COURT FILE NO.: CV-19-79462 DATE: 2024-02-02 SUPERIOR COURT OF JUSTICE - ONTARIO

BETWEEN: W.O. STINSON & SON LIMITED Plaintiffs

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WESTERN CLIMATE INITIATIVE, INC., ATTORNEY GENERAL OF QUÉBEC (MINISTÈRE DE L'ENVIRONNEMENT ET DE LA LUTTE CONTRE LES CHANGEMENTS CLIMATIQUES) and STATE OF CALIFORNIA (AIR RESOURCES BOARD) Defendants

BEFORE: Justice H.J. Williams

COUNSEL: Pierre Champagne and David Plotkin, lawyers for the plaintiff, W. O. Stinson & Son Limited Danielle Royal, Sinziana R. Hennig, and Hesam Wafaei, lawyers for the defendant, State of California (Air Resources Board) Matthieu Verner, lawyer for the defendant, Attorney General of Québec (Ministère de l’Environnement et de la Lutte Contre les Changements Climatiques) Talia Gordner, lawyer for the defendant, Western Climate Initiative, Inc.

HEARD: Costs submissions in writing

COSTS ENDORSEMENT

Overview

[1] The State of California (Air Resources Board) and the Attorney General of Quebec (Ministère de l’Environnement et de la Lutte Contre Les Changements Climatiques) seek costs against W. O. Stinson & Son Limited following their successful motions to dismiss claims against them. I dismissed Stinson’s claim against California under s. 3 of the State Immunity Act, R.S.C. 1985, c. S-18. I dismissed Stinson’s claim against Quebec for lack of jurisdiction because of Crown immunity.

[2] California seeks partial indemnity costs of $93,000, inclusive of disbursements and HST. California’s partial indemnity fees are $92,856.75.

[3] Quebec seeks partial indemnity costs of $99,663.58, inclusive of disbursements and HST. Quebec’s partial indemnity fees are $87,052.17. Quebec’s disbursements include a $10,500 fee for an expert witness.

Stinson’s position

[4] Stinson argues that although it lost both motions, in the circumstances, an order of no costs would nonetheless be just.

[5] Stinson argues that it was unfairly treated when Ontario cancelled its cap-and-trade program in June 2018 and California and Quebec immediately took steps to ensure that no Ontario compliance instruments could be transferred to accounts in California or Quebec. When the program was cancelled, all of Stinson’s compliance instruments were in its Ontario account. Stinson had paid more than $3 million for these compliance instruments, which it was suddenly unable to sell or transfer.

[6] Stinson was also precluded from seeking compensation for unused compliance instruments under the legislation that cancelled the Ontario cap-and-trade program. The Cap-and-Trade Cancellation Act, 2018, S.O. 2018, c. 13, s. 8(5)5, provided that no compensation would be paid to businesses which supplied petroleum products for consumption in Ontario.

[7] Stinson argues that California and Quebec benefited from the $3,065,000 Stinson paid for the compliance instruments it could no longer use, in that they both received a pro-rata share of the amount Stinson paid for the instruments. Stinson submits that California and Quebec also received a share of the amount Stinson paid for the compliance instruments it was forced to buy for use in Quebec, after the instruments in its Ontario accounts were effectively frozen.

[8] Stinson argues that California and Quebec have both profited from Stinson’s loss and Stinson should not be required to pay costs of the motions as well.

[9] Alternatively, Stinson argues that the costs requested by California and Quebec are excessive. Stinson notes that its costs outline, properly delivered before the decision on the motions was released, shows that Stinson’s partial indemnity fees for both motions were approximately $55,000, a fraction of the partial indemnity fees California and Quebec now each request. Stinson argues that the hourly rates charged by California’s Toronto-based lawyers significantly exceed the rates charged by counsel in Ottawa. Stinson argues that the hours worked by Quebec’s lawyers (453.7) are almost twice the number of hours worked by California’s lawyers (240.9) which in turn exceed the 176 hours Stinson’s lawyers devoted to both motions. Stinson argues there was no reason for California’s and Quebec’s lawyers to have docketed time for reviewing the materials for the other’s motion or for attending the hearing of the other’s motion. Stinson also argues that the $10,500 disbursement Quebec has claimed is for an expert witness much of whose evidence was found to be unnecessary and therefore inadmissible.

Costs: Some legal principles

[10] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C. 43, provides that the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court.

[11] Although discretionary, a court must fix costs on a principled basis. (Davies v. Clarington, 2009 ONCA 722, at para. 40).

[12] Rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, sets out the factors the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing, in exercising its discretion under section 131 of the Courts of Justice Act to award costs. These factors include the principle of indemnity, including the experience of the lawyer involved, the hourly rate and the hours spent. They include the complexity of the proceeding and the importance of the issues. They also include certain conduct of the parties, including conduct that may have shortened or lengthened the duration of the proceeding or that was improper, vexatious, or unnecessary.

[13] The Court of Appeal has made it clear that the fixing of costs does not begin and end with a calculation of hours times rates. It says the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay rather than an amount fixed by the actual costs incurred by the successful litigant. (Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), at para. 26).

Discussion

[14] I am not without sympathy for the position Stinson found itself in when Ontario cancelled its cap-and-trade program. I understand Stinson’s argument that it was harmed by the steps California and Quebec took in response to the Ontario decision. I understand that Ontario denied compensation to petroleum product suppliers, such as Stinson. I understand that Stinson argues that both California and Quebec received a share of the amount paid for compliance instruments by law-abiding Ontario greenhouse gas-emitting businesses such as Stinson. That said, I do not see how these arguments have a bearing on California’s or Quebec’s entitlement to the costs of their motions. It was Stinson’s choice to start an action against California and Quebec and Stinson’s choice not to discontinue the action after California and Quebec raised their jurisdiction issues.

[15] In my view, there is no reason why California and Quebec, as the successful parties, should not be entitled to costs on a partial indemnity basis. The issue is the amount of costs that would be fair and reasonable for Stinson, the unsuccessful party, to pay.

California

[16] I agree with Stinson that the hourly rates charged by California’s lawyers are high by Ottawa standards. Toronto-based lawyers called to the bar in 2020 and 2021 charged California $515/hour. The most senior of Stinson’s Ottawa-based lawyers, a 1995 call, charged $530/hour. California argues that it should not have been sued in Ottawa and that it was entitled to retain a national law firm to fight a claim started by a national law firm. In costs decisions, there is often a tension between the objectives of indemnification of the successful party and fixing an amount that is fair and reasonable for the unsuccessful party to pay. California was, of course, entitled to retain the lawyers of its choice for this Ottawa litigation, including Toronto-based national firm lawyers. That said, the hourly rates charged by Stinson’s Ottawa-based national firm lawyers are substantially lower than the rates charged by the California’s Toronto-based national firm lawyers and, in my view, also more reflective of the fair and reasonable rates an unsuccessful party to litigation in Ottawa would expect to pay.

[17] I agree with California that it was required to incur costs unnecessarily because Stinson (a) did not concede until May 2022 that California’s Air Resources Board was an organ of the state and therefore presumptively entitled to state immunity, and (b) decided only at the 11th hour that cross-examination of one of California’s witnesses would not be necessary.

[18] Although Stinson argues that it was providing “context”, I also agree with California that much of Stinson’s written and oral argument was not relevant because it was focused on the merits of its claim against the defendants and not on the narrow issue of whether the “commercial activity” exception to state immunity applies.

Quebec

[19] I find the amount of time docketed by Quebec’s lawyers to be disproportionately high in comparison to that of California’s lawyers and particularly to that of Stinson’s counsel. That said, the partial indemnity fees requested by Quebec’s lawyers are lower than the fees sought by California, a reflection of the much lower hourly rates charged by the Quebec lawyers.

[20] I agree with Stinson that the $10,500 disbursement for one of Quebec’s expert witnesses should be reduced. Although the witness has impressive credentials, his report was of very limited value.

[21] Stinson was critical of Quebec for having delivered multiple affidavits to counter Stinson’s argument that Quebec had attorned to the jurisdiction of Ontario by delivering a notice of intent to defend. Stinson argued the affidavits were unnecessary, but that Stinson was nonetheless required to respond to them. I will not fault Quebec if its response to the attornment argument was overly enthusiastic. Stinson lost the argument and, in my view, should not have raised it in the first place.

Time devoted to the other defendant’s motion

[22] Finally, I do not find fault with California or Quebec for having reviewed the other’s motion materials or for having attended the hearing of the other’s motion. I do, however, question the amount of time Quebec’s lawyers devoted to their review of the California motion materials and whether it was necessary for more than one lawyer for California and Quebec to attend the hearing of the other’s motion.

Disposition

[23] Having considered all the relevant factors listed under Rule 57.01(1) and for these reasons, I have concluded that $75,000, all-inclusive, is a fair and reasonable amount of partial indemnity costs for Stinson to pay to California. I have concluded that $77,500, all-inclusive, is a fair and reasonable amount of partial indemnity costs for Stinson to pay to Quebec. The amount to be paid to Quebec is comprised of $5,000, inclusive of HST, for its expert witness plus $72,500 for fees, any other disbursements and HST.

Justice H.J. Williams Released: February 02, 2024