Court File and Parties

Court File No.: CV-17-571863 Date: 2022 01 10

Superior Court of Justice – Ontario

Re: CPI SECURITY SERVICES INC., Plaintiff / Defendant by counterclaim - and - 2465855 ONTARIO LTD. o/a THE WESTIN PRINCE, TORONTO, Defendant / Plaintiff by counterclaim

Before: Associate Justice Todd Robinson

Counsel: J. Feiner and H. Brown, counsel for the plaintiff / defendant by counterclaim M. Milosevic, counsel for the defendant / plaintiff by counterclaim

Heard: In writing

Reasons for Decision (Costs of Action and Enforcing Settlement)

Overview

[1] CPI Security Services Inc. (“CPI”) provided security services to 2465855 Ontario Ltd. o/a The Westin Prince, Toronto (“Westin”) at its hotel at 900 York Mills, Toronto. CPI terminated its services agreement for breaches of contract and non-payment of fees. It then commenced this action seeking payment of $515,000 for unpaid invoices and lost profits. Westin counterclaimed for $73,581.16, alleging breach of contract, negligence, trespass to property, and unjust enrichment.

[2] The action proceeded through documentary and oral discoveries, an unsuccessful mediation, and was ultimately set down for trial, pre-tried, and scheduled for a 6-day trial in September 2020. Those original trial dates were adjourned on consent, at Westin’s request, and trial was re-scheduled to commence in mid-January 2021. In October 2017, prior to discoveries, CPI made a formal offer to settle under Rule 49 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) for payment by Westin of $90,000, plus pre-judgment interest and costs. Westin accepted that offer less than 10 days before the scheduled commencement of trial.

[3] After accepting the offer, Westin failed to make payment or provide its position on CPI’s costs as set out in the bill of costs provided by CPI to Westin. CPI ultimately sought to schedule a motion to enforce the settlement. The parties were directed to a case conference through the current triage process for judges’ motions in Toronto. Diamond J. conducted the case conference, by which time the parties had agreed to a consent judgment in accordance with the settlement, save for costs. Diamond J. directed that costs be determined by a motion in writing.

[4] CPI brings this motion seeking costs of $54,121.12, comprised of $45,164.97 for costs of the action on a partial indemnity basis, $4,118.85 for costs of enforcing the settlement on a full indemnity basis, and $4,837.30 for disbursements. Westin agrees that CPI is entitled to costs of the action, but disputes the amount. Westin’s position is that CPI’s claim is excessive, and that the award should be no more than $40,000.00 in costs, including taxes and disbursements.

[5] The motion first came before Sugunasiri J., who adjourned it to be heard by a master (as we were then titled) since it was a motion within our jurisdiction. Nothing in Diamond J.’s endorsement or order directed that this motion should be brought to a judge. The motion was ultimately assigned to me for disposition.

[6] Several issues must be addressed on this motion, namely:

(a) Should an assessment of CPI’s costs be directed in accordance with the accepted term of the offer to settle?

(b) If not, then in determining the appropriate quantum of costs:

(i) What is the proper analysis to be applied?

(ii) Were any of Westin’s pleading allegations spurious and, if so, do they warrant a higher costs sanction?

(iii) Is CPI claiming costs that are already the subject of a prior costs award?

(iv) Are the costs claimed by CPI unreasonable and disproportionate to the matters in issue?

(v) Is CPI entitled to additional costs of enforcing the settlement? If so, on what scale and do Westin’s reasons for defaulting on the settlement bear on the scale or amount of those costs?

(vi) Do Westin’s two offers to settle costs have an impact on the amount of costs awarded?

[7] Although the accepted term of settlement was that CPI’s costs be assessed or agreed, I am not directing an assessment. Having considered the circumstances of this case, including offers to settle and the factors in Rule 57.01(1) of the Rules, I am awarding CPI its costs of the action to the date of Westin accepting the offer to settle on a partial indemnity basis and costs of enforcing the settlement on a substantial indemnity basis. I fix those costs in the aggregate amount of $47,037.30, inclusive of taxes and disbursements.

Analysis

Should costs be assessed per the parties’ settlement agreement?

[8] The accepted offer includes a term that Westin pay costs incurred by CPI to the date of acceptance on a partial indemnity scale in an amount “to be assessed or agreed.” In my view, since the parties evidently have not agreed on costs, CPI’s costs ought properly to be determined by an assessment under Rule 58 of the Rules.

[9] Although Diamond J. ordered that costs be determined by motion, it is unclear to me whether the accepted offer was before him at the case conference or, even if it was, whether his attention was drawn to the specific language of the accepted term dealing with costs. Nothing before me suggests that any materials were filed for the case conference. Diamond J.’s endorsement does not reflect consideration on whether a motion was more appropriate than the assessment agreed by the parties. At a triage case conference for a motion to enforce a settlement, it is incumbent on the parties to draw the presiding judge’s attention to the specific settlement terms that are the subject of a dispute.

[10] In my view, when the parties agreed to a consent judgment other than costs, they should have taken steps to have CPI’s costs determined by an assessment per the accepted settlement term that costs be assessed if the parties could not agree. That would include ensuring that Diamond J. was aware of that specific settlement term and, if the parties sought to have costs determined by motion, making submissions on why their agreement to an assessment should be varied. Nevertheless, I need not consider if my discretion to direct an assessment of CPI’s costs has been precluded by Diamond J.’s direction that costs be determined by motion. In the circumstances, I would not direct an assessment.

[11] The parties have now gone down a winding road since CPI’s motion request was initially submitted and the parties were directed to a case conference. Although the parties effectively chose this course by their counsel not seeking an assessment upon settling the balance of the judgment, the result is still that I am the fourth judicial official involved in the process of the plaintiff obtaining judgment in accordance with the accepted offer to settle. Directing an assessment would be consistent with the accepted term, but doing so would only have delayed determining CPI’s costs for a longer period than any delay in deciding costs myself and releasing this decision. Considering the quantum of the settlement and the modest discrepancy in the parties’ positions on costs, requiring an assessment process after CPI’s motion was brought, adjourned, and assigned to me for disposition (with further materials prepared and filed after the adjournment) seems unnecessary.

What is the proper costs analysis to be applied?

[12] Westin submits that there is a three-stage process that courts “must” follow when assessing costs: (i) analyze the result after the step is complete and the degree of success achieved by each side; (ii) consider offers to settle from both sides, and not necessarily those limited to those made under Rule 49; and (iii) consider the factors in Rule 57.01. In support of that position, Westin cites Conlan J.’s comments in Georgian Flooring Centre Ltd. v Goslin & Goslin, 2018 ONSC 1189 at para. 35.

[13] I disagree with Westin’s characterization that there is a mandatory process for assessing costs, which is also not what Conlan J. says in Georgian Flooring. Conlan J. does state that “generally” there is a three-stage process, and he does identify the three stages noted by Westin. However, in my view, Georgian Flooring does not outline a mandated process for determining costs.

[14] Section 131 of the Courts of Justice Act, RSO 1990, c. C.43 and Rule 57.01(1) of the Rules afford broad discretion to fashion a costs award that the court deems fit and just in the circumstances. Although not cited by either party, in Calibur Tool v. Ecotemp Manufacturing, 2020 ONSC 2511, at paras. 36-43, King J. provides a helpful overview of general costs principles and jurisprudence, which includes principles identified by the parties in their submissions. I have considered the following principles in reaching my determination:

(a) Costs are discretionary, with Rule 57.01(1) setting out myriad of factors (also a non-exhaustive list) to be considered by the court in exercising that discretion;

(b) Discretion on costs must be exercised in light of the specific facts and circumstances of the case;

(c) The overriding principle in determining costs is reasonableness, with a view to balancing compensation of the successful party with the goal of fostering access to justice as applied to the factual matrix of the particular case;

(d) A successful party does not have a right to costs, but does have a reasonable expectation that it will be awarded costs in its favour;

(e) Costs ordinarily follow the event and are generally awarded on a partial indemnity basis payable forthwith (within 30 days), but discretion may be exercised in exceptional circumstances to depart from those “norms”;

(f) The quantum of costs awarded should reflect an amount the court considers to be fair and reasonable within the factual matrix of the particular case rather than any exact measure of the actual costs to the successful litigant;

(g) The costs expectations of the unsuccessful party is a factor to be considered; and

(h) The court should seek to avoid inconsistency with comparable costs awards in other similar cases.

[15] I have also considered Rule 1.04(1.1), which is equally applicable in determining costs as it is in other aspects of litigation. It requires the court to make orders that are proportionate to the importance and complexity of the issues and to the amount involved in the proceeding.

[16] I agree that, generally, courts first consider who has been the successful party and the extent of success when determining entitlement to costs, and would then turn to offers to settle and the factors outlined in Rule 57.01(1). However, in my view, costs principles are to be applied on a case-by-case basis as necessary to reach a fair and reasonable award of costs in the particular circumstances of each particular case. That will inevitably include considering offers to settle and the factors outlined in Rule 57.01(1), albeit to different degrees depending on the case. However, they need not be (and ought not to be) considered and applied in a static, staged process in every case.

Were any of Westin’s allegations spurious, warranting a higher costs sanction?

[17] In its statement of defence and counterclaim, Westin alleges that CPI breached the agreement and caused Westin to incur damages by “engaging in acts of vandalism” and “thwarting” Westin’s statutory obligations to post labour notices. CPI argues that Westin’s unproven allegations, notably the alleged vandalism, impugned the reputation of CPI and merit a higher cost sanction. Since CPI is only seeking its partial indemnity costs of the action, the purpose of making this submission is somewhat unclear.

[18] Regardless, the parties have settled their dispute. As Westin rightly points out, that means there have not been, and will not be, any findings or determinations on the allegations made by the parties. That includes whether CPI did or did not engage in any vandalism and whether it “thwarted” Westin in posting required labour notices. There is no evidence before me supporting that the allegations are spurious, as CPI submits. Nothing has been tendered by either party on the matter at all. I do accept, however, that CPI needed to defend the allegations, particularly since Westin pleads that they caused it to incur damages.

Is CPI claiming costs that are already the subject of a prior costs award?

[19] Westin submits that CPI’s costs claim should be reduced to $48,677.62 to deduct costs that Westin argues are already the subject of a costs award made in CPI’s prior undertakings and refusals motion. CPI’s prior motion was ultimately resolved between the parties with a narrow consent order issued, which included an award of $3,000 in costs of the motion payable to CPI. Westin submits that CPI’s costs for answers to undertakings have thereby already been addressed. CPI disagrees that there is any overlap between its bill of costs and the costs that CPI claimed and was awarded in that motion.

[20] The impugned block in CPI’s bill of costs is for an aggregate of 44.5 hours totalling $8,443.50 in partial indemnity costs for work described as follows: “Answering undertakings, preparation of Undertakings and Refusals Chart and obtaining undertakings and refusals from The Westin Prince.” CPI submits that the time included in its bill of costs is not time for its undertakings and refusals motion, but rather is the time spent answering CPI’s undertakings, making repeated follow-ups with Westin on its undertakings, and reviewing Westin’s answers to undertakings when provided.

[21] I accept that time spent answering CPI’s undertakings, preparing undertakings and refusals charts, and reviewing Westin’s answers to undertakings would not be captured in the prior costs award. Although “obtaining undertakings and refusals from The Westin Prince” could include bringing the motion, it also reasonably captures (as CPI submits) reviewing Westin’s answers.

[22] Even if I accept that costs of the prior motion are not included in the time block, in my view, the time spent on undertaking-related work is quite high. The disbursement invoice filed by CPI suggests that examination for discovery of Westin’s representative was completed within 4 hours (the time charged). From the materials filed, it appears that both examinations for discovery were agreed to be completed in a half-day each. Nothing before me supports that there were substantial or complex undertakings on either side. In a matter of this nature, it is unclear why 44.5 hours of time was required to deal with the parties’ undertakings (excluding the motion) or how spending that much time was reasonable. CPI has made no submissions on the matter.

[23] In my view, there is insufficient information and evidence before me to determine if the bill of costs is seeking double-recovery from the prior motion. Nevertheless, since nothing has been filed supporting voluminous or complex undertakings, I am satisfied that CPI’s costs claim for undertakings-related work is excessive and should be significantly reduced in allowing costs for those tasks clearly beyond the scope of the prior motion.

Are the costs claimed by CPI unreasonable and disproportionate to the matters in issue?

[24] Westin argues that CPI’s costs claim is beyond the reasonable expectations of the parties because the actual costs incurred are disproportionate to both the settlement amount agreed and the maximum damages at stake as acknowledged by CPI at both the mediation and the pre-trial. I have several problems with Westin’s position.

[25] First, absent a bill of costs from Westin or evidence outlining the costs it has incurred, I put little weight on its arguments about reasonable expectations. CPI’s costs claim may well be in line with Westin’s own costs, in which case they would be within the reasonable expectations of Westin. No case law has been put forward for costs awards in similar factual circumstances. If Westin intended to have the court to put weight on its reasonable expectations argument, it ought to have provided an indication of its own costs or case law outlining costs awards in comparable factual circumstances to this action.

[26] Second, I do not agree that proportionality of CPI’s costs claim should be gauged by the ultimate settlement amount in this case. CPI’s offer to settle was made in October 2017, prior to oral discoveries occurring (as supported by the dates of reporter invoices). Most of the costs claimed were incurred in preparation for, during, and following discoveries. I do not know Westin’s reasons for accepting the offer shortly before trial, but doing so was its choice. Had Westin accepted the offer sooner, CPI’s costs would have been lower. In my view, although I have considered the settlement amount in evaluating costs, I think it unfair to view proportionality through the narrower lens of the ultimate settlement in this particular case, since Westin chose not to accept CPI’s offer at any point prior to CPI incurring the very costs that Westin is now complaining about.

[27] Third, Westin argues that I should infer that CPI knew when serving its offer to settle that its actual claim for damages was far less than the $515,000 amount claimed in the action, and also submits that CPI should have “progressed the action accordingly”. Westin points to CPI’s position in its mediation and pre-trial briefs calculating damages at $38,779.39 for unpaid invoices and $125,000 for lost profits. Westin accordingly submits that incurring actual costs equal to 50% of the maximum value of the claim is excessive, particularly since trial had not yet taken place.

[28] Because of the settlement, there has not been, and will not be, any adjudication of the amount of CPI’s claim. I acknowledge and accept that CPI valued its claim for settlement purposes at $163,779.39. I also acknowledge that CPI proposed to limit its damages to $150,000 and transfer the action to the simplified procedure shortly after making its offer to settle. Westin appears to have agreed to that, but correspondence has been filed supporting repeated follow-ups to Westin about signing the necessary consent, which it seems was ultimately signed shortly before trial in December 2020. Nevertheless, I do not know what actual damages would have been pursued or proven by CPI at trial. I agree with Westin that CPI’s settlement positions on the value of its claim are relevant to costs, but I do not think it fair or appropriate to infer that CPI knew it would have been unable to prove greater damages at trial.

[29] Fourth, Westin argues that this action dealt with “relatively simple breach of contract issues.” That statement may be true of CPI’s claim, but Westin appears to be forgetting (or at least neglects to acknowledge) that it advanced a counterclaim against CPI making particularized allegations of conduct undertaken by CPI and its employees. As already noted, Westin’s statement of defence and counterclaim included allegations of vandalism and interference with Westin’s statutory obligations, among other specific allegations of wrongdoing by CPI. These allegations reasonably gave rise to additional costs for CPI to investigate, discover, and defend them.

[30] I agree with CPI’s submission that Westin cannot hide behind the principle of proportionality to avoid the reasonable consequences of its conduct: Egredzija v. Gullett, 2019 ONSC 7150 at paras. 66-67. Proportionality does not override other considerations when determining costs and should not be used as a sword to undercompensate a litigant for costs legitimately incurred: Armstrong v. Gallagher’s Garage Ltd., 2018 ONSC 5929 at para. 8.

[31] Costs incurred by CPI following its offer to settle were for steps required to advance the litigation to trial. Westin contributed to increasing those costs, including an apparent non-attendance by Westin’s representative at a scheduled examination, the need for follow-ups leading to the undertakings and refusals motion against Westin, and repeated follow-ups over the years to obtain Westin’s formal consent to transfer the action to the simplified procedure.

[32] I agree with the view of Salmers J. in Savage v. Cathers, 2017 ONSC 7591, at para. 8, that parties are encouraged to try to settle claims rather than put the parties to unnecessary legal costs and delay payment of meritorious claims. However, much like in Savage, based on what is before me, CPI had no choice but to take steps to advance this litigation, consistent with its obligation as the plaintiff.

[33] This is not a case where CPI’s settlement position has been a moving target. CPI’s formal Rule 49 offer has remained unchanged since October 2017. At both the mediation and the pre-trial, CPI took the same position on the value of its claim for settlement discussion purposes, which was an amount unsurprisingly higher than its Rule 49 offer position. No offers to settle from Westin nor its settlement positions throughout the litigation (if any) have been put before me. As far as I can tell, Westin was unwilling to settle this action until the day it decided not to proceed to trial by accepting CPI’s long-standing offer to settle. That acceptance was less than 10 days before the scheduled commencement of trial.

[34] With no indication from Westin that it was interested in settlement, CPI was reasonably required to take every step necessary to advance the litigation and prepare for trial. This is a factor I have considered in assessing the reasonableness and proportionality of CPI’s costs claim.

[35] Dealing with CPI’s bill of costs, I do not find the time spent and costs claimed by CPI to be excessive or unreasonable in all the circumstances, with two exceptions: the time spent on undertakings-related work and the time spent on preparing for the pre-trial. I have already discussed my view that, since nothing has been filed supporting voluminous or complex undertakings, CPI’s claim of 44.5 hours of time totalling $8,443.50 in partial indemnity costs for undertakings-related work is excessive.

[36] Similarly, I find the time spent drafting pre-trial materials and preparing for and attending the pre-trial to be high. Approximately the same time was spent on materials and preparation for the prior mediation. Pre-trial briefs are typically an updated version of prior mediation materials and, generally, pre-trials are much shorter than mediations. As a result, pre-trial preparation and attendance costs tend to be lower than for a mediation. Other than attachments, there do not appear to be any substantive differences between CPI’s mediation and pre-trial briefs, which Westin has included in its responding materials. It is unclear why so much time was required for pre-trial preparation. No explanation or justification for the time spent has been provided.

[37] Taking into account the foregoing, and considering the factors in Rule 57.01, I do not find CPI’s claimed costs to be unreasonable or disproportionate in the circumstances, although reduction is appropriate. I fix the fair and reasonable costs of the action to the date of Westin accepting CPI’s offer in the amount of $38,500.00, including taxes, on a partial indemnity basis, plus $4,837.30 in disbursements (undisputed by Westin in its costs submissions), for a total of $43,337.30.

Is CPI entitled to additional costs incurred to enforce the settlement?

[38] CPI claims full indemnity costs for the steps required after Westin accepted the Rule 49 offer. CPI argues that these are costs incurred solely by Westin ignoring its obligations under the settlement, which CPI should not have to bear. I agree, but do not agree that CPI is entitled to full indemnity costs.

[39] CPI cites no authority in support of its claimed entitlement to full indemnity costs. Costs awards on an elevated scale are justified in only very narrow circumstances, including where the losing party has engaged in behaviour worthy of sanction. Substantial indemnity costs are typically awarded by the court to express its disapproval of a party’s conduct. Full indemnity costs are reserved for conduct that is especially egregious: Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766 at para. 8.

[40] The Vice-President of Westin has sworn an affidavit stating that Westin does intend to make full payment of the settlement, but has had its income severely depleted by COVID-19 shutdowns and “has only recently started operating again, in a limited capacity”. I accept that government-directed shutdowns have impacted the hotel industry (among many others). However, Westin voluntarily accepted CPI’s offer to settle on January 9, 2021, well into the pandemic and, more pertinently, the financial impacts of the pandemic on businesses. The accepted offer expressly contemplated payment within 30 days of acceptance. Westin has provided no explanation or evidence supporting any change in its financial circumstances after January 9, 2021 resulting in an inability to make payment as agreed.

[41] In addition, there is no evidence of any communication from Westin to CPI explaining its circumstances for default or seeking an extension in the time to pay. Prior to CPI seeking to schedule its motion to enforce the settlement, Westin had made only two payments totalling $14,000. Both of those were made after the deadline for payment had passed and seemingly only in response to CPI’s demands for payment. Further payments were not made until after the case conference with Diamond J.

[42] Impact from the COVID-19 pandemic is now invoked too regularly, and too generically, to justify default on payment or other obligations. Where government restrictions in response to COVID-19 or other impacts from the pandemic are relied upon to justify default, evidence is needed to substantiate actual impacts. General and unspecific statements about financial impacts are insufficient.

[43] Westin agreed to the 30-day payment term when it accepted CPI’s offer amidst the global pandemic. Westin’s explanation for non-compliance fails to address why the offer was accepted in the first place if Westin knew it could not comply with the payment deadline or, if payment could have been made when the offer was accepted, how Westin’s circumstances changed as a result of new or revised government restrictions.

[44] In my view, CPI’s costs incurred after Westin accepted the settlement would have been significantly reduced, if not avoided, had Westin communicated its circumstances to CPI and discussed how and when it intended to comply with the settlement. It chose otherwise. Accepting CPI’s offer to settle on the eve of trial and then immediately defaulting on the payment terms caused CPI to incur further legal costs that were only exacerbated by Westin’s lack of frank communication following that default. Such conduct should not be condoned by the court and, in my view, warrants heightened costs.

[45] Nevertheless, Westin’s default and failure to communicate do not rise to the level of egregious conduct for which courts typically award full indemnity costs. Substantial indemnity is the appropriate scale here.

[46] Westin has not challenged the post-settlement steps in CPI’s bill of costs. I do not view the hours claimed as being unreasonable. I thereby fix CPI’s costs of enforcing the settlement in the amount of $3,700.00, including taxes, on a substantial indemnity basis.

Do Westin’s two offers to settle costs have any impact on the quantum of costs fixed?

[47] Westin submits that it made two offers to settle costs of the action after the case conference before Diamond J.: an initial offer of $35,000 and a subsequent offer of $45,000. CPI is said not to have provided a counter-offer and “essentially refused to engage in meaningful negotiations about the costs issue.” In reply, CPI argues that Westin’s submission should be disregarded because CPI did not consent to disclosure of without prejudice communications.

[48] In exercising my discretion with respect to costs, Rule 49.13 provides that I am entitled to take into account any offer to settle made in writing, the date the offer was made, and the terms of the offer. However, I am unclear if Westin’s two offers were written offers. If committed to writing, they have not been filed. Regardless, based on my determinations on the other factors, I would not find either offer relevant to costs for two reasons.

[49] First, Westin submits that it was unreasonable for CPI to reject its $45,000 offer to settle costs because there is only a “relatively minor” discrepancy in the parties’ true costs positions. Westin’s argument is premised on CPI’s actual costs claim being properly reduced to $48,677.62 to account for the prior costs award. I have rejected Westin’s argument and accepted CPI’s position that tasks included in its claim for undertakings-related costs do not duplicate costs already resolved by the prior award. In my view, it was not unreasonable for CPI to maintain its position of entitlement to more than $9,000 in additional costs above Westin’s offer, even though I have not ultimately granted all of CPI’s claimed costs.

[50] Second, Westin argues that CPI’s rejection of the $45,000 offer was unreasonable since CPI’s costs claim is disproportionate to both the settlement reached and Westin’s maximum liability as acknowledged by CPI at mediation. Having considered proportionality and other factors, I have determined that CPI’s total costs entitlement, before considering Weston’s offers, is $47,037.30, including taxes and disbursements. That result is modestly better than the $45,000 offered by Westin. Since Westin has provided no indication of when its $45,000 offer was made (other than that it was after the case conference in June 2021), I cannot find that any of the costs claimed by CPI, which do not appear to include any time incurred after CPI’s initial costs submissions, would have been avoided.

[51] I thereby find that, since my determination on costs is more favourable to CPI than the offers to settle costs, Westin’s offers have no impact on the ultimate costs award.

Disposition

[52] For the foregoing reasons, I find that the fair and reasonable amount of costs payable by Westin to CPI in respect of this action and enforcing the settlement is $47,037.30, inclusive of taxes and disbursements, comprised of $43,337.30 for costs of the action on a partial indemnity basis and $3,700.00 for costs of enforcing the settlement on a substantial indemnity basis. Costs shall be payable within thirty (30) days. Order accordingly.

ASSOCIATE JUSTICE TODD ROBINSON DATE: January 10, 2022