partial indemnity basis. Drawing inspiration from Perrell, J. in Mancinelli , I find that there is not a great deal of traction to Empire’s submission that the Plaintiff’s should not be granted its claim for costs in the amount of $16,094.69 calculated on a partial indemnity scale and as allocated between IBT and Empire portions of the Motion (as detailed above) and I do not find that the Plaintiff’s claim for costs is “…excessive and not within the reasonable expectations of the unsuccessful party.”
[81] Following Davies v. Clarington (Municipality) (Supra) , rather than engaging in a purely mathematical exercise, I find that the Costs Allocation as calculated by the Plaintiff is a fair and reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. I find that the allocation of the costs between the IBT and Empire portion of the Motion and between the initial scope of the motion materials, and the final disposition of only Issue 14, on the apparent agreement of counsel for Empire, to be fair and reasonable and implementing such a reduction encourages parties to settle issues between themselves, as, apparently, they tried to here.
[82] I find that the costs claimed by the Plaintiff are fair and reasonable in the circumstances, and in terms of the provisions Rule 1.04(1.1) I find that the costs requested are proportionate to the importance and complexity of the issues and to the amount in dispute in the proceeding between the parties, as per the test in Deonath , above.
IV) Summary of Costs Order Granted
[83] Considering the factors in rule 57.01, and R.1.04(1.1), and the application of the binding jurisprudence I have cited, I have concluded that given:
the significance of the relief sought on this motion,
the time spent,
the amount at stake in the action,
the complexity of the issues as asserted in the almost 150 pages of combined Pleadings, and 773 pages of Materials filed by the Plaintiff, and 424 pages of materials filed by Empire, and
the conduct of both the Plaintiff and the Defendant Empire on the motion, and in these costs submissions,
and employing my discretion, that the partial indemnity costs as claimed by the Plaintiff are fair, reasonable, proportionate and an amount that the Defendants should reasonably have expected to pay in the event they were unsuccessful on this motion, given that the costs listed in the Empire Costs Outline are greater in hours spent and similar in the costs claimed.
[84] I am satisfied that the Plaintiff is entitled to the costs claimed, as analyzed above, given the Plaintiff’s substantial success. In my view the all-inclusive sum of $16,094.69, calculated on a partial indemnity basis is a fair and reasonable amount that the Defendant Empire could expect to pay for costs in all of the circumstances of the Motion, and within the reasonable expectations of the parties, payable by Empire within 30 days of the release of this endorsement
Associate Justice Ilchenko Superior Court of Justice March 30, 2022