Court File and Parties

COURT FILE NO. CV-18-00135657 DATE: 20230719

ONTARIO SUPERIOR COURT OF JUSTICE

IN THE MATTER OF the Construction Lien Act, R.S.O. 1990, c. C.30

B E T W E E N:

BENOIT CONSTRUCTION INC. Plaintiff

- and –

BAWA ORGANIZATION INC. and HARD AT WORK INC. Defendants

WOODLEY, J.

COSTS RULING FOLLOWING TRIAL

OVERVIEW

[1] The Plaintiff, Benoit Construction Inc. (“Benoit”) commenced a claim for damages for breach of contract against the Defendant, Hard at Work Inc. (“HAW”) relating to work and services provided for the framing and construction of a luxury residential home project located in King City, Ontario (“the property”).

[2] At the trial of the action Benoit sought payment in the amount of $135,199.79, relating to a Revised Customer Contract dated December 12, 2017 (the “Contract”), and related subsequent verbal agreement for the rental of a telehandler (the “Verbal Agreement”), as follows:

i. Amount Unpaid from Invoice dated March 16, 2018: $25,713.79; ii. Equipment rental invoice for Magni telehandler: $72,320.00; iii. Holdback: $ 7,157.00; iv. Balance due on the Contract $30,000.00.

[3] Following the trial, I determined that HAW was required to pay to Benoit the total sum of $144,950.97 inclusive of HST, plus interest, as follows:

i. $25,713.79 on account of the March 16, 2018 invoice; ii. $79,477.00 on account of the April 23, 2018 invoice; and iii. $39,760.18 for damages for breach of contract.

[4] As for the issue of costs, HAW was ordered to pay to Benoit its costs of this action, as may be agreed and failing agreement as fixed by this Court.

THE ISSUE

[5] The sole issue to be decided is the appropriate amount of costs payable to Benoit.

THE FACTS

[6] The facts are outlined in my reasons for decision reported as Benoit Construction Inc. and BAWA Organization Inc. and Hard At Work Inc., 2023 ONSC 1678 and are not repeated in any detail herein.

[7] The specific facts relevant to the within costs decision are as follows:

i. The Plaintiff Benoit Construction was wholly successful at trial and obtained a judgment requiring the Defendant HAW to pay to them the sum of $144,950.97 inclusive of HST, plus interest; ii. The Defendant HAW was not entitled to any amount on account of their counterclaim of $125,000; iii. Prior to trial, the Plaintiff Benoit made an offer to settle the proceeding for $75,000 plus $15,000 in costs which offer Benoit succeeded at trial; and iv. The trial was lengthy and hard fought by both sides.

THE LAW AND ANALYSIS

Entitlement to Costs

[8] Section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides that subject to the provisions of an Act or the rules of court, the costs of and incidental to a proceeding or 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.

[9] The general principle is that a successful party is entitled to costs. It is accepted that this general principle should not be departed from unless there is good cause to do so.

[10] Section 86(1) of the Construction Lien Act, R.S.O. 1990, c. 30, as amended, provides the Court with authority to award costs on a substantial indemnity basis.

[11] Rule 49.10 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, provides that where a plaintiff has made an offer to settle at least seven days prior to the commencement of the hearing, that is not withdrawn, and does not expire before the commencement of the hearing, and is not accepted by the defendant, and the plaintiff obtains a judgment as favourable as or more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date of the offer to settle was served and substantial indemnity costs from that date unless the court orders otherwise.

[12] Pursuant to Rule 57 of the Rules of Civil Procedure, R.R.O. 1990 Reg. 194, in exercising my discretion under s. 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 made in writing,

i. 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; ii. 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; iii. the amount claimed and the amount recovered in the proceeding; iv. the apportionment of liability; v. the importance of the issues; vi. the conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding; vii. whether any step in the proceeding was, 1. improper, vexatious or unnecessary, or 2. taken through negligence, mistake or excessive caution; viii. a party’s denial or refusal to admit anything that should have been admitted; ix. whether it is appropriate to award any costs or more than one set of costs; and x. any other matter relevant to the question of costs.

[13] Nothing in Rule 57 affects the authority of the court under s. 131 of the CJA to award all or part of the costs on a substantial indemnity basis or to award costs that represents full indemnity.

[14] I am required to fix costs in all but exceptional cases. This is not an exceptional case, and I will fix the costs.

Amount Sought

[15] Counsel for Benoit provided a Bill of Costs/Costs Outline detailing the work completed and time spent on the matter. Benoit seeks costs on a complete indemnity basis fixed at $228,826.01 inclusive of HST and $6,500 plus HST for cost submissions. Alternatively, Benoit seeks costs on a substantial indemnity basis at $184,620.11.96 inclusive of HST plus $6,500 for cost submissions. In the further alternative, Benoit seeks costs on a partial indemnity basis in the amount of $140,414.35 inclusive of HST and $6,500 plus HST for cost submissions.

[16] Counsel for HAW claims that its fees total $127,398.18 inclusive and that the fees sought by Benoit are excessive and that Benoit’s lawyers docketed 300.55 hours more than HAW’s lawyers on the file. HAW notes that the difference between the fees paid by HAW and the fees owed by Benoit is $108,772.83, and in fixing costs the court should be mindful of the principle of indemnity to the successful litigator and the amount of costs that an unsuccessful party could reasonably be expected to pay.

[17] HAW submits that the fair and reasonable costs on a partial indemnity basis would be $65,000 but acknowledges that an offer to settle was made and therefore proposes costs fixed at $89,000.

Cost Considerations

[18] HAW submits that the cost award should reflect what the Court views as a fair and reasonable amount that should be paid to the successful party rather than an exact measure of the actual costs of the successful litigant. See Boucher v. Public Accounts Council (Ontario), 2004 CarswellOnt 2521, ONCA wherein the ONCA ordered the total sum of $144,950.97 inclusive of HST plus interest. In Boucher the ONCA determined that when deciding what is fair and reasonable, the expectation of the parties concerning the quantum of costs is a relevant factor.

[19] The focus in awarding costs is what is fair and reasonable having regard to all the circumstances of the case, including any offers to settle that have been exchanged.

[20] As noted by Justice Lax in Anderson v. St. Jude Medical Inc., the principles to consider in fixing costs applicable to the present case are as follows:

i. Discretion must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in Rule 57; ii. Consideration of experience, rates charged and hours spent is appropriate but subject to the overriding principle of reasonableness as applied to the factual matrix of the case; iii. The reasonable expectation of the unsuccessful party is one of the factors to consider in determining what is fair and reasonable; iv. The court should avoid inconsistency with comparable awards in other cases; and v. The court should seek to balance the principle of indemnity with the fundamental objective of access to justice.

[21] Benoit argues that prior to the litigation that HAW improperly advanced a set of self-serving allegations as grounds for termination to avoid paying the amounts properly due. Benoit further submits that HAW’s claims that required Benoit’s response were unsubstantiated and frivolous. Benoit claims that as HAW was not entitled to any damages in respect of its counterclaim that they were wholly unsuccessful. As such, and in consideration of the fact that Benoit served an offer to settle that was not accepted or bested at trial, Benoit submits that it is entitled to be indemnified for its costs to prosecute the lien action, discredit, and disprove HAW’s breach of contract theory, and to dismiss HAW’s baseless counterclaim in addition to their entitlement for costs on a complete indemnity basis for proof of Benoit’s claims.

Reasonableness of Hourly Rates

[22] Dealing first with the issue of proportionality, time spent, rates charged, and the expectation of the parties, I note as follows:

i. Between May 4, 2018 and March 24, 2022 Benoit’s lawyers spent 178.3 hours and HAW’s lawyers spent 129.5 hours for a difference of 48.8 hours; ii. Between March 25, 2022 (the date of the Offer to Settle) and current, Benoit’s lawyers spent 401.1 hours and HAW spent 92.95 hours for a difference of 308.15 hours.

[23] There is a great difference in the number of hours docketed by each law firm. The difference may be explained by many factors including the experience and year of call of the trial lawyers which difference is often balanced through the lawyers hourly billing rate.

[24] In the present case, Benoit’s lawyers were Mr. Moubarak (prior to trial) and Mr. Frustaglio (at trial). Mr. Moubarak was called to the bar in 2007 and charged $375 to $400 per hour and Mr. Frustaglio, was called to the Bar in 2015 and charged $350 to $400 per hour.

[25] HAW’s lawyers were Mr. Lo Faso and Ms. Romita. Mr. Lo Faso was called to the Bar in 1993 and charged $525 - $550 per hour and Ms. Romita was called to the Bar in 2019 and charged $200 to $300 per hour.

[26] Both law firms utilized the services of a law clerk with a billing rate of $180 (Benoit) and $140 (HAW) and both law firms utilized one lawyer at trial. In this regard, I find the law firms to have acted reasonably in an effort to reduce trial costs.

[27] With respect to the reasonableness of the hourly rates applied, the costs guideline published by the Costs Sub-Committee of the Civil Rules Committee provides a (somewhat outdated) guideline for applicable hourly rates. Apart from this guideline, I am aware of the varying rates charged by lawyers throughout the Central East Region as I fix costs in civil proceedings on a regular basis.

[28] Considering the year of call of the individual lawyers involved and the relative experience and skill exhibited by those lawyers who appeared at trial, I find that the rates charged by the lawyers for Benoit and HAW to be reasonable and in keeping with the range of usual rates charged by lawyers practising in the Central East Region.

[29] As for the overall reasonableness of the costs claimed, the costs claimed by Benoit outweigh the damages awarded at trial. Having said this, however, I found Mr. Frustaglio to be eminently prepared, purposeful, and concise. It is no surprise that Mr. Frustaglio’s success at trial was achieved, in part, due to long hours and hard work. It was clear that counsel put the work into the file. That does not, however, mean that counsel will be paid for all hours dedicated to the file. Proportionality and the expectation of the parties remains a relevant consideration when fixing costs.

[30] The question remains as to what is reasonable in the overall circumstances of the case.

[31] Generally, I am of the view that a cost award should not exceed the results achieved at trial. However, there are exceptions.

[32] Pursuant to s. 86 of the Construction Lien Act, in a construction lien proceeding, the Court has discretion to exercise its authority to award costs in excess of the judgment amount. See Kalogon Spar Ltd. V. Papageorge, 2020 ONSC 3234, and Bellissimo Excavating Ltd. V. Ding, where the Court ordered costs amounting to 200% of the judgment amount. See also Royal Oak Railing & Stair Ltd. v. MyHaven Homes Ltd., 2016 ONSC 423, where the Court awarded costs which amounted to 600% of the judgment amount.

Rate of Costs to Apply: Complete, Substantial or Partial Indemnity

[33] Counsel for Benoit rely upon several cases where costs on a complete indemnity are awarded in situations where the plaintiff intended to mislead the Court and deceive it with respect to material facts. More specifically, in The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al., the Court awarded full indemnity costs against the plaintiff emphasizing that the “repeated fabrication of evidence and the repeated untruths” elevated the case to the realm of full indemnity costs. See also the cases cited in the above paragraph.

[34] In the present case, I found that the facts warranted denunciation such that an award of damages for breach of contract was appropriate. I further found that had damages for breach not been awarded, Benoit would have been entitled to an award of punitive damages due to acts of bad faith and unfair dealing.

[35] As noted in the reasons for decision at trial in this case, the conduct of HAW in their dealings with Benoit forced the claim forward and lengthened and complicated the proceedings at trial. Benoit was totally successful at trial in their claim and with respect to the counterclaim and are entitled to their costs.

[36] Additionally, Benoit served an offer to settle on March 25, 2022, which is conceded by HAW to attract substantial indemnity costs for the period March 25, 2022 forward pursuant to Rule 49.

[37] While the facts of this case are extremely close to warranting costs on a complete indemnity basis, there was no evidence of any intent to mislead the court by HAW’s principals (Mr. and Mrs. McCarthy). There was evidence, however, of efforts by HAW to get their “ducks in line” before terminating the contract amounting to acts of bad faith and unfair dealing. In the circumstances, considering all the evidence introduced at trial, I find that an award of costs based on a substantial indemnity basis for the entirety of the file to be appropriate.

Determining Overall Reasonableness of Costs Claimed

[38] As noted by Rule 57, proportionality, the conduct of the parties, and the expectation of the losing party as to their liability for costs are also matters to be considered in a cost ruling.

[39] In the present cases, based on the evidence at trial, HAW breached their contract with Benoit, refused to pay Benoit what they were promised, and then submitted an unsubstantiated and ill-advised counterclaim based on facts unproven at trial. HAW was wholly unsuccessful at trial and are responsible for the costs incurred by Benoit at trial on a substantial indemnity basis throughout the entirety of the court proceeding.

[40] The question remains what is reasonable, proportionate, and just in the circumstances of this case.

[41] HAW’s lawyers charged significantly less than Benoit’s lawyers. However, that does not mean that Benoit’s lawyers fees were unreasonable, nor does it mean that HAW did not understand the risks of litigation and the cost liability that they may be subject to pay if they were unsuccessful.

[42] While I do not accept that Benoit is entitled to recover from HAW all fees charged to them by their lawyers, having reviewed the Bill of Costs/Costs Outline of both Benoit and HAW, having considered the evidence raised at trial, the relative merits of each of the parties’ positions, the results achieved at trial, the amount in dispute relating to both the claim and the counterclaim, and having considered the able submissions of counsel, I conclude that Benoit is entitled to costs on a substantial indemnity basis as adjusted by me on the basis of proportionality and reasonableness.

[43] The lawyers for Benoit expended a great deal of time and effort in pursuing the litigation on behalf of their clients and were the successful party. Having reviewed the time dockets submitted to the period prior to March 25, 2022, I have reduced the amount noted to be docketed by $15,000 primarily on the basis of duplication, with the said reductions being applied roughly as follows:

i. drafting of the pleadings (-10 hours), ii. preparation of affidavit of documents and discovery (-10 hours); iii. cross-examination on claim for lien (-10 hours); iv. preparation and attendance at first pre-trial (-10 hours); and v. preparation and attendance at third pre-trial (-10 hours).

[44] As for the time dockets submitted for the period following March 25, 2022, I have reduced the amount noted to be docketed by $50,000 primarily on the basis of duplication, with the said reductions being applied roughly as follows:

i. Drafting and preparation of affidavits for trial (-25 hours); and ii. Preparation for trial and conduct trial (-10.8 hours RM) + (-80 hours BH/JF).

[45] As a result of the foregoing adjustments, I find that the assessable fees charged by Benoit’s lawyers are:

i. $62,522.50 - $15,000.00 = 47,522.50 + $6,177.93 HST + $6,234.87 disbursements = $54,375.30; and ii. $133,078.50 - $50,000.00 = $83,078.50 + $10,800.21 + $1,562.00 disbursements = $95,440.71 iii. For total assessable fees and disbursements of $149,816.01 on a substantial indemnity basis @ 80% = $119,852.01.

Disposition

[46] In exercising my discretion to determine the appropriate award of costs payable, I have considered the provisions of the Construction Lien Act, the provisions of s. 131 of the Courts of Justice Act, the general considerations applicable to calculating costs, the considerations set out at Rules 49 and 57, the conduct of the parties, the Bill of Costs/Costs Outlines, filed by both parties, the results obtained at trial, together with the issues of proportionality and reasonableness, the complexity of the proceeding, and the importance of the issues to the parties.

[47] Having reviewed and considered all the above factors, I find that a fair, reasonable, and proportionate award of costs in the present case fixed on a substantial indemnity basis at $119,852.01 inclusive of HST, interest, and disbursements for all costs sought, plus $1,000.00 inclusive relating to the cost submissions, for a total amount payable by HAW to Benoit in the amount of $120,852.01, payable within 60 days of today’s date.

Justice S.J. Woodley

Released: July 19, 2023