Court File and Parties

COURT FILE NO.: CV-19-00002785 DATE: 2024 03 14 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Mettko Construction Ltd., Plaintiff (Defendant by Counterclaim) AND: Hauser Realty Corp., Defendant (Plaintiff by Counterclaim)

BEFORE: Chozik J.

COUNSEL: Paul J. Pape and Cristina Senese, counsel for the Plaintiff Emily C. Durst, counsel for the Defendant

Costs Endorsement

[1] The trial in this matter proceeded before me on March 28, 29, 30, April 14, and May 29, 2023. In Reasons for Judgment dated December 08, 2023, I found in favour of the plaintiff Mettko Construction Ltd. (“Mettko”) and awarded damages of $281,345.52, plus prejudgement interest to be calculated at the contractual rate and post judgment interest as per the Courts of Justice Act, R.S.O. 1990, c. C.43, s.129. In its costs submissions, Mettko sets out that the pre-judgment costs are calculated at $268,911.42.

[2] As the successful party, Mettko is presumptively entitled to costs of the proceeding. I have received and reviewed the parties’ costs submissions and supporting materials, including Offers to Settle and Bills of Costs.

[3] Mettko seeks costs of approximately $456,609.81 for this action ($390,663.55 in substantial indemnity costs plus HST plus disbursements of $15,160).

Positions of the Parties:

[4] Mettko takes the position that costs should be awarded at a partial indemnity rate from the date the action was issued (July 2, 2019) until its Rule 49 Offer to Settle was served (September 23, 2020). In that offer, Mettko offered to settle the case for $179,900 plus HST. The offer was inclusive of pre-judgment interest and costs if it was accepted by September 27, 2020. If accepted after September 27, 2020, costs on a substantial indemnity basis and pre-judgment interest on the settlement amount would be calculated in accordance with the Courts of Justice Act, R.S.O. 1990, c. C.43. The defendant, Hauser Realty Corp. (“Hauser”), did not accept that offer. Mettko argues that it beat its offer at trial, and as a result it is entitled to substantial indemnity costs from September 23, 2020 onward.

[5] Hauser does not dispute that Mettko is entitled to costs but argues that the Offer of September 23, 2020 was withdrawn in light of subsequent offers made during various attempts to settle. Hauser argues that costs should be awarded on a partial indemnity scale. Hauser also takes the position that it could not have reasonably anticipated that Mettko would incur legal costs of $456,609 to pursue its $225,000 claim. A costs award in this amount would be unreasonable. Its own costs were $175,000.

Legal Principles:

[6] No party is absolutely entitled to costs in any case. Under s. 131 of the Courts of Justice Act, the court retains wide discretion in ordering costs and in determining quantum. Discretion as to costs is always guided by reasonableness and proportionality. Costs are to be fixed in an amount that is fair and reasonable for the unsuccessful party to pay rather than any exact measure of the actual costs of the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario, (2004), 71 O.R. (3d) 291.

[7] Successful parties are presumed to be entitled to costs unless there is a good reason to rebut the presumption, such as bad behaviour. A “successful party” does not necessarily mean the party who won the issues. It can mean the party who made a favourable offer that would have eliminated the need for extended litigation. Rule 49.10 of the Rules of Civil Procedure provides for substantial indemnity costs to be awarded where a party achieves a result after a trial that is more favourable than its offer, unless the court orders otherwise. The court’s discretion in how it approaches offers to settle must be exercised considering the specific facts and circumstances of the case relative to the factors in r.57.01(1): Boucher.

[8] Modern costs rules are designed to foster three purposes: (1) to partially indemnify successful litigants for the cost of litigation; (2) to encourage settlement; and (3) to discourage and sanction inappropriate behaviour by litigants: Serra v. Serra, 2009 ONCA 395, at para. 8.

Application:

[9] In this case, Mettko was successful at trial. It is not disputed that it is entitled to reasonable costs.

[10] I am of the view that Mettko is not entitled to substantial indemnity costs despite its Offer to Settle dated September 23, 2020. While I accept that Mettko obtained a more favourable result at trial, I find that the offer was subsequently withdrawn or rescinded by Mettko by implication. During mediation in May 2021, the parties exchanged several other offers. In June 2022, Hauser offered to settle for $275,000, slightly less than the damages ultimately awarded. Mettko counter-offered to settle for $300,000 all in and “not a penny less”. The September 23, 2020 offer was no longer on the table by then.

[11] Regardless of the offers exchanged, I am ultimately concerned with the overall fairness of the costs award. I agree with Hauser that the quantum sought by Mettko is not reasonable in the circumstances. It is excessive, having regard to what an unsuccessful litigant could expect to pay for a four-day trial of these issues.

[12] It appears that both parties made genuine attempts to settle this matter without success. Hauser did not engage in any vexatious, malicious, or unreasonable conduct. Both parties agree that this case should never have gone to trial. Both parties made substantial efforts to avoid trial, and then worked effectively to narrow the issues and facts in dispute. The trial was very streamlined, the evidence was very effectively presented and flowed efficiently due to their efforts.

[13] I accept Mettko’s argument that for Mettko, the issues at this trial were important. For Mettko, this was not a simple breach of contract claim because of the allegations in defence of the action that Mettko had failed to perform its core obligations as the construction manager. Mettko had to demonstrate that its performance over the course of the contract was beyond reproach and, as I found, it did so. The trial was unnecessarily complicated because Hauser put Mettko’s reputation at stake. For some reason that remains unexplained, but to its credit, at the end of the day Hauser did not dispute much of the evidence and acknowledged through its evidence at trial that Mettko performed competently under the contract.

[14] I also accept Hauser’s argument that the trial was unnecessarily complicated because Mettko’s theory of the case evolved at trial, resulting in additional costs. The matter started as a construction lien action seeking payment for three outstanding invoices. It was only mid-trial that the damages were particularized as lost profits, and only in closing submissions that the issues really crystalized. I agree that Hauser should not have to bear the costs thrown away to respond to claims that were abandoned at trial. It is also of some consequences that Mettko changed lawyers three times, and had multiple lawyers working on the file whereas Hauser had fewer. All of this would drive up Mettko’s costs through no fault of Hauser. In respect of the motion to restore the matter to the trial list, Mettko sought no costs at the time. No costs were granted, and none should be awarded now.

[15] Having regard to all the circumstances, and weighing all of the factors, I am of the view that reasonable and proportionate costs for this action are $225,000 all inclusive.

[16] Hauser shall pay these costs to Mettko forthwith.

Chozik J. Date: March 14, 2024