Court File and Parties
COURT FILE NO.: CV-19-80608 DATE: 2023/03/24 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: MARGARET GODARD, Plaintiff AND: INTELCOM COURIER CANADA INC, Defendant
BEFORE: Justice Karen A. Jensen
COUNSEL: Yavar Hameed and Nicholas Pope, for the Plaintiff Sébastien Lorquet and Sophie Arseneault, for the Defendant
HEARD: March 24, 2023, in writing.
Amended Costs Endorsement
The text of the original costs endorsement was amended on April 4, 2023, and the description of the amendment is appended.
1This is a decision regarding costs in a matter that was settled four days before trial.
2The Plaintiff, Margaret Godard, seeks partial indemnity costs of $109,107.50, plus HST in the amount of $14,183.98, and disbursements in the amount of $22,341.83 for a total of $145,633.31.
3Ms. Godard settled the claim against the Defendant Intelcom for $70,000. The claim against a personally named Defendant, Mr. Mohamed, was settled some time ago for $25,000.
4Intelcom submits that Ms. Godard's claim is improper, inappropriate, and excessive.
Overview
5Margaret Godard worked as a Shift Supervisor for Intelcom Courier Canada Inc. ("Intelcom"), at its Ottawa Station for eight (8) months until she was terminated for cause on November 5, 2018. Intelcom's position was that Ms. Godard breached two employer policies relating to workplace harassment and communication with drivers.
6Ms. Godard alleged that during the course of her employment, she was repeatedly harassed and treated with aggression and hostility by several driver subcontractors for Intelcom. She claimed that she complained about the workplace harassment to her manager but was advised that there was nothing that could be done.
7Intelcom stated that they investigated complaints about Ms. Godard's behaviour and concluded that she made highly inappropriate sexual comments to the contractors, as well as making demands for food or other items from contractors in exchange for better routes. Therefore, her employment was terminated for cause.
8Ms. Godard commenced an action against Intelcom on June 25, 2019, claiming pay in lieu of notice, aggravated damages, punitive damages and damages for defamation and negligence as against one of the subcontractors.
9Ms. Godard provided the Defendant with an offer to settle the action pursuant to Rule 49 of the Rules of the Civil Procedure, R. R. O. 1990, Reg. 194 (the “Rules”), on November 16, 2021, for $70,000 in general damages payable to her, as well as party and party, or partial indemnity costs.
10The trial was scheduled for one week, to commence on Monday, February 6, 2023.
11On Thursday, February 2, 2023, Intelcom accepted the Plaintiff's offer to settle. On Monday, February 6, 2023, the parties signed Minutes of Settlement, which entitled Ms. Godard to costs on a partial indemnity basis.
12On February 6, 2023, the parties appeared before me to advise that they had resolved all of the substantive issues, except for the question of costs. I asked the parties to file their submissions on costs, limited to ten pages and permitted them to file affidavit evidence on that issue.
13Counsel for Ms. Godard filed a ten-page brief along with three affidavits. The affidavits and exhibits totaled close to 300 pages. Counsel for Intelcom filed a ten-page brief. Counsel for Intelcom wrote to the court on February 22, 2023, asking the court to strike the evidence filed by Ms. Godard or, in the alternative, to provide her with time to amend her submission to conform with my endorsement.
14I do not find it necessary or appropriate to grant either of Intelcom's requests. I did indicate to the parties that they could file affidavit evidence and while some of Ms. Godard's evidence is not entirely appropriate, in that she appears to be arguing the merits of the case, I see no need in striking it. I have disregarded those portions of the affidavits and submissions where counsel has attempted to prove the substantive issues in the case. I have not accepted the documents for their truth value, except to the extent that they relate directly to costs. In short, I have focused my attention on those submissions and documents that are relevant to the factors under Rule 57 of the Rules.
The Law
15The making of a costs award is an exercise of judicial discretion under s. 131 of the Courts of Justice Act, which states:
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.
16Rule 57 of the Rules deals with the awarding and fixing of costs in civil proceedings and provides guidance in the exercise of the court’s discretion by enumerating circumstances and factors that the court may consider when determining costs.
17Relying on Campbell v. Norbury, 2014 ONSC 5168 (S.C.J.), Ms. Godard submits that where an offer to settle is accepted prior to trial, the traditional factors used in fixing costs under subrule 57.01(1) do not apply. In Campbell, the court found that the applicable rules are contained in Rule 58, and in those circumstances, the judge determining the question of costs essentially steps into the shoes of an assessment officer conducing an assessment of costs under Rule 58.
18However, as pointed out by the court in Wilkinson-Moore v. United Floors, 2019 ONSC 3711, one must be sensitive to the particular factual context before the court and the authority upon which the court is determining the question of costs. In Campbell, the offer to settle that was ultimately accepted contained the following term regarding costs: “[t]he Defendants shall pay to the Plaintiff her disbursements and costs of this Action in an amount to be assessed or agreed, pursuant to the Rules of Civil Procedure."
19In Wilkinson-Moore, the offer to settle provided that the defendant was to pay to the plaintiff her “costs of this action in an amount to be agreed upon by the parties or as fixed by a Justice of this Court.” (para 86). The court stated that:
… the court derives its authority to fix costs by the agreement of the parties, that is, by the express terms of the plaintiff’s offer to settle as accepted by the defendant through its notice of acceptance. Paragraph 3 of the offer to settle expressly provides that the costs shall be “fixed” by a judge of the court, using language that contemplates the direction in subrule 57.01(3). In my view, the express language of para. 3 of the offer to settle here leaves no room for the notion that costs are to be assessed under Rule 58 by a judge stepping into the shoes of an assessment officer.
20Therefore, the court in Wilkinson-Moore refused to apply Rule 58 to the determination of the appropriate costs award and instead applied Rule 57.
21In the present case, the offer that was ultimately accepted read as follows with respect to costs: "The Defendant Intelcom shall pay the Plaintiff her costs of this action on a party and party basis." Although the wording does not mention that costs are to be fixed by the court as in Wilkinson-Moore, that is in fact what the parties ultimately decided to do, given that they could not agree on the costs. As such, the situation is more akin to the exercise of judicial discretion in the awarding of costs, as contemplated by section 131 of the Courts of Justice Act and Rule 57 of the Rules. Therefore, based on the circumstances in the present case, I decline to follow the approach in Campbell v. Norbury and instead follow the approach set out in Wilkinson-Moore.
22As noted by the Ontario Superior Court of Justice in Doyle v. Zochem Inc. et al., 2017 ONSC 920:
A Judge in fixing of costs is engaged in a different exercise than an Assessment Officer engaged in assessing costs. The Judge does not engage in an arithmetical exercise. Rather, she or he fixes costs in an amount that is reasonable for the unsuccessful party to pay rather than determines the exact costs of the successful litigant (Davies, supra at para. 52, Boucher, supra, at para. 26). (at para 25)
Rule 57 of the Rules
23Rule 57 provides as follows:
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.
24In considering the above-noted factors in the context of a settlement, the court must of course, make the necessary modifications to the factors above. For example, given that there has been no determination of liability and in fact, as is often the case, liability is expressly denied in the context of a settlement, the court cannot determine factor (b) – the apportionment of liability.
25I will deal with the parties' arguments under each of the applicable factors in Rule 57.
The Principle of Indemnity
26In Wilkinson-Moore, at paragraph 25, the Ontario Superior Court made the following important observation with respect to the principle of indemnity:
In fixing the amount of costs to be awarded, the court’s objective is not to reimburse a litigant for every dollar spent on legal fees. Rather, in exercising its discretion, a court must produce a result that is fair and reasonable in all the circumstances. The “overriding principle is reasonableness.”
27Therefore, the analysis must focus on whether the costs claimed are reasonable. Intelcom has raised a number of concerns with regard to the reasonableness of various charges on the Bill of Costs. I will address each in turn.
28Intelcom argues that the retainer agreement between Ms. Godard and her legal counsel does not permit her to recover more than the amount of her settlement. The relevant part of the retainer agreement reads as follows:
Contingency Fee Agreement [...] It is noted that the above amount [the fees] is not to exceed the amount of the settlement amount or award. Such an arrangement is permissible under the Law Society of Upper Canada's Rules of Professional Conduct, Rule 3.6-2, and the applicable commentary…
29Rule 3.6-2 of the Rules of Professional Conduct stipulates that subject to rule 3.6-1 […] a lawyer may enter into a contingency fee agreement in accordance with the Solicitors Act and the regulations made under it.
30Section 1 of the Regulations under the Solicitors Act dealing with contingency fees (Contingency Fee Agreements, O Reg 563/20) provides that:
A solicitor for a client who is a claimant shall not recover more in fees under a contingency fee agreement than the amount recovered by the client under an award or settlement from the party or parties against whom the claim was made, including any costs but excluding disbursements and taxes. (emphasis added)
31My reading of this provision is that the fees claimed pursuant to a contingency agreement cannot be more than the settlement amount plus costs. If the settlement does not include costs, then the cost award is not limited to the amount of the settlement. This is consistent with what counsel for Ms. Godard states in the reply submissions. Counsel states that the settlement includes both $70,000 in general damages plus her partial indemnity costs, which are to be assessed by the Court. The settlement, therefore, as acknowledged by Ms. Godard, exceeds $70,000 in general damages and must include costs as assessed by this Court.
32The contingency agreement provides for payment of 200% of the solicitor's hourly rate in the event of an award or settlement. This would amount to $500/hour. While this hourly rate is high for a lawyer of Mr. Hameed's tenure, it is not unreasonable, and it was the amount agreed to by Ms. Godard, in the event that the litigation was successful.
33Intelcom does not take issue with the hourly amount charged for counsel. However, they argue that Ms. Godard is attempting to seek costs for students-at-law and services retained but not yet rendered which are not recoverable under the Rules.
34Firstly, it is no longer the case that students-at-law and law clerks cannot have their fees assessed unless permission is received from the judge. Tariff A of the Rules now allows students-at-law and law clerks to have to their fees assessed if they have provided services that they are allowed to perform within the Law Society of Ontario’s rules. Furthermore, as noted above, we are not dealing with an assessment under Rule 58 in this case.
35I do agree however, with counsel for Intelcom that there were charges for the expert witnesses under the disbursements that are not appropriate. I agree with the following submission of Intelcom:
The amounts of $287.98 (item 18) and $209.19 (item 22) were claimed for Dana Kabat-Farr's flight. Ms. Kabat-Farr was an expert witness who was going to testify at the trial. While Ms. Kabat-Farr was to depart on October 17, 2022 for her appearance in the first trial, the trial was adjourned for lack of judicial resources on October 13, 2022 and subsequently confirmed the next day. In the course of the second trial, she was to depart on February 7, 2023. Intelcom accepted the Plaintiff's Rule 49 offer putting an end to the litigation on February 2, 2023. Understanding that Ms. Kabat-Farr was likely able to cancel her flights or get credit in exchange for the cancellation, Intelcom should not be responsible for payment of these disbursements.
36Therefore, the total amount of $497.17 for Ms. Kabat-Farr's flights will be deducted from the costs. However, the fee for the expert's report will not be excluded. Intelcom states that the $6,000 charge for expert fees was not supported by an invoice, contrary to Rule 58.05(3). At the time of preparing the Affidavit, Mr. Hameed was not in receipt of Dr. McDonagh's invoice. However, the invoice has been provided along with Mr. Hameed's reply submissions. The charge is therefore compliant with Rule 58.05(3). Furthermore, it is not possible to say that only part of this fee is attributable to the claim against Intelcom. If the charge would have been incurred even if Mr. Mohamed had not been part of the Claim, then it cannot be said that only half of the report, or some other portion can be claimed. It is not for the court to assess, without the benefit of a trial, whether the decision to call experts instead of Ms. Godard's own physician was a sound one. Therefore, no deduction will be made with respect to the expert reports.
37Secondly, Intelcom argues that Ms. Godard has failed to provide descriptions for the times listed at each step of the litigation, rendering it impossible to determine the extent of duplication. Intelcom states that dockets must be attached in support of a Bill of Costs, and therefore, Ms. Godard has not complied with sub-rule 57.01(5), which provides:
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.
38Sub-rule 57.01(5) applies to awards of costs that are made at the completion of a trial or hearing. That is not the case here. Furthermore, I agree with the statement of Marrocco J., in Animal House Investments Inc. v. Lisgar Development Ltd., that although Form 57A indicates that the bill of costs should contain "copies of the dockets or other evidence" in support of the claim for fees, the form does not require the production of the plaintiff's dockets. It requires either the dockets or other evidence.
39Therefore, I find the failure to submit any dockets is not fatal to the costs claim in this case. The Bill of Costs is sufficiently detailed to permit me to assess the work that was done, the time that was spent and the rates that were charged, which seem to be reasonable to me. Although there may be some uncertainty with respect to the duplication of services, I do not find that to be a significant concern in the present case.
40Intelcom also argues that the claim for costs should be reduced by $25,000, which was the amount reached in settlement of the claim against the contractor, Mr. Mohamed. That amount was to go to legal fees incurred and therefore, that amount should be excluded from the total. I disagree. Ms. Godard's counsel has in fact deducted over $30,000 from the Bill for costs related to the settlement and discontinuance of the claim against Mr. Mohamed. That is more than the settlement amount.
41In conclusion, in considering the parties' submissions under the principle of indemnity, I find that it is appropriate to reduce the costs by $497.17 to account for the expert's flights.
Reasonable Expectations
42It is still necessary to continue the analysis, having regard to the other factors in Rule 57. Rule 57.01(1)(0.b) of the Rules directs me to take into account “the amount of costs that an unsuccessful party could reasonably expect to pay…”.
43One way of ascertaining the amount of legal costs that Intelcom would reasonably have expected to pay is to look at what Intelcom's costs were by this point in the process. They were $109,323.65, which is approximately $36,000 less than Ms. Godard's fees (based on the partial indemnity amounts provided in the Bills of Cost). One significant area of difference would appear to be in the disbursements, which may be explained, to a large extent, by the cost of expert reports and expert witness fees for trial preparation.
44Intelcom did not call expert evidence and as a result, it did not incur similar expenses. Intelcom argues that Ms. Godard did not need to call expert witnesses, and therefore, this amount should be deducted from any cost award. I am simply not in a position to make that determination, as the judge assessing costs on a settlement. What I can say is that based on Intelcom's litigation costs, it would have been reasonable for them to have been expecting Ms. Godard's costs to be in the vicinity of $100,000 for both fees and disbursements.
Proportionality
45The Rules require that proportionality be considered when applying any of the Rules. As such, Rule 1.1 states:
Proportionality
In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.
46The case law also underlines the fundamental importance of proportionality in assessing costs. In Mullin v. Lagace, 2015 ONSC 4267, the Ontario Superior Court of Justice made the following comment with regard to the importance of proportionality in determining costs:
Among all of the factors that the court may consider in awarding costs, Patene Building Supplies Ltd. and Elbakhiet reference the fact that such award must be proportionate to the amount recovered. I make the observation that if rule 1.1 is to have any meaning, how could it be otherwise? In Patene, costs of $5,000 were awarded representing approximately one-third of the amount recovered at trial. In Elbakhiet, costs of $100,000 were awarded representing approximately two-thirds of the amount recovered at trial. (para. 24)
47In Mullin, the court found that an award of costs in the amount of $102,000 inclusive of costs, HST, and disbursements was appropriate for a settlement of $190,000. In Elbakhiet v. Palmer, 2014 ONCA 544, the Ontario Court of Appeal held that it was not fair and reasonable to award the plaintiffs costs of almost $580,000 for a claim the jury valued at just under $145,000. The Court held that the award was wholly disproportionate to the amounts recovered and therefore, should be reduced to $100,000. In Crawford v. Standard Building Contractors Limited, 2021 ONSC 655, the Ontario Superior Court of Justice awarded $120,000 in costs to a Plaintiff who obtained $191,429.88 at trial.
48However, as pointed out by Ms. Godard's counsel, the court in Crawford stated at paragraph 25 that:
However, as a general proposition: (i) proportionality does not override other considerations when determining costs; and (ii) proportionality should not be used as a sword to undercompensate a litigant for costs legitimately incurred: Aacurate General Contracting Ltd. v. Tarasco, 2015 ONSC 5980, at paras. 13-17; Dang v. Anderson, 2017 ONSC 2150, paras. 12-15.
49In Doyle v Zochem Inc. et al., 2017 ONSC 920, Trimble J. stated that although costs, generally, should be proportional to the issues in the action and amount awarded, it does not follow that a reasonable amount for costs cannot exceed the award of damage in appropriate circumstances. Trimble J. cited McCarthy J. in Aacurate General Contracting, wherein McCarthy J. provided several examples of situations where proportionality should not be invoked to save litigants from the actual costs of litigation, including "circumstances where those litigants have put forth a wholly unmeritorious defence to a legitimate claim or have caused the proceeding to become unduly prolonged or complicated" (Aacurate General Contracting, at para 15).
50In Aacurate General Contracting, McCarthy J. awarded $42,000 in costs against the defendant stating that this was a case "where the prospect of an award of costs against the Defendants should have acted as reality check for them. It did not." The judgment in that case was $42,652.20 plus prejudgment interest of $2,006.40. Thus, the costs were about the same as the award. In so doing, McCarthy J. reduced the Plaintiff's claim by 70% on the basis of proportionality.
51The parties in the present matter differ in their view of the complexity of this case; each blames the other for making the case more complicated than it needed to be. Ms. Godard's counsel asserts that the case is one of moderate to high complexity, given the refusal of Intelcom to admit certain obvious facts, such as the lack of an anti-harassment policy and Ms. Godard's complaint to her manager about the alleged harassment. Intelcom states that while Ms. Godard did not deny having corresponded in an inappropriate manner with the complainant, she provided no evidence in support of her own allegations made against Mr. Mohamed. In addition, there was an investigation report that was not in her favour.
52This is a matter where both sides must accept some responsibility for the complexity of the matter. Having not heard the evidence or the submissions of counsel, I am not in a position to determine whether the strategies employed by counsel in this matter were valid or justified. However, it does appear that throughout the course of the litigation, with some exceptions noted below, the parties dug in their heels and prepared to do battle, rather than conceding any issues. They are perfectly entitled to do so but then they cannot claim that it was the other party's fault that the case became complicated.
53Both parties did exchange offers to settle during the course of the proceedings. Ms. Godard provided her Offer to Settle on November 16, 2021. Intelcom did not accept that offer until days before trial. Intelcom served its own offer to settle on September 13, 2022. The offer was for $70,000 inclusive of costs and general damages if accepted within a week of the offer, and $60,000 inclusive if accepted one minute prior to trial. This was substantially lower than Ms. Godard's offer, given that by September 13, 2022, substantial costs had been incurred.
54Ms. Godard further signaled her willingness to compromise by reducing her claim for damages from approximately $415,000 in her Statement of Claim to $184,236.45 in her settlement brief, which was filed on August 22, 2022. Therefore, there were indications that Ms. Godard was prepared to resolve the matter without going to trial, which would have saved considerable cost.
55In contrast, Intelcom served two series of very extensive requests to admit right before the trial was scheduled to commence. These actions most certainly increased the cost of the proceedings and also suggested that there would be no opportunity for resolution outside of going to trial. Therefore, Intelcom should have expected that their acceptance of Ms. Godard's offer to settle four days before trial would come with increased costs. Although there may be various reasons for Intelcom's decision not to accept the offer to settle until several days before trial, including a conviction that they had a very strong case, Intelcom must accept the consequences of this approach.
56I am cognizant that the principle of proportionality must be balanced against the other factors in this case. The courts have indicated that costs awards should be proportional to the quantum of the award or settlement amount, barring egregious behaviour on the part of the losing/paying party. Although Intelcom was clearly playing "hard ball" in this case, I do not find Intelcom's behaviour to have been egregious.
57Therefore, taking into account the principle of proportionality, I fix the costs at $70,000, inclusive of HST and disbursements. From this amount, $497.17 should be deducted to account for the flights that were not taken by the expert witnesses.
58I recognize that this award is equivalent to the value of the settlement amount or slightly less, depending upon whether one takes the settlement with Mr. Mohamed into account. This award is therefore higher than some costs awards have been, where the principle of proportionality has weighed heavily. However, it represents only half of what Ms. Godard has claimed.
59I believe that the amount of $70,000 strikes the appropriate balance among the factors in Rule 57.
Released: April 4, 2023 Justice K.A. Jensen
Release Information
COURT FILE NO.: CV-19-80608 DATE: 2023/04/04 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: RE: MARGARET GODARD Plaintiff AND INTELCOM COURIER CANADA INC Defendant COSTS ENDORSEMENT Jensen J
Released: April 4, 2023
Appendix
April 4, 2023: The following change was made to paragraph 51:
. Intelcom states that while Ms. Godard did not deny having corresponded in an inappropriate manner with the complainant, she provided no evidence in support of her own allegations made against Mr. Mohamed.