Court File and Parties
COURT FILE NO.: CV-21-86071 DATE: 2023/01/10 SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN: JUSTMARK INDUSTRIES INC. (formerly CANOMEGA INDUSTRIES INC.), Plaintiff -and- INFINITUS (CHINA) COMPANY LTD., Defendant
BEFORE: Justice Heather J. Williams
COUNSEL: Brett Hodgins, Lawyer for the Plaintiff Robert W. Staley and Ian W. Thompson, Lawyers for the Defendant
HEARD: In writing
COSTS ENDORSEMENT
Overview
[1] Infinitus (China) Company Ltd. (“Infinitus”) brought a motion asking the court to stay this action because of an arbitration clause in the parties’ contract. Justmark Industries Inc. argued that the arbitration clause was inoperative because Infinitus had waived arbitration through conduct that was inconsistent with the right to arbitrate. I was not persuaded by Justmark’s argument. In a decision dated October 25, 2022, I granted the motion, stayed the action and referred the parties to arbitration. Infinitus now seeks its costs of the motion.
[2] In a consent order dated January 25, 2022, Maranger J. had dismissed both Justmark’s action against Infinitus Innovations (Canada) Inc. (“Infinitus Innovations”) and a motion by Justmark to examine a non-party witness. Justice Maranger ordered that the costs of what I am going to refer to as the January motions would be decided by the judge hearing the stay motion. Infinitus Innovations seeks costs of the January motions.
[3] Infinitus Innovations and Justmark filed written costs submissions following the January motions. Infinitus Innovations appended a Form 57B costs outline. Justmark did not. Infinitus and Justmark both filed Form 57B costs outlines for the stay motion. At the conclusion of the hearing of the stay motion, counsel made oral submissions on costs. In my October 25, 2022 decision in the stay motion, I invited counsel to file written submissions to supplement their costs outlines and, if they believed it would be of assistance, to request a brief oral hearing. On November 14, 2022, Justmark filed further written submissions. Infinitus requested a hearing. The parties made oral submissions on costs on December 14, 2022.
[4] Infinitus and Infinitus Innovations are represented by the same law firm.
The parties’ positions
[5] Infinitus Innovations seeks costs of the January motions on a substantial indemnity basis in the all-inclusive amount of $59,589.70. It argues that its motion to strike should not have been necessary and that Justmark acted unreasonably. Alternatively, Infinitus Innovations seeks costs of the January motions on a partial indemnity basis in the all-inclusive amount of $39,871.30. For the stay motion, Infinitus seeks partial indemnity costs of $19,697.26, all-inclusive.
[6] Justmark argues that all costs should be deferred to the arbitrator. Alternatively, in respect of the January motions, Justmark argues that there is no basis for awarding Infinitus Innovations substantial indemnity costs. Justmark also argues that there is time on the bill of costs for the January motions that should have been attributed to the stay motion. Justmark argues that as Infinitus Innovations is seeking substantial indemnity costs for the January motions, and Infinitus is seeking only partial indemnity costs for the stay motion, shifting time from the stay motion to the January motions could have the effect of increasing the value of the time. In respect of the stay motion, Justmark argues that if Infinitus had not ignored its proposal to arbitrate, Justmark would not have started its action and, if it had not started its action, the stay motion would not have been necessary. Justmark also argues that the costs requested by Infinitus Innovations and Infinitus are unreasonable and disproportionate. In particular, Justmark takes issue with the hourly rates charged by the two lawyers and the articling student who worked on the motions.
Some guiding principles
[7] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C. 43, provides that the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court.
[8] Although discretionary, a court must fix costs on a principled basis. (Davies v. Clarington, 2009 ONCA 722, at para. 40.)
[9] Rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, sets out the factors the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing, in exercising its discretion under section 131 of the Courts of Justice Act to award costs.
[10] The Court of Appeal has made it clear that the fixing of costs does not begin and end with a calculation of hours times rates. It says the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay rather than an amount fixed by the actual costs incurred by the successful litigant. (Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), at para. 26.)
Analysis
[11] I am satisfied that Infinitus Innovations is entitled to its costs of the January motions and that Infinitus is entitled to its costs of the stay motion.
[12] I am not satisfied that Infinitus Innovations is entitled to substantial indemnity costs for the January motions. In Davies, the Court of Appeal noted that it had repeatedly said that elevated (that is to say, full or substantial indemnity as opposed to partial indemnity) costs are warranted in only two circumstances: (1) where specifically authorized through the operation of an offer to settle under rule 49.10; or (2) where the losing party has engaged in behaviour worthy of sanction. Substantial indemnity costs are only awarded in rare and exceptional cases. (St. Elizabeth Home Society v. Hamilton (City), 2010 ONCA 280, at para. 92.) Rule 49 was not a factor in any of these motions. I do not consider the motions to be among the rare and exceptional cases in which the losing party engaged in behaviour worthy of sanction.
[13] I do not accept Justmark’s argument that costs should be deferred to the arbitrator. The January motions and the stay motion both dealt with procedural, not substantive, issues. Having heard the stay motion and the parties’ costs submissions in relation to the January motions, I was close to the action, and I feel that I am in a good position to decide the costs issues. Rule 57.03(1)(a) provides that on the hearing of a contested motion, unless the court is satisfied that a different order would be more just, the court shall fix the costs of the motion. I am not satisfied that a different order would be more just. I will fix the costs of the motions.
[14] I do not accept Justmark’s argument that Infinitus’s failure to respond to Justmark’s arbitration overtures has a bearing on Infinitus’s entitlement to costs of the stay motion. While it is true that Infinitus was uncooperative when Justmark proposed arbitration, it was Justmark’s choice to start a legal action and then to resist the stay motion.
[15] Justmark argues that the amount of costs requested by Infinitus Innovations and Infinitus is unreasonable and disproportionate in relation to the complexity of the issues on the motions. Justmark argues that the hourly rates charged by the Toronto-based counsel for Infinitus are markedly higher than the rate of Justmark’s counsel. The hourly rate of the more senior counsel for Infinitus is almost four times the hourly rate of Justmark’s counsel. The more junior counsel for Infinitus was called to the bar two years after Justmark’s counsel, but charges almost twice as much per hour.
[16] The hourly rates charged by a party’s counsel are, of course, only one variable in the equation. These rates are multiplied by hours. [1] While Justmark focused its argument on rates, Infinitus focused its argument on hours. Infinitus noted that Justmark’s counsel had worked on the stay motion for 110 hours, while counsel and the student for Infinitus had spent only about 38 hours on the stay motion. By my calculations, despite Justmark’s counsel’s considerably lower hourly rate, if successful, Justmark would have requested $21,270 in partial indemnity fees for the stay motion, almost $4,000 more than the $17,431.20 in partial indemnity fees requested by Infinitus. Even if Justmark is correct, and Infinitus attributed time to the January motions that should have been attributed to the stay motion, the partial indemnity fees of Justmark and Infinitus still would be within the same range.
[17] Unfortunately, I am unable to compare the fees of Justmark and Infinitus fees for the January motions because, as I have already noted, Justmark did not include a Form 57B costs outline with its costs submissions for the January motions. I assume that Justmark did not do so because the January motions were resolved without a hearing and because at the time the parties filed their written costs submissions, Justmark was expecting to pay costs, not to be paid costs. Regardless of the reason, by not filing a Form 57B, which would have disclosed how many hours Justmark’s counsel devoted to the January motions, Justmark has made it more difficult for me to accept its argument that the costs Infinitus Innovations is seeking for those motions are too high. Perhaps the fees Justmark would have requested for the January motions if successful would have been much less than the fees Infinitus Innovations is seeking. Perhaps, as was the case with the stay motion, the fees Justmark would have requested would have been similar to the fees Infinitus Innovations is seeking. I simply don’t know. However, in the absence of a Form 57B, regardless of the reason for its absence, I cannot infer that the information the party would have disclosed in a Form 57B, such as the number of hours worked, would have been helpful to the party’s cause.
[18] I do know that counsel and the student for Infinitus Innovations worked for about 78 hours on the January motions. The lead-up to the motions included preparation for and attendance at two days of cross-examinations and preparation of a factum. The 78 hours does not strike me as unreasonable for these two motions, particularly given Justmark’s contention that Infinitus Innovations included time on its costs outline for the January motions that was more properly attributable to the stay motion; if this was the case, the hours worked on behalf of Infinitus Innovations would have been lower. I also know that counsel and the student for Infinitus Innovations worked for a total of about 118 hours on the January motions and the stay motion, while counsel for Justmark spent 110 hours on the stay motion alone.
[19] Turning to the factors other than rates and hours that are listed in Rule 57.01(1) and applicable to the January motions, I begin by noting that Infinitus Innovations was entirely successful: On consent, Justmark’s action against Infinitus Innovations was dismissed, as was Justmark’s motion to examine a non-party witness. I consider the issue on the January motion to strike to have been important, as the motion had the potential to, and in fact did, extract Infinitus Innovations from the litigation. The issues in the January motions were not particularly complex from a factual or a legal perspective. With respect to conduct that lengthened the proceeding, Justmark ultimately consented to the order sought by Infinitus Innovations and then agreed to a dismissal of its own motion to examine the non-party witness. Had Justmark consented earlier, the costs of the motions would have been much lower.
[20] In the circumstances, I consider partial indemnity costs of $35,000, inclusive of fees, disbursements and HST, to be a fair and reasonable amount for Justmark to pay to Infinitus Innovations for the January motions.
[21] For the stay motion, I am satisfied that would be fair and reasonable for Justmark to pay Infinitus partial indemnity costs of $19,500, inclusive of fees, disbursements and HST. As I have already observed, the fee component of this amount is either less than or in the same range as the partial indemnity fees Justmark would have requested had it been the successful party.
Disposition
[22] I make the following orders in respect of the costs of the January motions and the stay motion:
- Justmark shall pay Infinitus Innovations partial indemnity costs of the January motions fixed at $35,000, inclusive of fees, disbursements and HST.
- Justmark shall pay Infinitus partial indemnity costs of the stay motion, fixed at $19,500, inclusive of fees, disbursements and HST.
Justice H. J. Williams Date: January 10, 2023
Footnotes
[1] I am mindful that the Court of Appeal has made it clear that the fixing of costs does not begin and end with a calculation of hours times rates, and that the objective must be to fix an amount that is fair and reasonable for the unsuccessful party to pay. That said, a comparison of a calculation of the parties’ hours times rates can be a helpful factor in the determination of whether an amount is fair and reasonable: If a party would have requested a certain amount in costs had it been successful, all things being equal, it should be at least within the party’s realm of contemplation that the opposing party, if successful, might be awarded a similar amount.