Court File and Parties

COURT FILE NO.: CV-15-433-00 DATE: 20230126

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Shelly Legault Plaintiff/ Defendant by counterclaim – and – TD General Insurance Company Defendant/ Plaintiff by counterclaim

Counsel: Ashu Ismail & Peter Murray, Counsel for Ms. Legault Arie Odinocki & Victoria Dale, Counsel for TD Insurance

HEARD: In writing

Reasons on Costs

HEALEY J.

[1] This is a ruling on costs following a 16-day trial. The defendant was the successful party.

[2] The main issue for trial was whether the plaintiff had committed fraud. The decision on all other issues flowed from that initial determination.

[3] The additional issues were whether such fraud entirely vitiated the plaintiff’s claim under her homeowner’s insurance policy and whether the defendant’s counterclaim for repayment of benefits should be granted.

[4] The plaintiff’s claim was for $1M in damages. The plaintiff alleged that the defendant breached the policy and its implied duty of good faith owed to her by failing to provide and/or explain the effect of a Proof of Loss, thereby prolonging the claims process; failing to conduct a fair and thorough investigation into the allegation of fraud; and denying her insurance claim. She also sought special and aggravated damages.

[5] The defendant proved fraud and its counterclaim was granted. The defendant is entitled to its costs. The scale and quantum are in dispute.

[6] The defendant asks that it be awarded costs on a substantial indemnity basis in the amount of $366,219.43 inclusive of fees, disbursements and HST. The plaintiff suggests that costs of $50,000 to $65,000 plus HST and disbursements of $2,654.52 would be reasonable.

[7] The court has broad discretion in deciding whether to award costs, to whom, and in what amount: s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. However, that discretion is to be exercised in accordance with the provisions of an act or the Rules of Civil Procedure, O. Reg. 194: 1465778 Ontario Inc. v. 1122077 Ontario Ltd., 2006 ONCA 35819, [2006] O.J. No. 4248 (Ont. C.A.), at para. 25; Andersen v. St. Jude Medical Inc., 2006 ONSC 85158, [2006] O.J. No. 508 (Div. Ct.), at para. 20; leave to appeal refused, 2006 CarswellOnt 7749 (Ont. C.A.).

[8] Rule 57.01 sets out the factors a court may consider when deciding costs, and the court must adhere to the principle of proportionality set out in r. 1.04(1.1). Despite those factors, the court’s authority under r. 57.01(1) remains discretionary: Ontario v. Rothmans Inc., 2013 ONCA 353, [2013] O.J. No. 2367, at para. 134.

[9] The defendant served an offer to settle on December 23, 2019, in which it offered to pay the plaintiff $1,000. It remained open for acceptance for over two years, being withdrawn five days prior to the commencement of trial.

[10] The withdrawal of the offer does not bar an award of costs on the higher scale. As r. 57.01(4) provides, this court has the authority to award all or part of the costs on a substantial indemnity basis. In exercising that discretion, the court may also consider any written offer to settle, its date and its terms. Even in the absence of an offer that attracts the provisions of r. 49.10, the court must not ignore offers that demonstrate a genuine and continuing effort to settle the action, and pre-trial efforts by counsel to expedite the conduct of the trial, when deciding the appropriate order as to costs: Bifolchi v. Sherar (Litigation Administrator of) (1998), 1998 ONCA 7122, 38 O.R. (3d) 772 (C.A.), at para. 20.

[11] The offer made by the defendant was a genuine effort at compromise, as it would have allowed the plaintiff to avoid the risk of a successful counterclaim in the amount of $207,767.84 plus interest.

[12] The plaintiff also served an offer to settle. It was served in the month before trial and asked for payment in the sum of $455,709.00 plus interest and costs. At trial the plaintiff did not provide evidence substantiating that amount of damages. To be a genuine effort at compromise, there must be some realistic evidentiary basis for achieving a result at trial that is as good as, or better, than put forth in the offer. Such evidence was not brought forward by the plaintiff in this case.

[13] The law allows for an award of substantial indemnity costs only in narrow circumstances, which is where an offer to settle is engaged or whether the losing party has engaged in conduct, either in the proceeding or in the circumstances giving rise to the cause of action, that is worthy of being sanctioned: Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, at paras. 29-30, quoting Young v. Young, 1993 SCC 34, [1993] 4 S.C.R. 3, at p. 134 and Mortimer v. Cameron (1994), 1994 ONCA 10998, 17 O.R. (3d) 1 (C.A.), at p. 23; Smith v. Inco Ltd., 2013 ONCA 724 at para. 61; and Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766, at para. 8.

[14] The plaintiff perpetrated a fraud on the defendant, sued for $1M, and put the defendant through litigation for seven years, including a lengthy trial. That is conduct that should attract the sanction of costs on the higher scale.

[15] In determining the appropriate amount of costs to which the plaintiff is entitled, the principles that guide my decision are those articulated in Andersen, at para. 22:

(1) The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in Rule 57.01(1): [Boucher v. Public Accountants Council for the Province of Ontario, 2004 ONCA 14579; Moon v. Sher, 2004 ONCA 39005; and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC, 2005 ONCA 1042].

(2) A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case: Boucher. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant: [Zesta Engineering Ltd. v. Cloutier, 2002 ONCA 25577, at para. 4].

(3) The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: Rule 57.01(1)(0.b).

(4) The court should seek to avoid inconsistency with comparable awards in other cases. “Like cases, [if they can be found], should conclude with like substantive results”: [Murano v. Bank of Montreal, 1998 ONCA 5633] at p. 249.

(5) The court should seek to balance the indemnity principle with the fundamental objective of access to justice: Boucher.

[16] The overarching principle when fixing costs is that the amount of costs awarded be reasonable in the circumstances: Davies, at para. 52.

[17] The plaintiff does not object to the rates charged, but does object to the total time spent on the case by the defendant. Plaintiff’s counsel has correctly summarized the defendant’s Bill of Costs as follows:

STAGE LAWYERS TIME FULL FEES PLEADINGS 2 Lawyers 61.6 hrs $16,324.00 DISCOVERY 3 Lawyers* 134.6 hrs $29,597.00 PRE-TRIAL 2 Lawyers 92.1 hrs $22,480.00 TRIAL PREP 4 Lawyers 545.8 hrs $134,641.50 TRIAL PREP** 2 Lawyers 293.3 hrs $70,206.50 16 Day Trial 2 Lawyers 198 hrs $52,080.00

*one lawyer was an articling student ** this is in-trial prep versus before trial preparation Total: $325,329.00

[18] There are several areas in which the plaintiff submits that the hours are excessive. One is in-trial preparation time. She submits that two lawyers were not needed. I cannot agree. With many witnesses and a trial exceeding two weeks, in a case that has been litigated for seven years, having a second chair was reasonable. And the lawyer chosen for the role was a junior lawyer with a rate commensurate with that experience, so it was not the case of “over padding” with two senior counsel. The hours docketed by these two counsel during the trial was 293.3. With a six hour court day, allowing for two hours prep for each hour of court time for the 16 days, the calculation is 384 hours. The docketed time is much less. I cannot agree that it is excessive. Nor is the docketed time for the trial itself excessive, as it works out to only slightly more than six hours each day of trial.

[19] The plaintiff’s counsel also makes a submission that the time spent on preparing the witness Wendi Ogden, and having her testify, is time that should not be taken into account because she was shown to be dishonest, and only added unnecessarily to the costs on both sides. This is a conclusion impossible to reach, as the testimony of the plaintiff and this witness was thoroughly intertwined. As this court concluded, it was in concert with one another that they made a mutually beneficial plan that involved using alternative living expenses for something other than what those funds were intended.

[20] Where I do agree with the plaintiff is the role played by the defendant’s inadequate investigation in prolonging the length of the trial. This is the work that went on between March 22 and May 22, 2022. Instead of putting together a comprehensive investigation, the investigation left both sides to have to try to address the issue of fraud by calling numerous witnesses. This increased the amount of work to prepare the case for trial. The plaintiff should not have to pay for all of that. For example, one of the most damaging items of evidence was obtained by defence counsel from a witness employed by a pool company, not the investigator, either during or shortly before the start of the trial.

[21] In this time period, four lawyers worked on the case for a total of 505.8 hours. That amounts to two solid months preparing this case. That time is excessive, for the reason stated above and in general. However, I do take into consideration that some of this time was spent preparing legal briefs for trial to respond to anticipated tactics and arguments raised by plaintiff’s counsel, which most certainly translated into less interruption of evidence and reduction of trial days.

[22] Also, at least one of the witnesses called by the plaintiff was superfluous to the case, the defendant’s vendor manager. His evidence did nothing to support the plaintiff’s last minute allegation of collusion between the defendant and the restoration company hired to quote on refurbishing the plaintiff’s property following the fire.

[23] The time spent by defendant’s counsel also has to be viewed within the context of a case that presented a novel issue in relation to alternative living expenses. It was reasonable for defendant’s counsel to expend considerable resources to research this issue, and the outcome of the trial had particular importance.

[24] I do not agree that other areas of the Bill of Costs show inordinate time, as suggested by plaintiff’s counsel. The case dragged on for seven years and should have been able to have been tried or resolved before the pandemic. It was the plaintiff’s obligation to move it forward at a reasonable pace. Delay almost always equals increased costs as time is spent in file review and getting back on track. There will have been increased time at the discovery stage, for example, which stretched on for three years according to the Bill of Costs.

[25] The plaintiff has had counsel for years. Plaintiff’s counsel did not provide a Bill of Costs, or any other indication of time spent on the case since its inception. It is beyond doubt that the plaintiff had been forewarned of a significant cost order being made against her in the event that she was unsuccessful.

[26] Disbursements are also in dispute. The plaintiff submits that all back up documentation is required to be produced to the court as a prerequisite. There is no binding law to that effect. Disbursements must have actually been incurred and must be a reasonable and justified expense.

[27] As Mr. Odinocki submits, all back up documentation was produced to Ms. Ismail before her submissions were provided to the court. Accordingly, if she had a specific concern about any expense after seeing that it was incurred, that could have been addressed in her written submissions.

[28] The choice of the losing party to run a paperless trial does not exempt her from paying the copying costs of the winning party. While the copying costs are high, so too was the volume of documents submitted as exhibits, and other briefs for the court’s and witnesses’ assistance.

[29] Finally, hotel costs of $7,518.54 are included in the disbursements. Again, no binding authority has been provided to the court to convince me to disallow such a disbursement. It would be different if mileage and meals had been included, but the Bill of Costs refers only to two rooms. The plaintiff suggests that this cost could have been avoided if the defendant had chosen local counsel to conduct the trial, and the cost of accommodation for out of town counsel should not have to be absorbed by the plaintiff. The problem with this reasoning is that the defendant’s choice of counsel was local to its head office throughout the case, both being in Toronto; imagine the additional cost of having to switch to counsel in Midland or Barrie as the trial approached.

[30] There is nothing in the disbursements that I disallow, as I do not find them excessive or arbitrary. They total $35,359.84.

[31] Despite reaching the conclusion that substantial indemnity costs should be paid, courts have made clear that a calculation of hourly rates and time is not the object of the exercise. As Farley J. stated in BNY Financial Corp.-Canada v. National Automotive Warehousing Inc., [1999] O.J. No. 1273 (Ont. C.J.), at p. 4: “Rather essentially the question to be considered is what is the case reasonably worth in the circumstances.” Further, there must be proportionality between what is at stake and what is spent. The defendant had correctly assessed for a long time before this trial arrived that the plaintiff had not produced the evidence to prove her damages. It was highly unlikely, impossible in fact, for her to prove that her damages exceeded the $144,291.79 already paid out on her behalf. Therefore, if fraud was not proven, all that was at stake for the defendant was the counterclaim in the amount of $207,767.84 plus interest.

[32] The defendant’s actual costs were $325,329. Taking all of the above into consideration, I would reduce those costs to $250,000. The partial indemnity calculation at 60% is $150,000, making a substantial indemnity award of $225,000. The addition of tax and disbursements brings the total amount to $289,609.84.

[33] Having regard to all of the above, I find that a fair and reasonable cost order in this case is $289,609.84.

[34] This court orders that the plaintiff shall pay the defendant its costs of this action fixed in the amount of $289,609.84.

HEALEY J. Released: January 26, 2023