COURT FILE NO.: CV-22-00060577-0000 DATE: 20230217

ONTARIO SUPERIOR COURT OF JUSTICE

In the Matter of the Construction Act, R.S.O. 1990, c.C.30, as amended

BETWEEN:

Arcamm Electrical Services Ltd. Plaintiff/Moving Party – and – Avison Young Real Estate Management Services LP and 4342 Queen St Niagara Holdings Inc. Defendants/Responding Parties

Counsel: Michael C. Mazzuca, for Plaintiff/Moving Party Frank Costantini, for Defendant/Responding Party, Avison Young Real Estate Management Services LP James R. Smith, for Defendant/Responding Party, 4342 Queen St Niagara Holdings Inc.

Heard: In writing

COSTS DECISION

Justice L. Sheard

Overview

[1] On January 12, 2023, I was scheduled to hear two motions for summary judgment (“SJM”). The Motion Confirmation forms suggested that the SJMs would take one day to hear. That was inaccurate. While there was much overlap in the evidence and in the issues, the SJMs were heard separately.

[2] Likewise, separate decisions were released. For ease of reference, I will identify the Reasons for Judgment on Arcamm’s SJM as “the Arcamm Decision” Arcamm v. Avison et al., 2023 ONSC 1151 and the Reasons for Judgement on Avison’s SJM as “the Avison Decision” Arcamm v Avison et al., 2023 ONSC 1360.

Arcamm’s Summary Judgment Motion

[3] On its SJM, the plaintiff, Arcamm Electrical Services Ltd. (“Arcamm”), sought judgment on invoices rendered in respect of services and equipment delivered to and for the benefit of the defendant, 4342 Queen Street Niagara Holdings Inc. (“Queen”).

[4] Arcamm had been called in by Avison, Queen’s property manager, to restore power to a tenanted, commercial building owned by Queen. In less than 24 hours following Avison’s request, Arcamm had sourced and installed two temporary generators and power was restored. (Arcamm Decision at para. 7).

[5] Thereafter, Arcamm fronted the monthly cost to operate the temporary generators supplying power to Queen’s property; replaced damaged equipment; removed damaged transformers; sourced and installed replacement transformers; and ensured that Queen’s building was reconnected to the power grid (Arcamm Decision, at paras. 8-11).

[6] Queen submitted claims to its insurer, and, for a short period of time, Arcamm’s invoices were paid. However, when Queen’s insurer refused to continue to honour Queen’s claims, Queen simply stopped paying Arcamm. In the end result, Arcamm brought a SJM for payment of its outstanding invoices, which totalled close to $1,000,000, plus interest on the amount owed either at the rate shown on its invoices or at the Courts of Justice Act (“CJA”) rate.

[7] Arcamm also sued Avison Young Real Estate Management Services LP (“Avison”), Queen’s property manager, with whom Arcamm had been dealing. On its SJM, Arcamm sought judgment against Queen and Avison.

[8] Avison defended Arcamm’s claim on the basis that it was acting as Queen’s agent when it engaged Arcamm to provide services and equipment to the commercial property owned by Queen.

[9] Avison was successful in defending Arcamm’s claim on that basis; Avison was found to be acting as Queen’s agent and not personally liable to Arcamm. Arcamm was granted judgment against Queen only, and Arcamm’s SJM against Avison was dismissed.

[10] Judgment was signed in favour of Arcamm as against Queen in the principal amount of $985,881.38, plus an amount for monthly storage fees of the removed transformers, prejudgment interest of $6,068.74 and CJA post-judgment interest rate of 5% per annum.

Avison’s SJM

[11] Avison brought its own SJM against Queen. Avison asserted that, pursuant to its contract with Queen (the “REMSA”), Avison was entitled to be indemnified and held harmless from all liabilities, costs and expenses arising in connection with Arcamm’s claim.

[12] Avison was successful in its SJM against Queen: Queen was ordered to indemnify Avison for its past and future legal costs, fees, expenses and/or disbursements associated with Avison’s defence of the Arcamm action.

Costs

[13] In both Decisions, the parties were encouraged to agree on costs, failing which, they were invited to submit written costs submissions not to exceed three pages. The parties did not reach an agreement on costs. The court received and has considered the parties’ comprehensive costs submissions, (including responding and reply submissions) delivered between the end of March and the end of April 2023.

[14] As with the SJMs, there is much overlap in the issues to be addressed in determining costs. For that reason, this costs decision deals with both SJMs.

Costs to be determined

[15] The following costs must be determined:

1. The amount to be awarded to Arcamm on its successful SJM against Queen.
2. The amount to be awarded to Avison, on its successful defence of Arcamm’s SJM, and which party should pay those costs.
3. The amount to be awarded to Avison on its successful SJM against Queen.

Arcamm’s position:

[16] As per its Costs Outline, Arcamm incurred costs of $223,574.14. It seeks its costs on a substantial indemnity basis in the amount of $201,585.81 or, alternatively, on an elevated basis in the amount of $175,000 all inclusive. Arcamm calculates its partial indemnity costs at $148,318.81.

[17] In its initial costs submissions (March 31, 2023), Arcamm submits that costs should be awarded on a substantial indemnity or elevated rate basis because:

(i) Arcamm made several early resolution efforts and offers to resolve its claim at an amount very close to the judgment awarded, in order to avoid litigation and the associated litigation costs; (ii) Queen never intended to pay Arcamm’s claim and intended to “fight it out afterwards” in court; (iii) Queen employed legal tactics intended to delay and unnecessarily complicate Arcamm’s action and motion and “run up the costs”; (iv) Queen’s conduct is the very type of conduct sanctioned by the court in Thompson v. Carleton University, 2020 ONSC 3479; and (v) S. 86 (1) (b)(ii) of the Construction Act, R.S.O. 1990, c.C.30, as amended, (the “Act”) applies.

[18] Arcamm submits that the costs it seeks are reasonable and should be awarded in accordance with the factors set out under s.57.01 of the Rules of Civil Procedure and the principles set out in Boucher v. Public Accountants Council, (2004), 71 O.R. (3d) 291 (C.A.).

[19] Arcamm submits that its costs relating to its SJM should be paid by Queen, including costs relating to Arcamm’s unsuccessful claim as against Avison.

[20] Arcamm also submits that any costs that might be payable to Avison on Arcamm’s SJM, should also be paid by Queen. Arcamm reasons that it initially sued Avison on the basis that Avison could be considered a statutory “owner” under the Construction Act or that Avison was liable to Arcamm in contract. Arcamm submits that, had Queen admitted in its defence that Avison was Queen’s agent and not an owner - findings ultimately made in the Arcamm Decision – Arcamm would have discontinued its claim as against Avison.

[21] Arcamm says that Queen did “the opposite” and “expressly implicated Avison”: denied that Queen was an “owner” under the Act and asserted that if any amounts were found to be owing to Arcamm on Arcamm’s SJM, that those amounts should be paid by one or both of Avison, and Queen’s insurer, (para. 89 of the Arcamm Decision).

[22] In its reply submissions (April 21, 2023), Arcamm submits that:

(a) while Arcamm was suing on unpaid invoices, Queen raised and “pushed various meritless defences that made this motion much more complex”; (b) while Queen takes issue with Arcamm pursuing both Avison and Queen, it was Queen that asserted that Avison was a proper defendant and “it does not lie in Queen’s mouth to complain that Arcamm’s position was consistent with Queen’s own position”; (c) it disputes Queen’s suggestion that 50% of Arcamm’s time on the SJM was spent “dealing with” Avison and submits that Avison’s presence did not significantly increase that time; (d) Arcamm’s fees were higher than Queen’s because, whereas Queen simply repeated bald defences set out in its pleadings, Arcamm adduced detailed evidence to address Queen’s “meritless defences” - noting also, that while the hours spent by Queen’s lawyers were lower, their hourly rates were higher; (e) with respect to the position advanced by Avison, Arcamm replies that, had Queen not “asserted and maintained that Avison was the proper defendant, Arcamm could have let Avison out of the action at the pleadings stage”…and “Avison would have incurred no significant costs.”; (f) Avison did not limit its defence to its not being the proper defendant but also pleaded and led evidence that there were issues with Arcamm’s work. Had Avison volunteered prior to cross-examinations that they were aware Queen had instructed Arcamm to complete the work “despite having no intention of paying but instead intending to litigate”, significant costs could have been avoided; (g) Arcamm submits that this is a proper case for either a Sanderson Order or a Bullock Order.

Avison’s Position

[23] In Avison’s April 4, 2023 costs submissions, it claims full indemnity costs of $153,755 broken out as follows: (amounts include HST): i) fees $146,640; ii) disbursement $2,115; and, for costs submissions, $5,000.

[24] Avison seeks to be fully-indemnified for its costs. Avison submits that Arcamm should be ordered to pay $46,126.50 in costs to Avison on the Arcamm SJM, and the balance of Avison’s full-indemnity costs should be paid by Queen.

[25] In its April 14, 2023 costs submissions, Avison argues that Arcamm should pay a portion of Avison’s costs in that:

(h) Arcamm refused to concede that Avison was not an owner (at para.3); (i) Arcamm accused Avison of trying to “complicate and colour these proceedings” and that Avison engaged in “bad faith” (at para.4); (j) Arcamm painted a target on Avison’s back to “win-at-all-cost” against Queen’s litigation strategy to “avoid payment-at-all cost” (at para. 5); (k) Arcamm was unreasonable in it exercise of powers under Sections 86(1) and 35(1) of the Act in registering a lien against Avison and then suing Avison, with no factual basis to support its allegation that Avison was an “owner” (at para. 6); and (l) in response to Arcamm’s accusations of bad faith against Avison, Arcamm “forced Avison’s hand” in costly summary judgment motions.

[26] At para. 8 of its April 4, 2023 submissions, Avison says:

Avison’s hours and fees are reasonably reflected by the steps taken to respond to and address Arcamm’s claim, Queen’s issue-laden crossclaim inclusive of superfluous argument meant to obfuscate and distract, adding cost and complexity, and Avison’s own meritorious crossclaim, while arriving a whopping 40% lower in fees, or over $75,000 less then Arcamm’s full indemnity costs, which only had its own claim to deal with.

[27] Avison proposes that Arcamm’s share of Avison’s costs be calculated on the basis of one-half of Avison’s full indemnity costs ($153,755), fixed on a partial indemnity rate (60%) for a total of $46,126.50. On that basis, Avison submits that Queen would pay the balance of Avison’s full indemnity costs in the amount of $107,628.50 ($153,755 - $46,126.50).

[28] To ensure recovery from one or both of Queen and Arcamm, Avison seeks an order that:

(a) Arcamm pay Avison’s costs in the amount $46,126.50, jointly and severally with Queen; (b) Queen pay Avison’s costs in the amount of $107,628.60; (c) Arcamm and Queen pay Avison’s costs forthwith; and (d) Queen shall pay Avison’s costs fixed against Arcamm in the amount of $46,126.50 forthwith, if not paid by Arcamm within 14 days from the date of this order, and Queen may then set off or claim that amount from Arcamm.

[29] In its reply costs submissions dated April 25, 2023, Avison responded to Arcamm’s costs submissions dated March 31, 2023 and Queen’s costs submissions dated April 18, 2023, which challenged the amount of Avison’s costs and the scale claimed.

[30] Similar to the submissions made by Arcamm, in its April 25, 2023 submissions (extracted below), Avison argued that it is not fair to gauge Avison’s time and fees against those of Queen because:

2. …Queen avoided the merits by arguing that a trial was necessary due to multiple issues and a false narrative raised by repeatedly cutting and pasting into facta and affidavit materials expert reports excerpts and pleadings, some drafted by Aviva’s counsel, and bald conclusory assertions that were ultimately proven false”; and
3. Avison was required to address in evidence and law the multiple issues raised by Queen. We toiled through a 3,100-page record, correctly cited applicable case law related to the law of contracts and the Construction Act. We laid bare the evidence and exposed every argument on the merits. Your Honour’s combined Reasons span 227 paragraphs as definitive proof that this three-way horse race was equally a test of endurance. Despite our effort, it was simply not possible to complete the necessary steps in less time or by less costly means given the timeline being pushed by Arcamm.

[31] Avison concludes its submissions with reminding the court that the costs it seeks from Queen are damages in contract, “which are subject to the principles of remoteness, causation and mitigation”, arguments not advanced by Queen: Capital Sewer Servicing Inc. v. Crosslinx Transit Solutions Constructors, 2022 ONCA 10.

Queen’s Position

[32] Queen’s costs submissions are dated April 14, 2023. In its costs outline, Queen shows only time spent by its lawyer: 186 hours, whose full hourly rate is $500. On a substantial indemnity basis, Queen’s costs are $78,817.50 (186 x $375). On a partial indemnity basis, they are $60,450. Unlike the costs outlines provided by Arcamm and Avison that show time spent by senior and junior lawyers and by law clerks, Queen’s costs outline, and dockets, record only time spent by one lawyer.

[33] Queen takes no issue with Arcamm’s disbursements of $3,344.34 and submits that it is liable for 50% of that amount in that Arcamm had sued Queen and Avison.

[34] For the same reason, Queen submits that it is not appropriate for Arcamm to seek recovery of all of its costs from one party – Queen – when Arcamm “vigorously pursued” two defendants. Further, had Arcamm not sued Avison, Avison would not have pursued its “cross-motion” against Queen.

[35] Queen asserts that its lawyer recorded a total of 186 hours to defend the Arcamm SJM and the Avison SJM and, therefore, it is not fair, nor reasonable, for Arcamm to claim three times that number of hours for its SJM.

[36] Queen submits it could not reasonably expect to pay costs to Arcamm based on 560 hours of time when Queen’s lawyer, defending two SJMs, docketed only one-third as many hours.

[37] Queen submits that the time spent by Arcamm’s counsel was excessive, using as examples the 40.9 hours spent on the motion record, which included a 6-page affidavit; 129.1 hours spent to prepare for and attend at cross-examinations, which took 1.5 days in contrast to the time spent by Queen’s of 16.5 hours on the cross-examination. Another example is the 159.8 hours spent by Arcamm under the heading “Facta and Authorities” compared to Queen’s time for the same items of 23.8 hours, although each factum totals 31 pages.

[38] Queen also submits that Arcamm’s costs should reflect that it was not successful in its claim for interest in the amount of $265, 282.63 when interest was only allowed at the CJA interest rate [5], resulting in interest of approximately $6,000. [6]

[39] Queen also submits that Arcamm spent “considerable time” advancing an argument under the “prompt payment” provisions in Part 1.1 of the Act, which was not accepted by the court (Arcamm Decision, para. 97).

[40] As to Arcamm’s claim against Avison, Queen submits that Arcamm chose to pursue a claim and summary judgment against Avison, against whom Arcamm was not successful.

[41] Queen disputes that it engaged in any conduct that would warrant substantial indemnity costs.

[42] Finally, Queen submits that it should be ordered to pay costs to Arcamm of a maximum of $42,000, “which equates to 70% of Queen’s total partial indemnity costs” and is within $3,000 of $46, 126.50 costs Avison seeks from Arcamm.

[43] Queen’s reply to Avison’s costs submissions that Avison’s hours (373.50) also do not meet the “reasonable expectation criteria” when compared to Queen’s 186 hours.

The Law

[44] Section 131(1) of the CJA gives the court the discretion to determine by whom and to what extent costs are to be paid.

[45] In civil litigation, costs usually follow the event. That rule should not be departed from except for very good reasons: see Gonawati v. Teitsson, [2002] CarswellOnt 1007 (Ont. C.A.) and Macfie v. Cater, [1920] O.J. No. 71 (H.C.J.) at para 28: Usanovic v. La Capital Life Ins., 2016 ONSC 5795, at para. 7.

[46] Costs are discretionary and, in the exercise of that discretion, the court is to consider the factors set out in r. 57.01:

57.01 (1) 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; and (i) any other matter relevant to the question of costs.

[47] In 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (Ont. S.C.J.), Perell J. reformulated the purposes of the modern costs rules, at para. 10, as follows:

(1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements.

[48] Overall, the objective is to fix an amount that is fair and reasonable, having regard for, among other things, the expectations of the parties concerning the quantum of costs: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.) at paras. 26 and 38.

[49] A costs award should reflect what the court views as a fair and reasonable contribution by the unsuccessful party to the successful party rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier, 2002 CarswellOnt 4020, 118 A.C.W.S. (3d) 341 (C.A.), at para. 4: Fehr et al. v. Sun Life Assurance Company of Canada, 2021 ONSC 8368, at para 83.

Analysis

Rule 57 Factors

Offers to Settle

[50] The parties have not disclosed any offers to settle that might bear upon costs.

The Principle of Indemnity – experience of counsel, hours spent, and rates charged

[51] As noted above, Queen’s position is that the hours spent by counsel for Arcamm and for Avison were excessive.

[52] Avison responds that Queen relied on its bald denial of liability in its pleadings and, as a result, avoided responding to the SJMs on their merits, or in any depth, arguing that a trial was needed.

[53] I accept Avison’s submissions.

Complexity and Failure to make Admissions

[54] As noted by Avison in its April 25, 2023 costs submission, the combined record on the SJMs comprised 3,100 pages (the “Comprehensive Record”). As set out at para. 20 of the Arcamm Decision, although the SJMs proceeded separately, the materials had been filed with the understanding that the SJMs would be heard together and were treated by the court as comprising one record.

[55] The 3,100 pages that made up the Comprehensive Record provided an extensive evidentiary record that included pleadings in related actions; affidavits sworn by the principals of the corporate parties; transcripts from cross-examinations on affidavits; answers to undertakings; and opinions expressed by experts.

[56] Queen vigorously defended Arcamm’s SJM (Arcamm Decision at paras. 28-37) taking the position that there were genuine issues requiring a trial. Queen’s preliminary opposition to the SJM was its submission that leave to bring the SJM should have been obtained under s.13 of O. Reg. 302/18 under the Act.

[57] The court heard legal argument on that issue. Leave was granted (Arcamm Decision, at paras. 47-55). As noted at para. 49, the court adopted Perell’s J.’s reasoning that “unless a motion for leave is brought as a preliminary motion, it is hollow to discuss the leave requirement once the court schedules or approves a timetable for the summary judgment motion.”

[58] In my view, Queen’s objection - that leave should have been sought - was ill-founded and resulted in unnecessary time and expense to the parties.

[59] Queen also opposed Arcamm’s claim being determined on a SJM on the basis there were other pending lawsuits dealing with related issues and parties, such as Queen’s action against its insurer for, in part, refusing to honour Queen’s claim for insurance coverage to pay Arcamm. Another outstanding action was one brought by Queen’s insurer (a subrogated claim in Queen’s name) against a number entities, who, it was alleged, caused or contributed to the failure of the transformers and the subsequent damage suffered after the initial failure.

[60] Queen took the position that Arcamm’s SJM should not proceed or should be stayed, because “with the multiple lawsuits, the issues in the litigation have become complicated and that there are genuine issues to be tried and “a profound risk of inconsistent and contradictory findings.”” (Arcamm Decision, at para. 60).

[61] As seen in the following paragraphs of the Arcamm Decision, Queen’s submissions were not accepted:

[63] In essence, Queen’s position is that, until it is determined which of the defendants named in the Aviva Subrogated Action, if any, is liable for the damage allegedly suffered by the transformers while they sat de-energized over the summer of 2021 (assuming that the transformers would have been otherwise fit to re-energize), Queen is not obliged to pay Arcamm’s invoices.

[64] I do not accept Queen’s position.

[68] I do not accept Queen’s submissions that simply because there is a multiplicity of proceedings, a decision on Arcamm’s SJM will create a risk of inconsistent or contradictory findings on key issues: I make no determination of Arcamm’s liability, if any, for the damaged transformers.

[69] Queen’s damages claim against Arcamm ought to be determined in the Aviva Subrogated Action and not used, as it is here, as a defence to payment of invoices rendered by Arcamm for services and materials in respect of which Queen has admitted it has no valid dispute. [Emphasis added.]

[71] I conclude that there is no genuine issue for trial with respect to whether Arcamm is entitled to payment for the services and materials it provided in respect of the Property.

[62] The Arcamm Decision makes clear that Queen’s procedural and other objections to proceeding with Arcamm’s SJM were rejected. See, for example, the following paragraphs:

(a) at para. 105, referring to the evidence put forth by Queen to support its position that Arcamm was at fault for damage to the electrical transformers, “the evidence put forth by Queen falls short of establishing liability on the part of Arcamm”; and (b) at para. 105: “Another example in which the evidence put forth by Queen on this SJM falls short, is its acknowledgement that until Aviva took the position that Queen’s claim was not covered by insurance, Queen took no issue with the services and materials provided by Arcamm.”.

[63] At para. 107 of the Arcamm Decision, Queen’s defences are rejected. The factual findings reached on the evidence also undermines the positions taken by Queen by which it sought to avoid its obligation to pay Arcamm and to allocate liability to Avison:

[107] I have considered the evidence put forth on this motion, which I find allows me to make the following factual findings:

(i) Avison represented to Arcamm that it was acting as Queen’s authorized agent and that it had authority to contract with Arcamm on behalf of Queen and to thereby bind and obligate Queen to pay Arcamm for services and materials; (ii) Queen was the owner of the Property; (iii) Avison was not an owner of the Property and at all times, was acting solely as Queen’s agent under the REMSA; (iv) Queen was fully aware of the fact that Avison had engaged Arcamm to supply the services and materials to the Property and for which Arcamm submitted invoices; (v) Queen: a) reviewed and approved the quotes submitted by Arcamm for the services and materials to be provided by Arcamm to the Property; b) and/or its directors, had no direct personal knowledge of the labour and materials supplied by Arcamm and relied upon Avison to ensure that the work performed by Arcamm was done properly and approved by the appropriate authority; c) at no time disputed the work that was done or the quality of the repairs performed by Arcamm; d) knew that Arcamm intended to, and did, submit invoices to Queen for payment in respect of the services and materials provided; e) benefitted from the services and materials provided by Arcamm, by which power was restored to the Property quickly and was maintained throughout the period during which the Property’s transformers were inoperable; and f) submitted proofs of loss to its own insurer, Aviva, in respect of labour and materials supplied by Arcamm, for which Arcamm submitted invoices.

[64] In their costs submissions, both Avison and Arcamm submit that the lengthy materials comprising the Comprehensive Record were required by reason of the position taken by Queen. I accept those submissions. I note also, that, in large part, the Comprehensive Record was made up of evidence led by Arcamm and/or Avison, and was essential to the factual findings made in the Arcamm Decision and the Avison Decision. Ultimately, it was this evidence that undermined the defences put forth by Queen.

[65] Without question, the positions taken by Queen on the Arcamm SJM precipitated the lengthy and detailed evidence presented by Arcamm and by Avison. Also, Queen’s assertion on Arcamm’s SJM that Queen had never retained or contracted with Arcamm [7] and that, in fact, Arcamm had contracted with Avison, left Arcamm little choice but to pursue both Avison and Queen.

[66] I find that the position taken by Queen on Arcamm’s SJM - and particularly with respecting Queen’s relationship with Avison - added significantly to its complexity and to the length of the proceedings. I find also that Queen improperly refused to admit facts found by the court on Arcamm’s SJM, including those set out at para. 107 of the Arcamm Decision. As a result, costs were unnecessarily incurred by Arcamm and by Avison on the Arcamm SJM.

[67] On Avison’s SJM, Queen took the position that it was not liable to indemnify Avison on the basis, in part, that s.11.1 of the REMSA applied. Under that section, Queen did not have to indemnify Avison in with “respect to any liability, loss, damages, costs or expense to the extent suffered as a result of Avison’s “gross negligence or willful misconduct”.

[68] Avison submitted that, on the facts, s.11.1 did not apply and that other sections under the REMSA operated to obligate Queen to indemnify Avison from all losses associated with its defence of the Arcamm Action”. Those submissions were accepted.

[69] Avison succeeded on its SJM against Queen. Queen’s crossclaim against Avison (in the Arcamm action) was dismissed. Avison’s crossclaim against Queen was granted and Queen was ordered to pay Avison’s past and future legal costs, fees, expenses and/or disbursements associated with its defence of the Arcamm action: (Avison Decision, at para. 106).

Importance to the Parties

[70] The amount claimed by Arcamm was significant by any standard and especially so to Arcamm. Also, the unpaid invoices related not only to services rendered but also to out-of-pocket expenses incurred by Arcamm, clearly for the benefit of Queen.

[71] I conclude, therefore, that Arcamm’s SJM was of importance to it.

[72] I find that avoiding payment of amounts owing to Arcamm was also important to Queen, who had expected its insurers to cover the costs related to the unexpected failure of the electrical transformers. However, as between them, it was Arcamm who suffered the greater loss: Queen received the benefit of Arcamm’s services and materials, for which it made no payment, and may recover the cost of those services and materials in the action it has brought as against its own insurer. Also, Queen owns the multi-million dollar building that was the subject of Arcamm’s service and materials, and was in a position to use that building to finance payment of Arcamm’s invoices. As stated at para. 66 of the Arcamm Decision:

[66]. . . As between Queen and Arcamm, I have no hesitation whatsoever in concluding that it is Queen that should bear the cost of restoring power to the Property: Queen has enjoyed the benefit of the services and materials provided by Arcamm, which allowed Queen to carry on its business and to meet its obligations to its tenants. It was at the request and direction of Queen (or at least that of its agent, Avison) that Arcamm supplied Queen with temporary generators, the fuel to run them, and provided and connected replacement transformers. I conclude that it should be Queen, not Arcamm, which should assume those costs while Queen is engaged in a dispute with its own insurers over what expenses are covered by insurance.

[73] Given that it was involved in the litigation by reasons of its contract with Queen, under which it was (as found) acting entirely as Queen’s agent, it was important to Avison that it not be liable to pay Arcamm, nor pay its own significant legal costs associated with defending Arcamm’s claim.

Hourly Rates and Time Spent

[74] In its submissions respecting the “fair and reasonable” amount it should pay in costs to either Arcamm or Avison, Queen asks the court to look at the comparatively modest number of hours spent by Queen’s lawyer as compared to the hours spent by counsel for Arcamm and Avison.

[75] For the reasons above, I accept the submissions made by Arcamm and Avison that the approach suggested by Queen is unfair and ought not to be used: Arcamm and Avison provided detailed and thorough evidence in answer to Queen’s bald assertion that it should not pay Arcamm’s invoices, or, at least, should not pay them yet.

[76] Queen was unsuccessful in its defences and Arcamm succeeded in obtaining judgment on its invoices.

[77] Queen was also unsuccessful in defending Avison’s SJM.

[78] As mentioned above, the materials before the court were treated as one record (the Comprehensive Record) and the factual findings in the Arcamm Decision were binding upon the parties in the Avison SJM (Avison Decision, at para. 49).

[79] While the focus of the Avison SJM was on the contractual rights and obligations of the parties under the REMSA, in making that determination, the court relied upon the Comprehensive Record and the factual findings set out in the Arcamm Decision.

[80] The need for detailed and in-depth evidence, found in the Comprehensive Record, supports the arguments made by Arcamm and by Avison that, given the positions taken by Queen on the two SJMs, the costs each incurred were necessary and reasonable. I accept those arguments.

Reasonable Expectations

[81] Again, I do not accept Queen’s submissions that the time its lawyer spent should be used to gauge the time for which Arcamm or Avison should be compensated. Also, as explained, the defences raised by Queen were such that Arcamm and Avison were forced to respond in a thorough and detailed manner. It has now become trite law that on a summary judgment motion, the parties must lead trump or risk losing. Arcamm and Avison led trump. Finally, and, also as noted, based on and because of the Comprehensive Record, both Arcamm and Avison were successful as against Queen.

[82] For those reasons, I find that Queen should have reasonably expected that the hours reasonably needed to be spent by Arcamm and Avison’s counsel would well exceed the time spent by Queen’s lawyer, whose principal argument was that the facts and circumstances (multiple lawsuits, etc.) were so complex that the SJMs were not appropriate.

Section 86 of the Act

[83] Arcamm references s. 86 of the Act as authority to award substantial or elevated costs. As noted in Brian Stucco Construction Inc. v. Nili-Ardakani, 2021 ONSC 5, at para. 5, s. 86 provides the court with broad discretion to award costs, including on a substantial indemnity basis. However, case law from non-lien actions is still applicable: Brian Stucco, at paras. 7 and 10.

[84] Courts have held that the authority under s. 86 to award elevated costs should be exercised only where there has been “reprehensible, scandalous or outrageous conduct on the part of one of the parties”: Migliazza v. Sandpaul Investments Limited, 2019 ONSC 735, at para. 27, citing Young v. Young, [1993] 4 S.C.R. 3 (S.C.C.).

[85] Costs should not be awarded on a substantial indemnity basis “simply because a party has a weak or even a very weak case”: Migliazzi, at para. 28, citing Bond v. Brookfield Asset Management Inc., [2011] O. J. No. 2760 (S.C.J.).

[86] In Thompson v Carleton University, 2020 ONSC 3479, MacLeod J., determined that on the facts before him, substantial indemnity costs were warranted. Those facts included that the defendant sought “to reduce the statutory holdback by retroactive adjustment to the books of the payor and by advancing arguments that complicate[d] and prolong[ed] the legal proceeding… a “strategy pursued after the fact to defeat a valid lien claim” (at para. 8). In addition, the costs exceeded the amount of the judgment.

[87] In Standard Life v. Elliott, substantial indemnity costs were awarded following the court’s finding that the third party claim advanced by the defendant against the employees of the plaintiff to be an abuse of process and a “tactic” to put pressure on the plaintiff to settle its claim and to obtain “the procedural advantage of multiple examinations for discovery” of the plaintiff’s employees.

[88] The facts in this case are distinguishable from those in Thompson and in Standard Life. Notwithstanding the factual findings in the Arcamm Decision and Avison Decision, which went against Queen, I do not conclude that Queen’s position on the SJM rises to a level that might justify an award of costs on an elevated level: Queen’s positions were in response to the refusal by Queen’s own insurer to pay Arcamm’s claim, on the basis that Arcamm and Avison were potentially liable for Queen’s damages.

Sanderson and Bullock Orders

[89] With respect to its liability to pay costs to Avison, Arcamm asks that the court consider making a “Sanderson” or “Bullock” order.

[90] Sanderson and Bullock orders are relevant where there are multiple defendants, and the plaintiff succeeds against some, but not all of them. See: Moore (Litigation Guardian of) v. Wienecke, 2008 ONCA 162, 90 O.R. (3d) 463, at para. 38. While the general rule is that an unsuccessful defendant pays the plaintiff’s costs, and that the plaintiff pays the successful defendant’s costs (Wienecke, at para. 37), this can lead to an unjust result. Bullock and Sanderson orders alleviate that injustice (Wienecke, at para. 38).

[91] Pursuant to a Sanderson order, the unsuccessful defendant pays the successful defendant’s costs directly. Under a Bullock order, the unsuccessful defendant reimburses the plaintiff for the successful defendant’s costs.

[92] The test for determining whether a Sanderson or Bullock order is appropriate is the same for both types of orders. See: Gardner (Litigation guardian of) v. Hann, 2012 ONSC 2006, at para. 16. The test has two steps:

1. Threshold Question: Whether it was reasonable to join the several defendants together in one action?
2. If so, whether courts should exercise their discretion to award such an order, i.e., would it be just and fair in the circumstances?

[93] The Court of Appeal for Ontario in Wienecke set out four factors that are relevant in determining whether it is appropriate for the court to exercise its discretion (Hann, at para. 17). However, the Court noted that they “need not be applied mechanically in every case” since a determination of costs is discretionary (Hann, at para. 17, citing Wienecke, at para. 45).

[94] The four factors are:

(a) Did the unsuccessful defendant try to shift responsibility to the successful defendant? (b) Did the unsuccessful defendant cause the successful defendant to be added as a party? (c) Are the causes of action independent of each other? (d) Who has the ability to pay costs?

[95] Based on the above factors, and having considered the parties’ submissions, on Arcamm’s SJM, I find that Queen did try to shift responsibility to Avison and caused Arcamm to pursue its SJM against Avison. Also, I find that, as between Arcamm and Queen, Queen is in a better position and is able to pay Avison’s costs.

[96] I hereby fix Avison’s costs of the Arcamm SJM, on a partial indemnity basis at $46,126.50. I further find that it is just and fair in the circumstances for a Sanderson Order to issue whereby Queen’s pays those costs to Avison.

Disposition

[97] For the reasons set out, in the exercise of my discretion and having given consideration to the provisions of r. 57, s.86 of the Act, and applicable case law, I fix and award the following costs:

(1) To Arcamm, the costs of its SJM on a partial indemnity basis in the amount of $148,813 to be paid by Queen. (2) To Avison, its partial indemnity costs in defending Arcamm’s SJM in the amount of $46,126.50, to be paid by Queen. (3) To Avison, pursuant to the REMSA, its full indemnity costs of both SJMs in the amount of $107,628.50 ($153,755 -$46,126.50), to be paid by Queen. (4) The costs awards are inclusive of disbursements and taxes and are payable forthwith. (5) Interest is to accrue on the costs in accordance with the CJA.

L. Sheard J.

Released: July 17, 2023