ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-09-375888
DATE: 20220906
BETWEEN:
AMELIN ENGINEERING LTD. and MICHAEL ELINSON
Plaintiffs
– and –
STEAM-ENG INC. and BLOWER ENGINEERING INC.
Defendants
Peter-Paul DuVernet, Matthew Diskin and Thomas Dumigan, for the Plaintiffs
Jonathan F. Lancaster and Rachel Laurion, for the Defendants
HEARD: February 24, 2022, and Written Submissions
A.P. Ramsay J.
[1] In Reasons for Decision released on September 8, 2021, I dismissed the plaintiffs’ claim for negligent misrepresentation against the defendants on the basis that the action was barred by the six-year limitation period under section 45(1)(g) of the Limitations Act, R.S.O. 1990, c.L.15. The plaintiffs claimed that they were induced by the defendants’ misrepresentations in the early 1990s about the capacities of the defendants’ steam generators and entered into agency agreements with the defendants. The plaintiffs contended that the steam generators never operated at their rated capacity. I also found that there was no misrepresentation, negligent, or otherwise by the defendants
[2] The plaintiffs’ motion to amend the statement of claim, brought at the trial, to plead breach of contract, breach of good faith, and breach of the Sale of Goods Act, R.S.O. 1990, c. S.1, was also dismissed. The defendants’ counterclaim for unpaid invoices and services was also dismissed.
[3] I have now heard submissions from counsel with respect to costs and received the parties’ submissions on costs in writing. The defendants, who are seeking costs, supported their written argument by including a Bill of Costs and dockets (redacted for solicitor-client and other privileged information). The plaintiffs did not submit a Bill of Costs nor any dockets from any of the law firms representing the plaintiffs. At the trial, the plaintiffs were represented by three different lawyers from three different law firms. The defendants were represented by two lawyers from the same firm.
[4] This judge alone trial on liability alone occupied thirteen days of trial time. The trial proceeded as a bifurcated and hybrid trial, pursuant to the pretrial order of Wilson J. The parties have been litigating for almost twenty years.
[5] The evidence-in-chief went in, for the most part, by way of affidavit, but a great deal of trial time was devoted to motions, by both parties, related to the admissibility of evidence by various deponents in their affidavits. In my view, neither side bears more responsibility for these motions which, while they did lengthen the trial, were organized efficiently with helpful charts to assist the court and, in many cases, resulted in concessions being made by the parties with respect to the admissibility of certain evidence.
[6] The defendants Steam-Eng Inc. (“Steam-Eng”) and Blower Engineering Inc. (“Blower”) (collectively, the “defendants”) seek substantial indemnity costs of $860,828.40 in respect of the amounts paid to Fasken and substantial indemnity costs of $111,213.89 in respect of amounts paid to Wires Jolley LLP (“Wires Jolley”), for a total of $972,042.29 overall in fees. The defendants also seek disbursements of $135,416.40, which include the account of Arcon Engineering Consultants Limited (“Arcon”) in the amount of $65,404.99 and that of BDO Canada LLP (“BDO Canada”) in the amount of $70,011.41.
[7] The plaintiffs argue that the defendants are not entitled to costs on the basis that success was divided, and, based on the conduct of the defendants throughout proceeding and the underlying facts of the case. In the alternative, the plaintiffs submit that the defendants’ costs are not reasonable, fair, or proportionate. The plaintiffs submit that if costs are awarded to the defendants, the defendants ought to be awarded $337,516.27.
[8] The defendants argue that they were entirely successful given the drastic dichotomy between the ten million dollars in damages sought by the plaintiffs, the modest amount in damages sought by the defendants in the counterclaim ($130,000), and the defendants’ success in resisting various claims, among other things. The defendants also seek a higher scale of costs on the basis of the allegation of intentional misrepresentation, other factors in r. 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and the defendants’ r. 49 offer to settle.
Analysis
[9] Section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, governs the court’s jurisdiction to award costs and provides that:
131 (1) Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.
[10] In exercising its discretion with respect to costs, the court must consider the factors in r. 57.01(1) in order to achieve a just and reasonable determination: Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041 (Div. Ct.) at para. 15.
[11] The defendants were successful in the main action, which was dismissed, and I see no reason to depart from the presumptive rule that a successful party is prima facie entitled to their costs of the main action in accordance with r. 57.01(1) of the Rules of Civil Procedure. And, for the reasons below, the plaintiffs are entitled to their costs of defending the counterclaim.
Rates charged, hours spent – R. 57.01(1)(0.a)
[12] The plaintiffs do not challenge the hourly rate or the years of call of the defendants’ lawyers. In my view, the hourly rates appear reasonable having regard to the years of call.
Reasonable Expectation of the Parties – R. 57.01(1)(0.b)
[13] The overarching consideration for awarding costs is whether the costs award is reasonable, fair and proportionate in the circumstances of the case, having regard to the factors set out in r. 57.01 and the reasonable expectations of the party: Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA), [2004] 71 O.R. (3d) 291 (C.A.) at para. 26 [Boucher].
[14] The Court of Appeal has long indicated that costs are not simply a mathematical calculation. The amount of costs should reflect what is fair and reasonable and in accordance with what the losing party would reasonably expect to pay: Zesta Engineering Ltd. v. Cloutier, 2002 25577 (Ont. C.A.); Boucher.
[15] While the plaintiffs argue that the defendants’ costs are not reasonable, fair, or proportionate, they have not delivered their own Bill of Costs or dockets. I agree with the defendants that, by failing to do so, the court has no yard stick to measure the plaintiffs’ own reasonable expectation with respect to costs. The court is not required to undertake a line-by-line review of the time expended and the amount charged.
[16] While I agree with the plaintiffs’ submission that there would be some duplication of time with the changing law firms by the defendants, I am satisfied, on the materials before me, that the time has been adequately discounted by defendants. In my view, no further discount is warranted.
Amount Claimed and amount recovered – R. 57.01(1)(a)
[17] The amount claimed in the statement of claim is $10,000,00, which is significant. And, while the assessment of damages was bifurcated, the end result of the court finding that the plaintiffs’ action is statute barred, is that the plaintiffs’ claim for damages is also barred. The court has held that in general, costs should not be disproportionate to the amount claimed, and should be consistent with the objectives of fairness, reasonableness, and the need for proportionality: Elbakhiet v. Palmer, 2014 ONCA 544, 121 O.R. (3d) 616 at paras. 37 and 38; Muskoka Fuels v. Hassan Steel Fabricators Limited, 2011 ONCA 495, at para. 6.
Apportionment of Liability – R. 57.01(1)(b)
[18] Liability was not apportioned and therefore, in theory, this clause is not applicable to the case. However, the plaintiffs submit that there was split success as the defendants’ counter claim was dismissed. I disagree. There was no evidence advanced at trial on the counterclaim. The court’s decision was based on evidence filed. However, to the extent that the counterclaim was dismissed, the plaintiffs are entitled to their costs for defending the counterclaim.
[19] The defendants counterclaimed for damages for components and service fees for the steam generators which remain unpaid. While there was no evidence on the counterclaim at the trial, to the extent that there was documentary discovery, examination for discovery, and some preparation through to trial, the plaintiffs are entitled to their costs as they were successful in resisting the counterclaim.
[20] I do not accept, however, the plaintiffs’ submission that the court should set off any amounts owed by the defendants on account of costs for the counterclaim by reducing any award of costs to the defendants by ten percent. The counterclaim, commenced in 2009, is a separate proceeding which was apparently subject to documentary and oral discovery. The number of damages sought in the counterclaim originally was $130,000.00 and relate to specific unpaid invoices. The plaintiffs have not quantified to any extent, or at all, the time spent in defending the counterclaim. In the circumstances, given the amounts involved in the counter claim, the discrete invoices involved, and taking into consideration that documentary and oral discovery was completed, but no oral evidence was called at trial on the counterclaim, in my view, a reasonable amount for costs to the plaintiff in the counterclaim is $19,500, which represents fifteen percent of the amount claimed for damages.
Complexity of the Proceeding – R. 57.01(1)(c)
[21] The plaintiffs argue this was not a complex case and involved only 4 days of discovery, four motions, and 184 documents at a hybrid trial, with only one expert witness.
[22] While I agree that the issues at trial, which focused on liability only, were not overly complex, based on the submissions of both sides, the costs being sought are for the entire action. Aside from the amounts involved and the technical nature of some of the evidence, this case, based largely on alleged representations made by one party and a determination of the limitation period, was of average complexity.
Importance of Issues – R. 57.01(1)(d)
[23] As indicated previously, the damages claimed by the plaintiffs amount to $10,000,000. The plaintiff’s economic expert quantified the plaintiffs’ losses at between $4,330,000 and $37,090,000. From the perspective of the amount in issue, and the allegations of misrepresentation, the issues were important to all parties. I agree with the defendants that the importance of the case to the plaintiffs is reflected in the fact that the plaintiffs were represented by three lawyers from three separate firms at the trial.
Conduct Tending to Lengthen Proceeding Unnecessarily - R. 57.01(1)(e)
[24] I am reluctant to order any costs of an adjournment of a trial or for various interlocutory motions or appeal initiated by the defendants. There is no order before me of the judge adjourning the trial directing that the defendants should be liable for costs, nor is there any evidence before me of the amount of the costs thrown away because of any adjournment of the trial. As for interlocutory motions initiated throughout the life of the proceedings, the court has jurisdiction to award costs for each step in the proceeding and presumably the judicial officer dealt with the issue of costs at the conclusion of those steps.
[25] Additionally, I am also not convinced that the defendants should be penalized in costs for the “unnecessary preparation of witnesses who they did not call”. The onus is on the plaintiffs to prove their case and it is always open to a defendant not to call any evidence at the conclusion of the plaintiffs’ case. In this case, the defendants elected to call evidence, made what the court can only assume was a strategic decision to call only certain witnesses based on the evidence that had gone in at trial. This strategy was not unreasonable in the circumstances and calling additional witnesses would no doubt have only lengthened the trial. I note the defendants also argue the proceedings were also lengthened by the plaintiffs by failing to remedy objections raised to the affidavit evidence in a timely manner or failing to provide a proper affidavit of the evidence-in-chief of their expert witness, among other things.
Denial of or refusal to admit anything that should have been admitted – R. 57.01(1)(g)
[26] The plaintiffs submit that the defendants’ refusal to admit that the “brochures described the features and capabilities of their steam generators” and failure to admit this was “an uncontroversial fact” was unreasonable. I disagree. The Request to Admit was in fact more targeted in its attempts to elicit admissions as to the descriptions contained in the first and second brochure. It is clear from paragraph 28 of my Reasons for Decision that there was no finding of fact as to whether the brochure was the first or the second and, in the result, the court could only conclude, based on the evidence at trial that: “One of the early brochures created by Blower, said to be the first brochure…”.
Scale of Costs
[27] The defendants submit that a higher scale of costs is warranted since the plaintiffs maintained their allegations of intentional misrepresentation throughout the action. The pleadings frame the action. I agree with the plaintiffs that there is no basis for the court to award a higher scale of costs based on a pleading. As I previously indicated in my Reasons for Decision, on a generous reading of the pleadings the only cause of action against the defendants is that of the tort of negligent misrepresentation.
[28] The defendants also seek a higher scale of costs on the basis that they made a very favourable r. 49 offer to settle dated July 24, 2019, which they exceeded at trial. The plaintiffs submit that the offer to settle requiring a release by the plaintiffs of all claims the plaintiffs ever had or may have against the defendants “by or by reason of, or in any way arising out of or relating to any cause, matter or thing existing up to the present time” does not comply with r. 49. In my view, it is impossible for the court to determine whether in fact the defendants obtained a judgment that was more favourable than their offer to settle.
[29] When comparing an offer to settle under r. 49.10 to determine whether a party’s judgment was as favourable as or more favourable than the party’s offer to settle, all the terms of the offer to settle must be compared, including costs, with all the terms of the judgment: Rooney (Litigation Guardian of) v. Graham, 2001 24064 (ON CA), [2001] 53 O.R. (3d) 685 at para. 57 (C.A.).
[30] The burden of proving that the judgment is as favourable as the terms of the offer to settle, or more or less favourable, as the case may be, is on the party who claims the benefit of r. 49.10(1) or (2): Rule 49.10(3); Zou v. Sanyal, 2019 ONSC 1661 at para. 9.
[31] The release, appended to the offer to settle, in this case, included a release, by the plaintiffs of the defendants:
…from any and all actions, applications, causes of action, suits, proceedings, debts, dues, accounts, bonds, covenants, contracts, complaints, claims (including subrogated claims), statements of claim, counterclaims, set offs, demands, damages, and sums of money, promises, grievances, executions, judgments and liabilities whatsoever, both in law and in equity, whether implied or express, (collectively, the “Claims”) which the Releasors ever had, now have or may hereafter have against the Releasees by or by reason of, or in any way arising out of or relating to any cause, matter or thing existing up to the present time including…” (emphasis added)
[32] I agree with the plaintiffs that the release goes beyond the subject matter of the action. The parties had a business relationship spanning many years and many agreements.
[33] In addition, the defendants’ offer to settle also included the counterclaim. In this case, the plaintiffs in fact succeeded on the counterclaim as it was dismissed against them, and they were awarded costs.
[34] Moreover, r. 49.10(2) of the Rules of Civil Procedure, which governs the costs consequences flowing from a defendant’s offer to settle, provides that if a plaintiff obtains a judgment as favourable as, or less favourable, than the defendant’s offer to settle, the plaintiff is entitled to costs up to the date of the offer to settle, and the defendant is entitled to costs from the date of the offer, but only on a partial indemnity scale, unless the court orders otherwise. There is therefore no presumptive entitlement to a higher scale of costs for a party defendant where a plaintiff obtains a judgment as favourable as or less favourable than the defendant’s offer to settle.
[35] The jurisprudence in Ontario also establishes that r. 49.10(2) of the Rules of Civil Procedure applies where a defendant exceeds its offer to settle and where the plaintiff has recovered a judgment of some value: S & A Strasser Ltd. v. Town of Richmond Hill et al., 1990 6856 (ON CA), [1990] 1 O.R. (3d) 243 (C.A.); Dunstan v. Flying J Travel Plaza, 2007 44819 (Ont. S.C.).
[36] In the circumstances, I am not satisfied that a higher scale of costs is warranted as the non-monetary term requiring a release by the plaintiffs of “all claims”, past and future, is overly broad and more expansive than the judgment granted in this case, and this court cannot ascertain and compare the immeasurable potential future claims. Moreover, the defendants’ offer to settle also includes the counterclaim.
[37] I agree with the plaintiffs that the appropriate scale should be on a partial indemnity basis. I do consider the defendants’ offer to settle and attempt to compromise in deciding the issue of costs as contemplated by r. 49.13; Elbakhiet v. Palmer, 2014 ONCA 544, 121 O.R. (3d) 616. However, I am not satisfied that just because a party does not recover any damages, the adverse party should be automatically entitled to a higher scale of costs in the absence of some rule, statute or conduct of the party that would otherwise dictate a different outcome.
Disbursements
[38] The plaintiffs challenge the reasonableness of the $135,416.40 claimed in disbursements, and related fees of approximately $56,000, for two proposed experts who never gave evidence.
[39] The mere fact that experts were not called to testify at trial does not disentitle a party to be paid appropriate amounts for expert reports reasonably necessary for the conduct of the proceeding: Charlesfort Developments Limited v. Ottawa (City), 2021 ONCA 542, at para. 6. However, in determining the reasonableness of the overall fees, the court may consider, as a factor, the fact that the expert was not called to give evidence: Charlesfort, at para. 7.
[40] The defendants retained Daniel Couture of Arcon (“Mr. Couture”) to provide an opinion on the steam generators which would have addressed the issue of liability. Mr. Couture also commented on the plaintiffs’ liability expert (Sparling) report. The defendants also retained Bob Ferguson of BDO Canada to provide a countervailing opinion to the plaintiffs’ expert on damages. Since the plaintiffs have not provided any information on their own disbursement account for their own experts, I can only assess the reasonableness of the defendants’ disbursements in the context of the nature of the claim, the amount claimed, and the necessity of responding to the plaintiffs’ experts.
[41] While the court may take into consideration the fact that the expert was not called, that would not extend to the defendants’ damages expert (BDO), as the damages assessment would be tried after the trial on liability. In my view, the BDO disbursement was reasonable. I am left with considering the significant amount claimed in this action and the opinion of the plaintiff’s own expert on the issue of damages. As for the Arcon report, given the very technical nature of the evidence, the amounts involved in the claim, and the onus on the plaintiffs to prove their case, on a balance of probability, I would not discount the fees for Arcon, which I find were reasonable in the circumstances.
CONCLUSION
[42] In my view, a reduction of the amount being claimed by Fasken to a partial indemnity scale to $516,496.80, and Wires Jolly to $66,000.00 is warranted.
[43] I would allow the defendants’ disbursements, which appear reasonable having regard to all the circumstances of this case.
DISPOSITION
- In the result, I make the following order as to costs:
i. The plaintiffs shall pay the defendants partial indemnity fees in the amount of $582,496.80 on the basis of Fasken’s partial indemnity fees of $516,496.80 and Wires Jolley LLP’s partial indemnity fees of $66,000, plus HST.
ii. The plaintiffs shall pay the defendants disbursements in the amount of $135,416.40.
iii. The defendants shall pay the plaintiffs their costs of the counterclaim in the amount of $19,500 plus HST.
A. P. Ramsay J.
Released: September 6, 2022
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
AMELIN ENGINEERING LTD. and MICHAEL ELINSON
Plaintiffs
– and –
STEAM-ENG INC. and BLOWER ENGINEERING INC.
Defendants
COSTS DECISION
A. Ramsay J.
Released: September 6, 2022