Court File and Parties

COURT FILE NOS.: CV-21-10191 / CV-22-10253 DATE: 2023-07-04 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Geoffrey Palin and Amy Johnston Applicants – and – Norman McIntosh and Barbara McIntosh Respondents

AND BETWEEN: Norman McIntosh and Barbara McIntosh Applicants – and – Geoffrey Palin and Amy Johnston Respondents

Counsel: Adam Zasada, for the Applicants J. Barry Eakins, for the Respondents J. Barry Eakins, for the Applicants Adam Zasada, for the Respondents

HEARD: Written Submissions

DECISION ON COSTS

Cullin, j.

Overview of the Proceeding

[1] This proceeding involved a dispute about the availability of road access to a property owned by Geoffrey Palin and Amy Johnston (the “applicants”). The road at issue is a private road which traverses a property owned by Norman and Barbara McIntosh (the “respondents”).

[2] On January 20, 2023, I rendered a decision which substantially favored the position of the applicants. While I denied the applicants’ request to amend the Judgment of Justice Gordon, dated May 13, 2019, and I did not wholly accept their arguments regarding issue estoppel, I denied the respondents’ counter-application and confirmed the ability of the applicants to use the road in accordance with the terms of the Judgment of Justice Gordon.

[3] The parties were given an opportunity to make submissions regarding the issue of costs. This is my decision with respect to the issue of costs.

Positions of the Parties

[4] The applicants submit that they were substantially successful in obtaining the relief sought in their application and opposing the relief sought by the respondents in the counter-application. They seek an award of costs on a substantial indemnity basis; in support of this position, they submit the following:

a. The respondents engaged in high-handed and egregious behaviour by preventing the applicants from using the access road rather than first bringing their application.

b. On September 17, 2021, two months before bringing their application, the applicants made an offer to settle in writing on terms that were more favorable than a r. 49 offer served after the commencement of their application.

c. On November 25, 2021, the applicants served a r. 49 offer with their application record. That offer substantially reflected the outcome of the proceeding, except that the applicants offered to bear their own costs of the proceedings.

[5] The applicants seek substantial indemnity costs in the range of $58,602.94 to $61,806.49.

[6] The respondents submit that costs are generally awarded on a party and party scale and that it is only in “rare and exceptional” circumstances that elevated costs are awarded. They submit that those circumstances are as follows:

a. Pursuant to r. 49.10, where a formal offer to settle has been made; and,

b. Where the unsuccessful party has engaged in behaviour worthy of sanction.

[7] The respondents submit that they were successful in their position regarding the amendment of the Judgment of Justice Gordon and were partially successful with respect to their arguments regarding issue estoppel. They submit that they should be entitled to partial indemnity costs in the amount of $19,600.52.

[8] The respondents further submit that the applicants’ r. 49 offer should only be considered in the context of their application, and not with respect to the respondents’ counter-application. They submit that there are two separate proceedings, and that two separate bills of costs should have been filed by the applicants. They further submit that any costs awarded to the applicants with respect to the counter-application ought to be partial indemnity costs.

The Law

[9] The court’s authority to award costs is set out in s. 131 (1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, which provides:

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] The factors to be applied by the court in exercising its discretion under s. 131 of the Courts of Justice Act are enumerated in r. 57.01 of the Rules of Civil Procedure.

[11] As a general rule, costs are awarded having regard to the principle of indemnity noted in r. 57.01(1)(0.a); that is, they are payable to the successful party by the unsuccessful party.

[12] In determining the issue of costs, offers to settle exchanged between the parties are a relevant consideration. Pursuant to r. 49.10, subject to certain conditions, a party who obtains a judgment as or more favourable than their offer to settle is entitled to substantial indemnity costs from the date of the offer. Pursuant to r. 49.13, the court has discretion to consider any offer to settle made in writing, notwithstanding that the offer may not strictly comply with the conditions in r. 49.10.

[13] In the absence of offers to settle, the court’s discretion with respect to costs is guided by case law. It is clear, pursuant to r. 57.01(4), that the court has discretion to award both substantial indemnity costs and full indemnity costs, however the case law suggests that discretion ought to be exercising sparingly and on a principled basis.

[14] In Gerula v. Flores, [1995] O.J. No. 2300, the Court of Appeal articulated the following three principles in relation to an award of costs on an elevated scale:

a. Solicitor and client costs as opposed to party-and-party costs will only be awarded in rare and exceptional cases.

b. A defendant is entitled to defend an action and to require a plaintiff to prove his case.

c. Where a defendant’s acts are a deliberate attempt to frustrate the proceedings by fraud or deception, where the conduct of the defendant is calculated to harm the plaintiff, or where the unreasonable conduct of the defendant compounds the complexity of the proceedings, there are proper grounds to order solicitor and client costs.

[15] These principles were also reflected by Epstein J.A. in Davies v. Clarington (Municipality) et al., 2009 ONCA 722.

Analysis

[16] I would note at the outset that I do not concur with the respondents’ position that the applicants’ written offer to settle should not be considered in determining costs with respect to the respondent’s application. I also do not concur with their position that the costs of each application should be considered individually.

[17] The respondents’ application was, in my view, a counter-application as contemplated pursuant to r. 38.03(4) and, for the purpose of assessing costs, should be viewed in the same manner as a counterclaim would be had this matter proceeded as an action. Rule 27.09(3) notes the following respect to costs of claims and counterclaims:

Where Both Claim and Counterclaim Succeed

(3) Where both the plaintiff in the main action and the plaintiff by counterclaim succeed, either in whole or in part, and there is a resulting balance in favour of one of them, the court may in a proper case give judgment for the balance and dismiss the smaller claim and may make such order for costs of the claim and counterclaim as is just.

[18] Although by operation of the Rules the applicants’ and respondents’ applications were required to be commenced under separate pleadings they were, for all intents and purposes, conducted as one proceeding. The evidentiary records for both applications were substantially the same. The cross-examinations were conducted together. The applications were argued together. The applicants’ offer to settle, had it been accepted, would have resolved both proceedings in their entirety.

[19] In my view, the costs of both applications should be considered as a whole and any offer to settle should be considered to be an offer to settle in both proceedings.

[20] I find that the applicants served an offer to settle in advance of the commencement of these proceedings and at the outset of these proceedings, that they have on balance been the successful parties, and that the result has been as favorable or more favorable than their offers to settle. The respondents served no offer to settle in this matter. I find, pursuant to r. 49.10 and 49.13, that the applicants are entitled to their substantial indemnity costs.

[21] If I am incorrect about the application of r. 49.10 and 49.13 to the respondents’ application, then I find that this is an appropriate case in which to exercise my discretion to award substantial indemnity costs. First, I find that, pursuant to r. 1.04(2), the circumstances presented in this proceeding are analogous to those described in r. 27.09(3), such that I have the discretion to make such order as to costs as is just. Second, I find that the respondents engaged in conduct calculated to harm the applicants and that they conducted themselves unreasonably thereby compounding the complexity of the litigation.

[22] It is clear that, even prior to the commencement of the litigation, the respondents were determined to visit their conflict with the Van Embdens on the next generation of owners of the Van Embden property. The respondents’ quarrel with the applicants started less than a month after the applicants took possession of the property. Notwithstanding the fact that the ink on Justice Gordon’s Judgment was barely dry, the respondents decided that they wanted a court to revisit the use of the access road. They also took the unilateral step of changing the lock on the access gate, thereby compelling the applicants to bring a motion for an interim injunction. Their conduct created the need for litigation and increased the cost and duration of the litigation; this conduct warrants an award of substantial indemnity costs.

[23] While I find that the conduct of the respondents was unreasonable, I do not find that it was egregious to the level that it warrants an award of full indemnity costs.

[24] With respect to the quantum of costs payable, I agree with the respondents’ submission that no costs should be payable with respect to the interim injunction motion or the motion for leave to file affidavit evidence as these costs were addressed by the hearing judge.

[25] Overall, I find that the Bill of Costs and the dockets submitted by the applicants are reasonable. While I am mindful of the fact that the argued application required only one-half day of court time, I note that multiple affidavits were filed and cross-examinations were conducted. The issues were somewhat novel in that the issue of road access had previously been considered and ruled upon and the court was being asked to revisit that ruling; this gave rise to questions of law which were not typical of a road access application. I would also note that while the total hours docketed by the applicants’ counsel were more than those docketed by the respondents’ counsel, the applicants’ counsel did not have the benefit of being involved in the 2019 proceeding, while the respondents’ counsel did have the benefit of that historical knowledge.

[26] The Bill of Costs submitted by the applicants indicated that adjustments were made for the costs of the injunction motion. This was not apparent upon reviewing the dockets submitted with the Bill of Costs. On my review, I noted in excess of 18 hours of Mr. Zasada’s time and in excess of 6 hours of Ms. Whetham’s time represented work performed on the injunction motion; in determining an appropriate award of costs, I have not considered this time which has already been compensated.

[27] The applicants seek substantial indemnity costs representing 90% of their actual costs. R. 1.03 defines substantial indemnity costs as, “an amount that is 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A”; as this Tariff is no longer used, however, there is a lack of guidance in the Rules about this calculation. I would note that it is generally accepted that substantial indemnity costs should represent 75% to 90% of a party’s actual costs. With this in mind I find that, in this case, 80% is a reasonable figure.

[28] Having regard to the analysis above, and having reviewed the applicants’ dockets, I order that the respondents pay the applicants substantial indemnity costs in the amount of $42,500.00, plus HST in the amount of $5,525.00, and disbursements (inclusive of HST) in the amount of $1,689.53, for a total amount of $49,714.53.

The Honourable Madam Justice K.E. Cullin

Released: July 4, 2023