COURT FILE NO.: CV-17-00061805 DATE: 2023-06-23

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Bennington Financial Corp. (formerly Equirex Leasing Corp.), Plaintiff (Responding Party)

AND:

Medcap Real Estate Holdings Inc., Defendant (Moving Party)

BEFORE: The Honourable Justice M. Bordin

COUNSEL: Ivan Lavrence for the plaintiff Bennington Financial Corp. Scott Turton for the defendant Medcap Real Estate Holding Inc.

Ruling on costs

Overview

[1] On May 9, 2023, I released my reasons in this matter dismissing the defendant, Medcap Real Estate Holding Inc.’s (“Medcap”) motion to dismiss or stay the following actions:

a. this action (CV-17-00061805) and eight other actions brought by Bennington Financial Corp. (formerly Equirex Leasing Corp.) (“Bennington”) against Medcap in CV-17-00062436, CV-17-00062210, CV-17-00062437, CV-17-00062438, CV-17-00063058, CV-17-00063059, CV-17-00063060, and CV-17-00061806; and

b. this action brought against it by Heffner Investments Limited (“Heffner”) in CV-19-00068169.

[2] Medcap had asserted that Bennington, Heffner, and other non-parties to these actions entered into a settlement agreement that they would not settle with Medcap individually and would require any settlement to include all of them. Medcap asserted that the settlement agreement changed entirely the landscape of the litigation in a way that significantly altered the adversarial relationship among the parties to the litigation or the dynamics of the litigation and that Bennington and Heffner failed to immediately disclose that agreement.

[3] I found that the agreement was not an agreement which was required to be disclosed and dismissed the motions.

[4] Medcap has settled costs with Heffner but not Bennington.

Position of the Parties

[5] Bennington says it is presumptively entitled to costs as the successful party. It seeks $32,103.30 inclusive of HST on a substantial indemnity scale or $24,077.48 inclusive of HST on a partial indemnity scale.

[6] Bennington says that pursuant to section 36 of the Solicitors Act costs awarded to a party in a proceeding shall not be reduced on assessment merely because they relate to an in-house lawyer.

[7] Bennington says the stakes in the motion were the dismissal of its $14 million claim. It says the issues were complex and the motion unnecessarily lengthened the proceeding. Bennington submits that the motion was an attack on it and its counsel and that the conduct of Medcap warrants costs on a substantial indemnity scale.

[8] Bennington asserts its hourly rates were reasonable and similar to those claimed by Medcap’s counsel.

[9] Medcap says that the amount claimed by Bennington is too high and that the appropriate range is $7,500 to $10,000. Medcap says that while the consequences of the motion were important, it was factually and legally narrow. Further, Medcap asserts that the time claimed by Bennington’s in-house counsel of $11,600 for preparation of the factum, preparation for the motion and argument is excessive. It says that it is unlikely that in-house counsel kept dockets as a request for dockets was refused.

[10] Medcap says it incurred total time on a partial indemnity basis of $14,765 plus HST for both motions and splits its time between the two plaintiffs to arrive at a cost figure of $7,400 per motion/plaintiff. It says this is its reasonable expectation of costs.

Decision on costs

[11] The affidavits in support of the motion were relatively brief. Bennington did not cross-examine on Medcap’s affidavit. Medcap cross-examined on Bennington’s affidavits. Both parties served factums. Medcap’s materials were essentially the same for both motions.

[12] All parties had to review the same materials and attend the full motion. Although Bennington did not have to respond to the motion against Heffner, the motions were interrelated, referenced each other’s materials, and Heffner’s presence resulted in additional materials for Bennington to review and additional hearing time.

[13] I find the number of hours claimed by Medcap’s counsel – 35.9 – is likely low given the materials filed, cross-examinations and the issues before the court. Bennington claims a more realistic 55.5 hours for its counsel, although the 6.5 hours claimed for attendance for argument (which was conducted virtually and excludes preparation time) is excessive. Bennington also claims another 8.6 hours for clerk time.

[14] The hourly rate suggested for counsel for Bennington, $500, is similar to the rate of counsel for Medcap, $550, given their respective years of experience.

[15] Bennington’s math in its bill of costs makes clear that the amounts claimed for substantial indemnity are in reality full indemnity fees and its resultant partial indemnity calculations represent 75 percent of full indemnity fees which is excessive for partial indemnity.

[16] As defined by the Rules of Civil Procedure, “partial indemnity costs” mean costs awarded in accordance with Part I of Tariff A. Further, “substantial indemnity costs” mean costs awarded in an amount that is 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A.

[17] Tariff A, Part I provides that fees for any step in a proceeding authorized by the Rules of Civil Procedure and the counsel fee for motions, applications, trials, references and appeals shall be determined in accordance with section 131 of the Courts of Justice Act and the factors set out in subrule 57.01 (1).

[18] Bennington’s partial indemnity rate would therefore lead to a substantial indemnity rate of $562.50 per hour which is $62.50 more per hour than the $500 an hour full indemnity rate claimed by Bennington.

[19] As noted by the Court of Appeal for Ontario in paragraphs 134 and 136 of Ontario (Attorney General) v. Rothman Inc., 2013 ONCA 353, rates and hours spent are not particularly "applicable" in situations where counsel are salaried employees of their employer litigant. In those circumstances, the salaried lawyer does not generally send a bill to his or her employer for services rendered, with or without hourly rates. However, the courts in many jurisdictions have adopted the principle that, where a successful party is represented by a salaried lawyer, the proper method of fixing costs is to deal with them as though they were the costs of an independent outside counsel.

[20] The court noted in Dorah v Dyal, 2023 ONSC 2908 at paragraph 49:

Ascribing an hourly rate to internal counsel creates certain challenges. On the one hand, s. 36 of the Solicitors Act stipulates that costs shall not be disallowed or reduced on assessment merely because they relate to counsel who is a salaried employee of the party. On the other hand, the principle behind cost awards is to indemnify, not to create a windfall. It would be an unjust result if insurers could use internal counsel and turn cost awards into a profit centre for the insurer.

[21] While Bennington is not an insurer, similar concerns may apply.

[22] I find that ascribing an hourly rate to the time incurred by in-house counsel is a useful measure in assessing costs. Based on the Rules, the tariffs, and the above principles, I find that Bennington’s partial indemnity hourly rate should be $300 per hour.

[23] However, hourly rates are important but not the only relevant consideration: 14565778 Ontario Inc. v. 1122077 Ontario Ltd. (2006), 82 O.R. (3d) 757 (Ont. C.A.) and Chiefs of Ontario v. R., [2007] O.J. No. 4068 (Ont. S.C.J.). The court’s authority under rule 57.01(1) remains discretionary; it is significant that under rule 57.01(1) (0.a), information regarding "rates charged and hours spent" is called for in applying the principle of indemnity only "where applicable": Rothmans Inc., para 134.

[24] In my view, costs should be awarded on a partial indemnity scale. In Net Connect Installation Inc v. Mobile Zone Inc., 2017 ONCA 766, the Court of Appeal for Ontario noted at para. 8:

There is a significant and important distinction between full indemnity costs and substantial indemnity costs. An award of costs on an elevated scale is justified in only very narrow circumstances – where an offer to settle is engaged or where the losing party has engaged in behaviour worthy of sanction: Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.) at para. 28. Substantial indemnity costs is the elevated scale of costs normally resorted to when the court wishes to express its disapproval of the conduct of a party to the litigation. It follows that conduct worthy of sanction would have to be especially egregious to justify the highest scale of full indemnity costs.

[25] While unsuccessful on the motion, Medcap’s conduct was not such as to be worthy of sanction or require the court to express its disapproval of its conduct.

[26] Fixing costs is not a mathematical exercise of multiplying hourly rates by the amount of time spent. Assessing the appropriate quantum of costs requires a consideration of what is fair and reasonable for the unsuccessful party to pay in the circumstances: see Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.). Pursuant to rule 57.01(1) of the Rules, some of the factors that may be considered include: the importance of the issues, complexity of the proceedings, and the reasonable expectations of the unsuccessful party: see Friends of Toronto Public Cemeteries Inc. v. Public Guardian and Trustee, 2020 ONCA 509, at para. 24.

[27] The issues here were important – the possible dismissal of Bennington’s claim. The legal issues were relatively complex. This was a long motion. The partial indemnity fees incurred by Medcap on the motion reflects a range of costs that Medcap, as the unsuccessful party, could and should have reasonably expected to pay if it lost the motion.

[28] Considering the above factors, I fix the costs of Bennington on a partial indemnity basis in the amount of $14,765 plus HST.

Order

[29] Medcap shall pay Bennington its costs of the motion on a partial indemnity basis fixed in the amount of $14,765 plus HST forthwith.

M. Bordin, J.

Date: June 23, 2023