Court File and Parties

COURT FILE NO.: CV-14-5976 DATE: 2024/05/24

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

STEELE INDUSTRIAL SUPPLIES INC. Plaintiff

- and -

SHARON ELLIOTT and THE ESTATE OF KERRY ELLIOTT, Deceased Defendants

BEFORE: M.G. Ellies J.

COUNSEL: Joseph D. Kennedy, for the Applicant Paul E. Trenker, for the Defendants

HEARD: In writing

Reasons for Decision on Costs

Background

[1] In 2014, Steele Industrial Supplies Inc. (“Steele”) commenced this action for damages resulting from Mrs. Elliott's theft of money while she was working as Steele’s bookkeeper.

[2] In 2019, Steele brought a motion for summary judgment on its claim and the defendants brought a completing motion to dismiss Steele's claim under the Limitations Act, 2002, S.O 2002, c. 24, Sched. B. For reasons released on June 28, 2019, I dismissed the defendants’ motion, held that Mrs. Elliott was liable to Steele for the full amount she stole, and found that her deceased husband had been enriched by her thefts: Steele Industrial Supplies Inc. v. Elliott, 2019 ONSC 3904. However, because I was unable to determine the amount stolen or by which Mr. Elliott had been enriched, I ordered that those issues proceed to a trial.

[3] For reasons released on December 6, 2019, I assessed the costs of the summary judgment motion at $15,000, all-inclusive, in favour of Steele: Steele Industrial Supplies Inc. v. Elliott, 2019 ONSC 7092. However, I ordered that those costs be paid only in the event that Steele succeeded at demonstrating that Mrs. Elliott stole more than the $100,000 she had paid by way of restitution in the criminal proceedings. The matter then proceeded to trial.

[4] For reasons released on October 3, 2023, I found that Mrs. Elliott had stolen $204,670 from Steele: Steele Industrial Supplies Inc. v. Steele, 2023 ONSC 5527. Deducting the sum of $100,000 that Mrs. Elliott had already paid, I ordered that she pay Steele the further sum of $104,670. I invited written costs submissions from the parties which, unfortunately, I have only now come to consider.

Positions of the Parties

[5] Steele seeks partial indemnity costs in the total amount of $72,177.58. This amount consists of disbursements in the amount of $42,752, fees of $14,425.58 (including HST), and the $15,000 costs ordered following the motions. It submits that this amount is modest, given the importance of the issues to the parties, the complexity of the underlying facts, and the costs that the defendants should reasonably have expected to pay.

[6] The defendants submit that nothing more than the $15,000 costs of the motions should be paid. They submit that all of the issues in the trial could have been dealt with in the summary judgment motion, and would have been, but for Steele's failure to meet its evidentiary burden and the fact that, after the motion, Steele's experts expanded the scope of their evidence to encompass the period of 2002-2006, in addition to the 2006-2012 period to which it had restricted its evidence previously. They also submit that, as the evidence related to both periods of time, the court ultimately accepted the methodology of their experts over those of the plaintiff.

[7] As I will explain, I am unable to accept the defendants’ arguments and agree with those of the plaintiff.

Analysis

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

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.

[9] Rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, sets out a non-exhaustive list of factors the court may consider in exercising its discretion under s. 131(1). In the analysis that follows, I will address the parties’ positions by reference to the factors listed under r. 57.01(1) that have been relied upon by the parties, as well as those I believe are relevant, but not necessarily in the order in which they are listed in the rule.

The Amount Claimed and the Amount Recovered in the Proceeding

[10] The amount recovered by Steele fell well short of the amount claimed in its statement of claim. As I set out in my October 2023 reasons, the owner of Steele testified that the company had lost approximately $640,000 due to Mrs. Elliott's thefts. This was almost $200,000 higher than the amount Steele's experts, MNP, had arrived at in their highest estimates. The amount recovered of $204,670 is more than $200,000 less than MNP's lowest estimates.

[11] As the defendants submit, the amount recovered falls more in line with their experts’ estimates. In its 2018 report, which dealt only with the loss incurred during the 2006-2012 period, KPMG estimated the loss at between $67,163 and $164,648. In its 2021 report, which also encompassed the 2002-2006 period added by MNP to its 2021 report, KPMG estimated the total loss at between $101,305 and $248,273.

[12] As the defendants also correctly submit, I ultimately disagreed with the approach adopted by MNP in its 2021 report of using total cash deposits, rather than net cash deposits, as it had used in its 2018 report. However, I also disagreed with KPMG's characterization of many of the $53,855 in “unsupported possibly cash deposits” as being non-cash deposits and also with KPMG's deduction of $43,620 of possible credit card advances from the money stolen and spent at Rama.

Any Offers to Settle

[13] Ordinarily, the fact that the plaintiff recovered significantly less than the amount it sought would weigh in favour of a possible reduction in the amount of costs awarded. However, r. 57.01(1) also allows the court to consider any offers to settle, even if those offers do not attract the cost consequences set out in r. 49. In my view, these factors neutralize one another in this case.

[14] Although the plaintiff recovered less than it sought, it still recovered significantly more than the defendants were willing to pay. The defendants served a r. 49 offer to settle in the all-inclusive amount of $50,000. [1] Considering the $100,000 already paid by Mrs. Elliott as restitution, but leaving aside the offer's all-inclusive nature, this amount fell more than $50,000 short of the amount Steele eventually recovered. It also fell about $98,000 short of KPMG's highest estimate for the 2002-2012 period and about $14,000 short of its high estimate for the 2006-2012 period.

[15] Given this shortfall in the offer, I am inclined to give little to no weight to the shortfall in the recovery. In any event, as I will explain, I do not consider the amount sought by the plaintiff for costs as being at all out of proportion to the amount recovered.

The Complexity of the Proceeding

[16] I agree with the plaintiff that the proceeding was relatively complex. This was necessarily the case because Mrs. Elliott's evidence about the amount of the loss could not be relied upon and because there was more than one reasonable way to estimate the loss from the other available evidence.

[17] In my view, this factor would weigh in favour of a higher costs award, if one was being sought.

The Importance of the Issues

[18] Steele submits that this factor weighs in favour of a higher costs award because the issues were important to the parties. However, I do not see this factor as weighing much, if at all in the assessment of costs in this case.

[19] In some cases, the importance of the issues to the parties has been relied upon to justify an award of costs that is disproportionate to the amount recovered: see, for e.g., 1258917 Ontario Inc. v. Daimler Truck Financial, 2012 ONSC 4094 (Div. Ct.). In other cases, the importance of the issues to the public, as opposed to the parties, has been relied upon either to increase or to decrease the costs that an unsuccessful party might otherwise pay: see, for e.g., Elliot v. Waterloo Regional Police Services Board, 2012 ONSC 2881 (increase); Friends of Toronto Public Cemeteries Inc. v. Public Guardian and Trustee, 2020 ONCA 509 (decrease).

[20] For reasons I will come to, I do not view the amount sought by the plaintiff as being disproportionate to the amount recovered. Therefore, I do not see this factor as being significant in this case.

The Conduct of Any Party that Tended to Lengthen Unnecessarily the Duration of the Proceeding

[21] The defendants make two arguments that can be considered under this factor.

[22] The first is that it was the plaintiff's fault that I was unable to fairly and justly determine the amount that Mrs. Elliott had stolen and by which Mr. Elliott had been enriched in the summary judgment motion. The defendants submit that it was open to the plaintiff to have called sufficient evidence to meet its burden at the motion and that it simply failed to do so.

[23] However, as I wrote in my reasons on the motion, at para. 56, the reason I was unable to determine the amount of money stolen and by which Mr. Elliott had been enriched related to the difficulties counsel and I had interpreting the reports of the experts retained by both sides, not just that of the plaintiff.

[24] The second argument made by the defendants is that, by expanding the scope of its experts’ report to include the 2002-2006 period, the plaintiff lengthened the proceeding by increasing the complexity of the evidence and the issues. This is true. It is also true, as the defendants assert, that I wrote in an endorsement dated July 8, 2021, that any financial prejudice suffered by the defendants as a result of having to respond to the 2021 MNP report could be compensated for in costs, regardless of who wins.

[25] However, as I later wrote in my October 2023 reasons, at para. 85, it was appropriate for MNP to expand the scope of its review because MNP had initially established that scope based on Mrs. Elliott's discovery evidence that she started stealing from the plaintiff in 2007, when she started gambling, whereas it became clear later that she began gambling much earlier.

[26] For these reasons, I do not accept that this factor should weigh in favour of a reduction in the costs awarded to the plaintiff.

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

[27] The plaintiff submits that the amount it seeks for costs falls within the range of costs that an unsuccessful party could expect to pay. No issue is taken by the defendants with this submission by the plaintiff, and rightfully so, in my view.

[28] As I set out earlier, the total amount sought of $72,177.58 includes disbursements of $42,752, inclusive of taxes. This case required and turned on the evidence of the forensic accountants. Although I do not know the total amount paid by the defendants for their expert evidence, the defendants have indicated that they paid a further $13,787.32 to KPMG just to respond to the expanded scope of MNP's evidence. It is likely that they paid more than that for KPMG's first report, which would have required KPMG to become familiar with all of the evidence, some of which formed the basis for the opinions expressed in their second report. Therefore, the defendants ought to have expected to pay disbursements in the range sought by the plaintiff.

[29] As to the further sum of roughly $30,000 sought for costs, considering that approximately one-half of that amount relates to the motions, the balance is modest as an award for costs following a trial of about three days duration involving expert evidence.

Conclusion

[30] In exercising the court's discretion to award costs, the overriding principle is to fix an amount that is fair and reasonable: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), at para. 24; Coventree Inc. v. Lloyds Syndicate 1221 (Millenium Syndicate), 2011 ONSC 6660, at para. 1; see also, Zesta Engineering Ltd. v. David Cloutier, 21 C.C.E.L. (3d) 161, at para. 4; Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 75 O.R. (3d) 638 (C.A), at para. 8; Burr v. Tecumseh Products of Canada Ltd., 2023 ONCA 135, at para. 127. Considering all of the foregoing factors, it is my view that the amount sought by the plaintiff satisfies this principle.

[31] For these reasons, the defendants shall pay to the plaintiff the sum of $72,177.58 for costs.

M.G. Ellies J. Released: May 24, 2024

Footnotes

[1] The defendants’ submissions indicate that the defendants offered to pay “a further $50,000 towards settlement” after MNP expanded the scope of its review. However, the submissions of both parties refer to and include copies of only one offer, namely an offer dated October 7, 2021, in the total amount of $50,000.