Court File and Parties
Court File No.: CV-16-00546744-0000
Date: 2025-04-08
Court: Ontario Superior Court of Justice
Between:
Domenic Gesualdi, Plaintiff
-and-
Massimo Conti, Alex Armellin, Daytona Auto Centre Ltd. and 251485 Ontario Limited, Defendants
-and-
George Biggs and Body by Biggs Inc., Third Parties
Before: Robert Centa
Counsel:
- Emilio Bisceglia and Hana Tariq, for the plaintiff
- A. Edward Tonello, for the defendants
- David Zuber, for the third parties
Heard (in writing): April 4, 2025
Endorsement
Introduction
At the conclusion of this eight-day trial, I held that the plaintiff, Domenic Gesualdi, had proved that the defendants breached their contract with Mr. Gesualdi to rebuild the engines of his two vintage Ferrari automobiles. I also found that the defendants were negligent in their efforts to rebuild the engine. I awarded Mr. Gesualdi $58,710.54 in damages. I dismissed the defendants’ third party claim in its entirety.
The parties were unable to resolve the costs of the proceeding. I have now reviewed their submissions.
Mr. Gesualdi seeks costs in the amount of $447,376.85, which represents costs on a partial indemnity scale up to January 15, 2024, and on a substantial indemnity basis thereafter. Mr. Gesualdi submits that he beat his offer to settle the action, which he delivered on January 15, 2024.
The defendants submit that Mr. Gesualdi should pay them $243,052.90, representing their costs of the action on a partial indemnity basis because they were the successful party.
The third parties, George Biggs and Body by Biggs Inc., seek an order that the defendants pay their partial indemnity costs fixed in the total amount of $279,950.91. The defendants submit that the third parties should not receive a costs order, or, in the alternative, Mr. Gesualdi should be required to pay those costs.
As I will explain, I find that it is fair and reasonable to require the defendants jointly and severally to pay:
a. costs of the action to Mr. Gesualdi fixed in the amount of $300,000; and
b. costs to the third parties fixed in the amount of $279,950.91.
A. Legal Principles
In Apotex Inc. v. Eli Lilly Canada Inc., 2022 ONCA 587, at paras. 59 to 66, the Court of Appeal for Ontario recently restated the general principles to be applied in the court’s exercise of its discretion to award costs. Fixing costs is a discretionary decision under s. 131 of the Courts of Justice Act, RSO 1990, c C.43. In exercising my discretion, I may consider the factors listed in rule 57.01 of the Rules of Civil Procedure, RRO 1990, Reg 194. These factors include the result achieved, the amounts claimed and recovered, the complexity and importance of the issues in the proceeding, the principle of indemnity, the reasonable expectations of the unsuccessful party, as well as any other matter relevant to costs.
A proper costs assessment requires the court to undertake a critical examination of the relevant factors as applied to the costs claimed and then “step back and consider the result produced and question whether, in all the circumstances, the result is fair and reasonable”: Apotex, at para. 60, citing Restoule v. Canada (Attorney General), 2021 ONCA 779, para. 356, citing Boucher v. Public Accountants Council (Ontario), para. 24. The overarching objective is to fix an amount of costs that is objectively reasonable, fair, and proportionate for the unsuccessful party to pay in the circumstances of the case, rather than to fix an amount based on the actual costs incurred by the successful litigant: Apotex, at para. 61; Boucher, at para. 26.
While the reasonable expectation of the parties concerning the amount of a costs award is a relevant factor that informs the determination of what is fair and reasonable, it is not the only determinative factor, and cannot be allowed to overwhelm the analysis of what is objectively reasonable in the circumstances of the case. To hold otherwise would result in the means of the parties artificially inflating costs with the concomitant chilling effect on access to justice for less wealthy parties: Apotex, at para. 62.
Costs that are reasonable, fair, and proportionate for a party to pay in the circumstances of the case should reflect what is reasonably predictable and warranted for the type of activity undertaken in the circumstances of the case, rather than the amount of time that a party’s lawyer is willing or permitted to expend: Apotex, at para. 65. The party required to pay the successful party’s costs “must not be faced with an award that does not reasonably reflect the amount of time and effort that was warranted by the proceedings”: Gratton-Masuy Environmental Technologies Inc. v. Building Materials Evaluation Commission, 2003 ONSC 8279 (Div. Ct.), para. 17.
The party seeking costs bears the burden of proving them to be reasonable, fair, and proportionate. The material provided for the assessment must allow the court to come to a conclusion as to the amount of time reasonably required by the party seeking costs to deal with all aspects of the proceedings for which costs are claimed, including whether there was over-lawyering or unnecessary duplication of legal work: Apotex, at para. 66; Restoule, at para. 355.
B. The Costs of the Main Action
I found that the defendants breached their contract with Mr. Gesualdi to rebuild the Ferrari engines and to return the cars in good working order. I also found that the defendants were negligent in their efforts to rebuild the engines. I found that the breach of contract and the negligence caused damage to Mr. Gesualdi, and I awarded him over $58,000 in damages.
Against these findings, it is somewhat surprising to see the defendants submit that they are entitled to a costs award of about $250,000 in their favour. The defendants hold this belief, apparently, because they believe that Mr. Gesualdi (who, recall, was successful at trial) “propagate[ed] an action that he knew was frivolous and vexatious, devoid of merit, certain to fail.” The defendants opened their submissions on costs this way:
The first sentence in the reasons for judgment stated that the plaintiff, “loved his vintage Ferraris”. Such pride engendered vengeance that drove him into this ill-advised action. As he expressly and emphatically testified, his 1970 Daytona should have won the platinum prize at world-prestigious 2016 Cavallino Classic Ferrari event in Miami. Instead, it won nothing; for all of that, he blamed the defendants and no one else. Aside for one tiny item (2.6%), every pleaded claim for damages was fueled by vexation and frivolity, certain to fail, devoid of merit and dismissed. This action was a personal vendetta, nothing more. Gesualdi had little, if any, true interest for monetary compensation, not surprising in view of his financial wealth.
Defendants respectfully submit that the plaintiff pay them the costs of this action and any costs awarded against them in the third-party action; or, if the court declines, that there be no costs payable to the plaintiff. Such request is made on the totality of four grounds: (a) defendants were the successful party as defined by the Court of Appeal for Ontario; (b) 97.4% of plaintiff’s claims were vexatious, frivolous, devoid of merit, certain to fail, dismissed. (c) plaintiff was awarded an amount within Simplified Procedure jurisdiction; and (d) the high-handed conduct of the plaintiff during litigation.
The tone of the defendants’ submission is remarkable, and, with a few exceptions, appears to be entirely disconnected from and inconsistent with my reasons for decision.
First, Mr. Gesualdi proved that the defendants breached the contract and were negligent in their work, which were the primary causes of action asserted in the claim. The claim for negligent misrepresentation, which I dismissed, consumed virtually no time at trial. Mr. Gesualdi was completely successful at proving that the defendants breached the contract and performed their work negligently. The plaintiff, not the defendants, was substantially successful on every contentious issue, contra Gainers Inc. v. Pocklington Holdings Ltd. (1996), 7 Alta. L.R. (3d) 248.
Second, it is true that I did not award Mr. Gesualdi a loss of capital value from the subsequent sale of the Ferraris as part of his damages for breach of contract. Mr. Gesualdi failed to prove the facts necessary to prove those damages. I do not accept the defendants’ submission that this portion of the claim for damages was “vexatious, frivolous, devoid of merit and certain to fail.”
Third, Mr. Gesualdi did abandon his claim for loss of use of the Ferraris on the eve of trial. This is a factor that I may take into account when assessing whether Mr. Gesualdi should be entitled to recover all of his costs claimed. However, the defendants have not demonstrated that they incurred any expenses responding to this claim. For example, they did not retain an expert to critique or respond to the report of Mr. Gesualdi’s damages expert. None of the affidavits prepared by the defendants addressed, in any way, this aspect of the damages claim.
Fourth, in my view, it was reasonable for Mr. Gesualdi to have commenced and continued this proceeding under the ordinary procedure. Mr. Gesualdi had a plausible, reasonable path to recover damages far, far in excess of the $100,000 limit on damages in a simplified proceeding, which was in place when this action commenced. Moreover, disgorgement of amounts paid to the defendants was a reasonable theory of damages to advance, and would have taken the claim above the monetary limits of Rule 76.
Moreover, this action would have been entirely ill-suited to the simplified procedure. The action was complicated and required expert evidence. The streamlined procedures under Rule 76 would not have been appropriate for the parties’ approach to this action. For example, a trial under Rule 76 may not last more than five days: rule 76.12(2). When the parties appeared for one of their six pre-trial conferences, they estimated that the trial would require 29 days of court time.
Fifth, the defendants’ submissions that Mr. Gesualdi took unreasonable litigation positions is significantly undermined by the fact that over one year before the start of trial, Mr. Gesualdi delivered a Rule 49 offer to settle the action for $50,000 plus partial indemnity costs. The defendants rejected this offer and instead offered to settle the action if Mr. Gesualdi paid them $300,000 in costs. The defendants submit that I should not give effect to this offer to settle for the following reasons:
An offer to settle addresses quantum of costs, not entitlement. Gesualdi $50,000 plus costs offer to settle January 15, 2024, made 8 years after action commenced. The amount is a last-minute implicit confirmation that Gesualdi knew that such amount represented potential recovery of his action. Acceptance of such an offer rewards Gesualdi’s of propagation [sic] of an action that he knew was frivolous and vexatious, devoid of merit, certain to fail.
I disagree. It seems to me that Mr. Gesualdi’s offer represented an extremely realistic assessment of his case: a high likelihood of proving liability; a high likelihood of recovering almost all amounts paid to third parties to repair the damage his defendants did to the Ferraris; and a near zero chance of proving his damages for loss of capital value and loss of use. It is difficult to see how the defendants’ counteroffer adequately reflected the risks that they faced at trial.
In my view, Mr. Gesualdi is entitled to a costs award in his favour. However, there are three reasons why I would not award him the $447,376.85 he claims.
First, Mr. Gesualdi’s bill of costs appears to include several motions where either the court awarded no costs of the motion or the costs of those motions has already been addressed. Those amounts must be excluded from the bill of costs.
Second, Mr. Gesualdi’s claim for $1.2 million in damages for loss of use of the Ferraris was, to put it charitably, a bit of a stretch. Although Mr. Gesualdi abandoned it on the eve of trial, and it is not clear that the defendants spent any time or energy marshalling evidence to refute this claim, at a minimum, it complicated attempts to resolve the trial. In my view, advancing such a claim may well have lengthened unnecessarily the duration of the proceeding (even if it did not lengthen the trial). This factor justifies a significant reduction in the amounts claimed.
Third, and most importantly, $447,000 is not a reasonable, fair, or proportionate amount for the defendants to pay in the circumstances of this case. An unwarranted amount of time was spent on this case by counsel for the plaintiff and the defendants. Even if Mr. Gesualdi permitted his counsel to spend that amount of time on this case, the losing party must not be faced with an award that does not reasonably reflect the amount of time and effort that was warranted by the proceedings: Gratton-Masuy, at para. 17.
I note that the third parties seek costs of $279,950.91 on a partial indemnity basis. The defendants claim $243,052 in partial indemnity costs with respect to the portion of the action dealing only with Mr. Gesualdi.
As I will explain below, I accept the third parties’ claim for costs. It is fair and reasonable and fully warranted. In addition, Mr. Gesualdi had a bigger task in this case than did the third parties.
In exercising my discretion to fix costs, I must consider what is fair and reasonable for the unsuccessful party to pay in this proceeding and balance the compensation of the successful party with the goal of fostering access to justice: Boucher, at paras. 26, 37.
It is fair and reasonable to require the defendants to pay costs of the action to Mr. Gesualdi fixed in the amount of $300,000. The defendants are jointly and severally liable to pay that amount to the plaintiff within 30 days of the date of this order.
C. The Costs of the Third Party Action
The third parties seek their costs of the action fixed in the amount of $279,950.91 on a partial indemnity basis.
The third party action should never have been brought. There was simply no evidence to suggest that the third parties could be liable for the defendants’ breach of contract or their negligence. Nor was there any reasonable prospect that Mr. Biggs would be found responsible for any of the delay in this proceeding.
I do not see any evidence that the third parties contributed to the overall delay in this proceeding, behaved unreasonably, or incurred unreasonable legal fees. Indeed, the third parties delivered offers to settle for a dismissal without costs as early as August 2017 and again in October 2021. In hindsight, those offers should have been accepted by the defendants.
The third parties are entitled to a costs award in their favour.
The defendants do not seriously challenge the hours spent or the hourly rates claimed by counsel for the third parties. The defendants do not suggest, nor could they suggest given their own bill of costs, that they did not reasonably expect to face a costs order against them of this magnitude. I do not accept the defendants’ bald assertion that the third parties did not spend time preparing for the rescheduled trial.
The defendants submit that Mr. Gesualdi should be responsible for paying the third parties’ costs. I disagree. First, Mr. Gesualdi was successful at trial. The defendants provided no case law in support of their proposition that a successful plaintiff should be required to pay the costs of a third party who successfully defended the third party claim instead of the defendant who lost both parts of the proceeding. The cases cited by the defendants concern situations involving an unsuccessful plaintiff. The defendants did not explain how they could have any application to the circumstances of this case.
The cases cited by the defendants confirm that the general rule is that a plaintiff who is unsuccessful against the defendant will not be charged with the costs of the third party because the plaintiff did not sue the third party, did not want him or her in the case, and was not responsible for bringing them into the litigation: Paul M. Perell, John W. Morden, The Law of Civil Procedure in Ontario, 5th Ed., (LexisNexis Canada: 2024), at para. 10.164; Drady v. Canada (Attorney General), paras. 21-25; Milina v. Bartsch, 63 B.C.L.R. 122 (B.C.S.C.).
Even if I accepted the proposition that Mr. Gesualdi was not successful (and I do not), I do not accept the defendants’ submission that this case falls outside the general rule that an unsuccessful plaintiff will not be charged with the costs of the third parties.
First, I do not accept the defendants’ submission that the third parties were brought or kept in because of the plaintiff’s neglect: Guarantee Co. of North America v. Resource Funding Ltd. (2009), 82 C.P.C. (6th) 258, at para. 5 (S.C.J.). Mr. Gesualdi had no complaint about the work of Mr. Biggs or his company. Even at trial, Mr. Gesualdi never suggested that anything Mr. Biggs did or did not do caused any damages to him. There was no reason for Mr. Gesualdi to bring the third parties into the action. In no way was the true contest at this trial between the plaintiff and the third party.
Second, I do not accept the defendants’ submission that the third party proceedings followed naturally and inevitably from the plaintiff’s action: Guarantee Co., at para. 5. In this case, it was the defendants who chose to bring the third parties into the proceeding. This action could have been, and should have been, decided as a contest between the plaintiff and the defendants.
The defendants had the right, of course, to initiate the third party proceedings. The defendants had the right to reject the third parties’ offers to settle the proceeding for a no-costs walk away. However, those decisions have consequences. In this case, the consequences are that the defendants are responsible to pay the costs of the successful third parties.
It is fair and reasonable to require the defendants to pay costs to the third parties fixed in the amount of $279,950.91. The defendants are jointly and severally liable to pay that amount to the plaintiff within 30 days of the date of this order.
Robert Centa
Date: April 8, 2025