BRACEBRIDGE COURT FILE NO.: CV-20-54 and CV-20-54-A1

DATE: 20241210

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

744185 Ontario Incorporated o/a Air Muskoka and Dave Gronfors

Plaintiffs

– and –

Attorney General of Canada

Defendant (Moving Party)

– and –

District Municipality of Muskoka

Third Party (Moving Party)

Paul Daffern, for the Plaintiffs

Roger Flaim and Tengteng Gai, for the Defendant (Moving Party), Attorney General of Canada

Daniel Szirmak, for the Third-Party Defendant, District Municipality of Muskoka, Third Party (Moving Party)

HEARD: In Writing

REASONS FOR DECISION ON COSTS

HEALEY, J.:

OVERVIEW

[1] The defendants, the Attorney General of Canada (“Canada”) and the District Municipality of Muskoka (the “District”) both brought successful motions to strike the statement of claim, and now seek their costs of the action and the motion. Where an interlocutory step results in a final order that disposes of the entire action, costs of the entire proceeding may be awarded: Persaud v. Bratanov and Unifund Assurance Co., 2012 ONSC 6870.

[2] The claim sought $5 million from Canada for causes of action stemming from the 1980s through to present day. Canada in turn claimed contribution and indemnity from the District for the entire amount of the plaintiffs’ claim because so many of the material facts purported to lay liability at the feet of the District.

[3] This court struck the claim as statute-barred: 744185 Ontario Incorporated v. Attorney General of Canada, 2024 ONSC 5825.

Positions of the Parties

[4] I have reviewed the written cost submissions filed by the parties.

[5] Both defendants seek their costs on a partial indemnity basis - the amount of $90,913 for Canada and $97,377.42 for the District.

[6] The defendants’ submissions outline the factors that increased the complexity of the proceeding, including the decades spanning the material facts alleged and the involved process of document and witness gathering, the fact that the District was not sued by the plaintiffs even though the claim raised allegations against the District, resulting in Canada issuing a third party claim, and the plaintiffs raising entirely new arguments and causes of action in their factum, not found in the pleading. The plaintiffs did not respond to the substance of these submissions but have argued that the time and resources expended by the defendants was unreasonable and disproportionate.

[7] Similarly, the defendants’ submissions outlined the plaintiffs’ conduct that lengthened the duration of the proceeding and increased costs, conduct that required the defendants to seek triage court intervention and rulings from the court on more than one occasion to deal with the matter of timetabling this motion. The plaintiffs’ submissions do not deny that these steps were required, nor that they are responsible for those additional steps.

[8] Also, the defendants’ submissions outline the importance of the issues for their clients, given the amount claimed and the nature of the claims pleaded. They submit that it was necessary for them to meet the claim by expending significant resources attempting to locate retired employees or other personnel, and to locate historic documents. For Canada, this involved a manual undertaking that required the assistance of Library and Archives Canada, and archival searches for documents either in storage or other locations as outlined in the supporting affidavit of Soha Ehsan. For the District, this involved correspondence with former District personnel and a hunt for documents going back decades. Resources were expended scanning these documents for document management and review purposes.

[9] Canada also makes submissions about the plaintiffs’ refusal to admit various things, including the limitation problem, and states that the plaintiffs could have pled different causes of action to avoid it, as they had attempted to do at the last minute. Canada submits that the plaintiffs also should have admitted that most of their claim targeted the District. In its claim and submissions, the plaintiffs took the position, without legal foundation, that Canada should have exerted authority over the District to make it comply with the plaintiffs’ requests.

[10] The plaintiffs’ submissions focus on the rates charged and time spent by the defendants’ lawyers. The plaintiffs suggest that an award of $10,000 combined for both defendants is a fair and reasonable cost award. In support of that figure, the plaintiffs suggest that the fees should be adjusted to reflect “Bracebridge standards”, that there has been a duplication of work as between the two parties, that Canada has duplicated costs arising from a different claim initiated by the plaintiffs in the Federal Court, and finally, that the equities favour the plaintiffs because of the unjust actions of the defendants. The plaintiffs ask the court to consider that the defendants’ actions have cost the individual plaintiff, Mr. Gronfors, his life savings.

Applicable Law

[11] 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 CanLII 35819 (ON CA), [2006] O.J. No. 4248 (Ont. C.A.), at para. 25; Andersen v. St. Jude Medical Inc., 2006 CanLII 85158 (ON SCDC), [2006] O.J. No. 508 (Div. Ct.), at para. 20; leave to appeal refused, 2006 CarswellOnt 7749 (Ont. C.A.).

[12] 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.

[13] 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, and Apotex Inc. v. Eli Lilly Canada Inc. 2022 ONCA 587:

(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): Apotex, at paras. 59 and 60; Boucher [Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.)], Moon [Moon v. Sher (2004), 2004 CanLII 39005 (ON CA), 246 D.L.R. (4th) 440 (Ont. C.A.)] and Coldmatic [Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 2005 CanLII 1042 (ON CA), 75 O.R. (3d) 638 (C.A.)].

(2) A consideration of experience, rates charged and hours spent (formerly a costs grid calculation) 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 [Zesta Engineering Ltd. v. Cloutier (2002), 2002 CanLII 25577 (ON CA), 21 C.C.E.L. (3d) 161 (Ont. C.A.), 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, but is not the only determinative factor: Rule 57.01(1)(0.b) and Apotex, at para. 62;

(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 [Murano v. Bank of Montreal (1998), 1998 CanLII 5633 (ON CA), 41 O.R. (3d) 222 (C.A.)] at p. 249; Apotex, at para. 63.

(5) The court should seek to balance the indemnity principle with the fundamental objective of access to justice: Apotex, at para. 62; Boucher, at para. 37.

[14] The overarching principle when fixing costs is that the amount of costs awarded be reasonable in the circumstances: Apotex, at para. 61; Davies v Clarington (Municipality), (2009) 2009 ONCA 722, 100 O.R. (3d) 66 (Ont. C.A.), at para. 52.

[15] The question is whether the costs are reasonable, fair, and proportionate for the losing party to pay in the particular circumstances of the case or whether the magnitude of the costs generally exceeds any fair and reasonable expectation of the parties: Apotex, at para. 64.

Analysis

[16] This action was commenced on April 6, 2020. It followed an earlier action commenced by the plaintiffs against Canada in the Federal Court of Canada in June 2015. That action was eventually stayed and the appeal by the plaintiffs to the Federal Court of Appeal was not successful. Although the plaintiffs have alleged that Canada has included costs related to that Federal Court proceeding in its bill of costs, my review of the costs documentation from both defendants does not disclose any basis for that submission.

[17] The figure suggested by the plaintiffs bears no relationship to the fees actually incurred by the defendants. The plaintiffs attempt to simplify the time and cost incurred by the defendants to defend this action and adequately prepare for a Rule 21 motion.

[18] It is difficult to assess what the plaintiffs’ expectations are as the losing party to this motion. Mr. Daffern did not submit anything to reveal the costs that the plaintiffs have incurred since commencing this action. The reason that the court ordered written submissions (at further cost to all parties) was that Mr. Daffern did not attend the long motion with a cost outline nor prepared to make submissions. Doing so is required by the Protocol for Civil Proceedings Central East Region, updated June 24, 2024, Part 4(I), which provides, in part:

Counsel are frequently attending motions and applications without costs outlines. When judges ask for the outlines or bills of costs, counsel often seek to file written submissions as to costs. This is contrary to the intention of the Rules, delays the determination of the issue, and requires judges to determine costs issues for motions and applications that were often decided weeks or months before.

All counsel appearing on motions and applications must attend the hearing with their costs outline in accordance with Rule 57.01 and be prepared to provide the cost outlines to the presiding judge. If a cost outline is not available to be given to the presiding judge, the judge may decline to make any costs award in favour of the defaulting party.

[19] As Apotex directs, this lack of disclosure is not dispositive of the issue of reasonableness, but “the amount of its own cost is nevertheless a relevant factor that informs the reasonableness of the parties’ expectations as to the amount the losing party could reasonably be expected to pay”: para. 71.

[20] In assessing the plaintiffs’ reasonable expectations, I note that in addition to the action in the Federal Court, these plaintiffs have been litigating against the District in the Superior Court of Justice ever since causing a statement of claim to be issued in Bracebridge on January 31, 2001. Remarkably, that proceeding appears to still be active. There is some basis for concluding that they have a good deal of familiarity with rates charged by their own counsel, who is an experienced litigator with over 30 years’ experience, and by opposing counsel.

[21] The pleading stage of this action was more complex than regularly seen because of the breadth of the plaintiffs’ claims. Canada docketed a total of 60 hours for reviewing the statement of claim, reviewing client documents and holding client consultations, research, drafting a demand for particulars, reviewing the response to particulars, drafting a statement of defence and third-party claim, replying to the District’s defence, and delivering a request to admit. These steps took place between 2020 and 2023.

[22] For the District, there was a docketing of 38.8 hours related to their counsels’ initial review of pleadings, case assessment and drafting a statement of defence.

[23] Significant hours were spent in preparing and finalizing productions, and reviewing those of the plaintiffs, for the reasons outlined by the defendants in their submissions. 125 hours were spent by Canada, and 33.7 hours by the District.

[24] Canada took the additional step of locating, contacting and interviewing retired Transport Canada officials, which led to a witness meeting and drafting a witness statement for a more elderly witness to preserve his evidence. That potential witness was employed by the Department of Transport Canada as the airport manager of Muskoka airport between 1987 and 1996. He held that position when Transport Canada transferred the Muskoka airport to the District in 1996, which was a significant period in the litigation. Canada has provided his statement for the court’s review, which satisfies me that that individual had relevant information to provide about the merits of the action. The time docketed by Canada for these additional steps was 20 hours.

[25] As described, attendances were required at two triage conferences in 2024 for which preparation and attendance was required. Canada docketed a total of 3.5 hours for those conferences. The District has docketed 45.5 hours, including considerable time in 2023, described as “assisting with motion scheduling, including responding and contesting various hearings brought and other attempts by the plaintiffs to prevent the scheduling of the motion or consolidated with unrelated matters”.

[26] These hours are explained by the District in its submissions, which describe the attempts made by the plaintiffs to oppose the scheduling of the Rule 21 motions. The District submits that the plaintiffs opposed the scheduling of the motions when they were brought in April 2023, requiring both defendants to make written submissions to the court to justify their motions. Once Regional Senior Justice Edwards confirmed that the Rule 21 motions could proceed, the plaintiffs sought to consolidate the motions with other proceedings involving the parties (namely the proceeding commenced in Bracebridge), which would have necessitated cross-examinations and a protracted timetable. This required the defendants to seek and obtain another endorsement from Regional Senior Justice Edwards confirming that their motions could proceed in isolation. Despite that second order, the plaintiffs still brought a cross-motion seeking to consolidate the defendants’ motions with other matters. This required the District to obtain yet another endorsement to provide direction to the plaintiffs. Again, the plaintiffs have not denied that this narrative is accurate.

[27] Then there are the Rule 21 motions themselves. Canada docketed 56 hours, which included additional research that was mandated by delivery of the plaintiffs’ factum which, for the first time, raised arguments related to the Real Property Limitations Act. Canada’s time includes everything from drafting the motion to preparing written cost submissions, including preparing a cost outline. The District’s associated time for all of these same steps is 66.8 hours.

[28] As noted by the defendants in their submissions, it was apparent to the court that the lawyers had coordinated with respect to the written and oral submissions to ensure that they were dealing discreetly with the claims made only against their own client.

[29] Canada seeks only assessable disbursements related to filing fees for their statement of defence, third-party claim in motion record, totaling $776. The District’s disbursements likewise only include filing costs for a total of $805.

[30] The District submits that the actual time incurred by its counsel far exceeds the total time reflected in its cost outline for the purpose of its partial indemnity calculations. They have excluded over 250 hours of collective time incurred by articling students, junior lawyers and law clerks, as well as an additional 45 hours of time incurred by the two lawyers who have had carriage of the matter. The District advised that it declined to claim for this additional time in order to ensure that the cost award it is seeking is fair and proportionate.

[31] The partial indemnity rate used by the District for the two lawyers whose time is captured in the costs outline ranges between $417 per hour and $521 per hour depending on the year in which the work was done. These lawyers were admitted to the Ontario Bar in 2009 and 2016 respectively. Counsel have used 60% of the actual hourly rate charged to the District, consistent with the approach taken in Inter-Leasing Inc. v. Ontario (Revenue), 2014 ONCA 683, at para 5. For law firms operating in the Toronto area, these rates are typical for lawyers of this experience.

[32] The two lawyers who had carriage of this matter for Canada both have over 20 years of experience. They have used a counsel fee of $350 per hour on a partial indemnity rate. Canada provides recent decisions from the Superior Court of Justice revealing that senior counsel hourly rates are routinely between $600 to $750 per hour. Taking 60% of those actual rates results in a partial indemnity rate which is higher than that being requested by Canada.

[33] Canada also relies on the recent decision of SageTea Inc. v. Attorney General of Canada, 2022 ONSC 4078 for the following principles, which I accept: costs awarded to Canada are not to be reduced on account of Canada’s counsel being salaried officers of the Crown; evidence of the actual costs of the legal services provided by salaried Crown counsel is not required; the amounts “charged” by counsel reflect an internal accounting mechanism and do not represent the actual cost of legal services provided by Canada’s counsel; and the rates provided in the 2005 Cost Grid have not been adjusted for inflation.

[34] While asking this court to use partial indemnity rates that reflect “Bracebridge standards”, the plaintiffs have not provided any guidance to the court. However, after a decade and half on the bench, during which determining costs is all in a days’ work, I am aware that the partial indemnity rates used by the defendants’ counsel are not higher than ordinary, nor unreasonable for lawyers with their years of experience.

[35] The plaintiffs’ cost submissions attempt to address the merits of the case. None of the merits of the case were tested on this motion other than whether the action was statute-barred. I agree with the defendants that this was not a close call, and the outcome of the motions obvious. In determining costs, I take into account that one aspect of upholding the interests of justice includes discouraging unmeritorious claims, in this case claims clearly statute-barred, from ever being initiated.

[36] Having reviewed the docketed time of the defendants in some detail, I cannot reach the conclusion that there has been an inordinate, disproportionate amount of time spent at any step, duplication or “over lawyering”. Given that the defendants were facing a complex claim seeking millions of dollars, they had little choice but to allocate significant resources. And the added complexity of the documentary discovery adds a unique feature to this case that may not be found in most Rule 21 motions. Even though no evidence was admissible on the motion, the defendants had to take these steps to assess their position in the litigation and for the purposes of advising their clients with regard to bringing their motions.

[37] The plaintiffs did attempt to use an affidavit on the motion, although it was from a different proceeding and had no relevance to the motions. This also wasted the time of the defendants.

[38] Despite reaching the conclusion that there is nothing objectionable about the amount of time or rates charged by either defendant, courts have made clear that a calculation of hourly rates and time is not the object of the exercise. The object is to fix costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding. Further, there must be proportionality between what is at stake and what is spent. 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.”

[39] Having considered the facts and the law and each of the factors set out in r. 57.01, and “stepping back” to consider the appropriateness of the costs overall, I find that in the circumstances of this case an amount of costs that is fair, proportionate and reasonable to have the plaintiffs pay to Canada is $85,000 and to the District is $85,000, both inclusive. Order to issue accordingly.

Madam Justice S.E. Healey

Released: December 10, 2024