and Hill Street Financial Services Inc., 2022 ONSC 6485
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Drago Krmpotic
Michael Switzer, for the Plaintiff
Plaintiff
- and -
Thunder Bay Electronics Limited and Hill Street Financial Services Inc.
Derek Zulianello, for the Defendents
Defendants
HEARD: By Written Submissions
Mr. Justice J.S. Fregeau
Reasons on Costs
Introduction
1In my Reasons for Judgment dated June 27, 2022, I concluded that the plaintiff was entitled to 24 months’ pay in lieu of notice. As the defendants had paid the plaintiff 16 months’ pay post termination, he was awarded damages equivalent to a further eight months salary, that being $48,576.00. The plaintiff was also awarded aggravated damages in the amount of $50,000.00, resulting in a total damage award of $98,576.00.
2I dismissed the plaintiff’s claim for mental distress damages and declined the plaintiff’s invitation to adjust the quantification of aggravated damages on account of the plaintiff not pursuing Human Rights Code damages.
3The parties have been unable to agree on the costs of this Rule 76 action and have now filed extensive Costs Submissions and Bills of Costs.
4The plaintiff seeks costs on a substantial indemnity basis for the entirety of the action on the basis that he offered to settle his claim for 24 months’ notice prior to the claim being issued. In the alternative, the plaintiff seeks costs on a partial indemnity basis to the date of an offer to settle made on February 27, 2018, and substantial indemnity costs thereafter.
5The full indemnity rate of plaintiff’s counsel is $695.00 per hour. Counsel’s Bill of Costs claims 237.80 hours, resulting in partial indemnity fees of $79,270.63 and substantial indemnity fees of $119,577.73, both figures inclusive of H.S.T. Disbursements claimed are $10,433.38, inclusive of H.S.T.
6The full indemnity rate of defendants’ counsel was $275.00 per hour up to August 31, 2018, $300.00 per hour from September 1, 2018 to June 30, 2020 and $350.00 per hour from July 1, 2020 to June 27, 2022. The defendants’ Bill of Costs, filed for comparative purposes, claims 192.60 hours, resulting in partial indemnity fees of $41,607.17 and substantially indemnity fees of $62,410.75, both figures inclusive of H.S.T.
7Counsel have approximately equal experience. Plaintiff’s counsel is based in Ottawa. Defendants’ counsel is from Thunder Bay.
The Position of the Plaintiff
8The plaintiff acknowledges that his June 21, 2016, offer to settle was prior to the start of the litigation and that it does not fall within the requirements of Rule 49.10. The plaintiff submits that this proposal should nonetheless be considered in ordering costs on a substantial indemnity basis throughout. The plaintiff submits that his February 27, 2018, offer to settle was a Rule 49 offer to settle which triggers the costs consequences of Rule 49.10.
9The plaintiff contends that as a result of these offers to settle, he should be awarded substantial indemnity costs throughout or, in the alternative, partial indemnity costs to February 27, 2018, and substantial indemnity costs from that date to the conclusion of the trial.
10Counsel for the plaintiff was called to the bar in 2002 and focuses his practice on civil litigation. He submits that his trial experience is comparable to senior trial lawyers in Ottawa. He contends that his hourly rate of $695.00 per hour is reasonable given his level of experience.
11Counsel for the plaintiff submits that he agreed to take the plaintiff’s case on a deferred payment arrangement due to the plaintiff’s inability to pay for legal services on an ongoing basis.
12The plaintiff submits that the costs of this proceeding are higher than usual due to several factors, including:
The defendants’ uncompromising position throughout the litigation
The fact that plaintiff’s counsel lives and practices in Ottawa resulting in increased travel costs
The provision of legal services to the plaintiff relating to a WSIB claim and an LTD claim in an attempt to mitigate damages
The plaintiff’s lack of sophistication, which necessitated spending more time explaining issues to him
The need to obtain medical records sought by the defendants
13The plaintiff contends that he agreed to limit his claim to stay within the simplified procedure provisions of the Rules in an attempt to mitigate costs and that he ought to be recognized for his efforts in doing so.
14In addressing the Rule 57.01 factors to be considered by the court when exercising its discretion regarding costs, the plaintiff submits as follows:
The principle of indemnity requires the court to consider the plaintiff’s net recovery after taking into account the actual legal costs to be paid less costs awarded
The hours docketed by plaintiff’s counsel are inevitably more than defendants’ counsel because the plaintiff bears the burden of proof
Liability was not divided and the plaintiff recovered very close to the maximum amount available under the simplified procedure
The proceedings were of moderate complexity but complicated by the various heads of damages claimed and the long history of the employment relationship
The issues were extremely important to the plaintiff given his age, inability to return to work and limited financial means
The defendants’ refusal to admit numerous facts that were proven at trial
15The plaintiff submits that the limits on costs and disbursement awards imposed by Rule 76.12.1(1) do not apply to this action pursuant to Rule 76.12.1(2), as the action was commenced prior to January 1, 2020.
16The plaintiff submits that, considering all of the above, costs should be awarded to him in the amount of $80,000.00 for fees, $9,233.08 for disbursements and $11,600.30 for H.S.T., resulting in a total costs award of $100,833.38.
The Position of the Defendants
17The defendants submits that the principle of proportionality now embodied in the cost limitations imposed on simplified procedure actions by Rule 76.12, while not applicable to this action, is a relevant consideration generally in fixing costs in Rule 76 cases. The defendants submit that the costs claimed by the plaintiff are completely inconsistent with the principle of proportionality to be applied when fixing costs. It is well established that the limited monetary ceiling for Rule 76 actions translates into reduced costs awards, according to the defendants.
18The defendant submits that the plaintiff’s Bill of Costs includes costs for matters already determined and that costs claimed for matters outside the scope of this litigation, such as WSIB or LTD claims, should not be allowed. The defendant contends that costs sought for travel time are excessive and that the hourly rate of plaintiff’s counsel, approximately twice that of defendants’ counsel, is unreasonable and entirely out of proportion to fees normally charged in the Northwest Region.
19The defendants submit that the plaintiff’s June 22, 2016 proposal was prior to the start of this litigation and therefore irrelevant. The defendants further submit that the plaintiff’s February 27, 2018 offer to settle was impliedly withdrawn by a subsequent offer to settle made by the plaintiff on February 26, 2021. This latter offer proposed that the defendants pay the plaintiff damages equivalent to a further 8.5 months of salary, payable as “exemplary damages” to avoid tax obligations. However, the defendants contend that the plaintiff’s refusal to include a firm figure for costs to be paid as part of this offer precluded the defendants from being able to meaningfully consider that offer. The defendants also submit that the characterization of the monetary sum in the latter offer was far more favourable to the plaintiff than the result he achieved at trial.
20The defendants submit that the plaintiff amended the Statement of Claim multiple times and, up to and including at trial, advanced confusing positions in relation to various heads of damages. This unnecessarily complicated the proceedings, according to the defendants. The defendants further submit that plaintiff’s counsel was alerted to the disputed portions of the affidavits filed by the plaintiff prior to trial for use at trial. The defendants contend that the plaintiff failed to respond to this issue and that significant trial time was thereafter consumed by the defendants’ successful challenge to many portions of the plaintiff’s trial affidavits.
21The defendants submit that the plaintiffs were not entirely successful at trial:
28 months reasonable notice was claimed and 24 months was awarded
Damages claimed for loss of benefits were not awarded
Mental distress damages were not awarded
Moral/aggravated damages were claimed in the amount of $200,000.00 and $50,000.00 was awarded
Exemplary damages were not awarded
22The defendants submit that the plaintiff should be awarded costs on a partial indemnity basis fixed in the amount of $25,000.00 for fees, plus H.S.T. and $2,500.00 for disbursements, inclusive of H.S.T.
Discussion
23An award of costs is a matter in the discretion of the court by virtue of s. 131(1) of the Courts of Justice Act, which provides:
…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 costs shall be paid.
24In Serra v. Serra (2009), 2009 ONCA 395, 66 R.F.L. (6th) 40 (Ont. C.A.), at p. 42, the Court of Appeal reiterated the fundamental purposes which modern costs rules are designed to foster, as set out in Fong v. Chan (1999), 1999 CanLII 2052 (ON CA), 46 O.R. (3d) 330 (Ont. C.A.), at para. 22:
(1) to partially indemnify successful litigants for the costs of litigation;
(2) to encourage settlement; and
(3) to discourage and sanction inappropriate behavior.
25In Anderson v. St. Jude Medical Inc., 2006 CanLII 85158 (ON SCDC), [2006] O. J. No. 508 (Ont. Div. Ct.), at para. 22, the Divisional Court set out the principles to be applied by the court in exercising its discretion (citations omitted):
The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in Rule 57.01(1).
A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant.
The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: Rule 57.01(1)(O.b).
The court should seek to avoid inconsistency with comparable awards in other cases. “Like cases [if they can be found], should conclude with like substantive results.”
The court should seek to balance the indemnity principle with the fundamental objective of access to justice.
26The Court of Appeal has made it clear that in assessing costs, the overriding principle is one of reasonableness, and that the failure to follow that principle can produce a result that is contrary to the fundamental objective of access to justice (Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.), at p. 302.
27In Zesta Engineering Ltd. v. Cloutier, [2001] O.J. No. 4495 (Ont. C.A.), at para. 4 the Court of Appeal did not make a specific finding with respect to the amount of time spent or the rates charged by counsel, and stated:
In our view, the costs award should reflect more what the court views as 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.
28Rule 57.01(1) of the Rules of Civil Procedure provides:
“57.01 (1) Factors in discretion - 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 on any party that tended to shorten or 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 solicitor; and
(i) any other matter relevant to the question of costs.”
29I accept the submission of the defendants that the litigation strategy of the plaintiff’s counsel unnecessarily complicated and lengthened what should have been a relatively straightforward wrongful dismissal action. This obviously increased costs.
30I also accept the submission of the defendants that the plaintiff’s counsel’s hourly rate and hours expended are unreasonable. Counsel’s experience, the rates charged and hours expended are relevant to the principle of indemnity, but they are also subject to the overriding principle of reasonableness in the context of a simple wrongful dismissal action brought under Rule 76.
31In my view, the plaintiff’s position as to costs - $100,833.38 all in, in excess of the amount awarded to the plaintiff – ignores the principle that costs incurred in a Rule 76 action in particular, and in all cases generally, must be reasonable and proportionate to the amount recovered.
32If counsel choose to engage in a litigation strategy which results in excessive costs in a case where modest amounts are in dispute, they cannot expect the other side to pick up the total tab. As noted in Zesta Engineering, a costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs to the successful litigant.
33The defendants have appropriately filed their Bill of Costs for comparative purposes. Defendants’ counsel’s partial indemnity costs, inclusive of fees, disbursements and H.S.T. are $44,000.00. I recognize that the hours expended by a plaintiff’s counsel will generally be greater than that of a defendant’s counsel. I also accept that higher disbursements are to be expected for out-of-town counsel. However, I reiterate that relatively modest amounts were in dispute in this case.
34Having said that, pursuant to Rule 57.01(1)(0.b), I must consider the amount of costs that the unsuccessful party could reasonably expect to pay for this litigation. Given that the defendants’ partial indemnity costs are $44,000.00 all in, I fail to see how they could expect to pay less than this amount in costs to the plaintiff.
35I accept the submission that the plaintiff’s February 27, 2018 offer to settle was impliedly withdrawn as a result of his subsequent February 26, 2021 offer to settle. I agree that the plaintiff’s February 26, 2021 offer to settle is difficult to quantify in the context of awarding costs because of how the plaintiff proposed the settlement amount be characterized for tax purposes and due to plaintiff’s counsel reluctance to quantify costs to that point in time.
36I therefore decline to impose any cost consequences as a result of either of these offers. However, pursuant to Rule 49.13, I do take these offers into account in exercising my discretion as to costs. In my view, the plaintiff’s offers represent reasonable proposals to resolve the litigation at a “price point” that was ultimately found to be appropriate after trial.
37In contrast, I have not been made aware of any offers to settle from the defendants, despite the fact that established case law clearly put the plaintiff’s notice period beyond what they offered him at the time of termination.
38The plaintiff was generally successful and is, in my view, entitled to a fair and reasonable award of costs on a partial indemnity basis, bearing in mind that this was a Rule 76 action and that damages in the total amount of $98,576.00 were awarded.
39Taking into account all relevant factors and circumstances, I find that a fair and reasonable amount to be paid by the defendants to the plaintiff for the costs of this action is
$55,000.00 for fees and $9,000.00 for disbursement plus applicable H.S.T. These costs shall be paid within 30 days.
The Honourable Mr. Justice J.S. Fregeau
Released: November 18, 2022
and Hill Street Financial Services Inc., 2022 ONSC 6485
COURT FILE NO.: CV-16-323
DATE: 2022-11-18
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Drago Krmpotic
Plaintiff
- and –
Thunder Bay Electronics Limited and Hill Street Financial Services Inc.
Defendants
REASONS ON COST
Fregeau J.
Released: November 18, 2022
dg/