COURT FILE NOS.: CV-22-685680 and CV-22-685681

DATE: 2025-05-30

SUPERIOR COURT OF JUSTICE - ONTARIO

IN THE MATTER OF the Construction Act, RSO 1990, c C.30, as amended

RE: JCL Concrete Pumping Limited, Plaintiff
- and -
SEMA Railway Structures Inc. and Metrolinx, Defendants

AND RE: Ontario Trucking and Disposal Ltd., Plaintiff
- and -
SEMA Railway Structures Inc. and Metrolinx, Defendants

BEFORE: Associate Justice Todd Robinson

COUNSEL:
D. Fridmar, for the plaintiffs
W. Ross MacDougall and T. Obradovic, for the defendant, SEMA Railway Structures Inc.

HEARD: In writing

COSTS ENDORSEMENT

Robinson A.J.

Introduction

[1] I have now received and considered the parties’ written costs submissions with respect to these actions, which I dismissed in their entirety following trial (2024 ONSC 6419).

[2] SEMA Railway Structures Inc. (“SEMA”) seeks its substantial indemnity costs in the amount of $73,196.13, including HST and disbursements, relying on two offers to settle that were rejected by the plaintiffs. SEMA also seeks a reasonable amount of costs for preparation of its written submissions. The plaintiffs, JCL Concrete Pumping Limited (“JCL Concrete”) and Ontario Trucking and Disposal Ltd. (“OTD”), dispute SEMA’s costs claim.

Statutory Framework and Discretion on Costs

[3] Costs in a lien action are governed by s. 86 of the Construction Act, RSO 1990, c C.30, which provides me broad discretion in deciding costs, including on a substantial indemnity basis. Pursuant to s. 86(2), where the least expensive course is not taken by a party, the costs awarded to that party shall not exceed what would have been incurred had the least expensive course been taken. Also relevant to assessing costs is the requirement that procedure in lien action be as far as possible of a summary character, having regard to the amount and nature of the liens in question: Construction Act, s. 50(3).

[4] By operation of s. 50(2) of the Construction Act, the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) apply except to the extent of any inconsistency with the Construction Act. Subrule 57.01(1) of the Rules outlines non-mandatory and non-exhaustive considerations for the court in assessing costs. The court has repeatedly held that subrule 57.01(1) is not inconsistent with the Construction Act and is applicable in the court’s exercise of its discretion under s. 86.

Principles for Fixing Costs

[5] Ultimately, my costs award in these actions must reflect what I view as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant. My overall objective is to fix an amount that is fair and reasonable in these particular proceedings, having regard to the expectations of the parties concerning the quantum of costs: R & G Draper Farms (Keswick) Ltd. v. Nature's Finest Produce Ltd., 2016 ONCA 626, paras. 10-12; Davies v. Clarington (Municipality), 2009 ONCA 722, para. 52; Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA), paras. 26 and 38.

Application of Simplified Procedure Cost Caps

[6] I first wish to address the plaintiffs’ submission that I should limit recoverable costs pursuant to subrule 76.12.1(1) of the Rules, which caps recoverable legal fees at $50,000 and recoverable disbursements at $25,000. I reject that argument. At the outset of the reference, I did direct that the actions be guided by the procedures for an action under rule 76 of the Rules. However, the costs limitations in subrule 76.12.1(1) do not apply in a lien action. The discretion in s. 86 of the Construction Act is broad and the caps established by subrule 76.12.1(1) are, in my view, inconsistent with that discretion. They may influence a costs decision, but they are not binding.

Success on the Merits

[7] The plaintiffs’ main argument against costs is that SEMA only succeeded on a “technicality” and did not obtain any ruling based on the substantive merits of the dispute. I disagree. The law of contract formation is not a technicality. A core legal dispute between the parties at trial was the legal relationship, if any, between SEMA and each of the plaintiffs. My decision on that issue did render moot the need to decide the issues of whether compliant Granular B Type II aggregate was supplied and whether the claimed rental equipment was provided. SEMA was nevertheless completely successful in its position on a substantive factual and legal issue at trial, which led to the dismissal of the actions.

[8] As identified at para. 6 of my reasons for judgment, SEMA’s challenge to the legal basis on which it could be sued by JCL Concrete and OTD in the first place was the core of the parties’ dispute. Although SEMA raised other defences, which did take up a fair bit of trial time to explore, SEMA was ultimately successful in its primary legal challenge. Importantly for costs, SEMA’s position that it had no contract with either plaintiff was not a new position at trial. SEMA has maintained throughout the litigation that it contracted with “JCL Group Inc.”, which was the entity named on the single purchase order issued by SEMA. Notably, that position was expressly pleaded in SEMA’s statement of defence in each action: see paras. 8 and 23 in each of SEMA’s statements of defence.

Plaintiffs’ Conduct and Litigation Choices

[9] I do not dispute that the plaintiffs did not commence these actions with any malice or frivolousness. SEMA does not suggest that is the case and there is no evidence to support that they did. I acknowledge that these actions were commenced to enforce payment for services and materials supplied to the subject improvement. However, it was ultimately for the plaintiffs to make decisions about how to advance their claims in response to the defences asserted by SEMA. The plaintiffs’ submissions overlook their own failure to address the reality that JCL Group Inc. was a valid and subsisting corporation with which the plaintiffs had no affiliation and over which the plaintiffs and their principals had no control. The plaintiffs could have (and frankly should have) been aware it. SEMA’s statements of defence challenging the alleged contractual relationships were served in October 2022. Trial did not occur until April 2024. As noted at para. 75 of my reasons, the plaintiffs did not seek to amend their statements of claim at any point during the litigation, or at trial.

[10] As discussed at para. 25 of my reasons, the plaintiffs argued misnomer, not that they operate as “JCL Group Inc.” I rejected their misnomer arguments. Specifically, I rejected the position taken that SEMA knew or ought to have known that JCL Group Inc. was not the proper contracting party. As discussed in my reasons, the argument that there were two contracts strained the evidentiary record before me. The plaintiffs’ contact person with SEMA during the project, Santo Costabile, listed himself as “Manager, JCL Group Inc.” in his email signature. He did not raise any issue with SEMA’s purchase order when it was sent to him naming “JCL Group Inc.” There was also a logo for “JCL Group Inc.” on the delivery tickets for the stone material supplied to site. No evidence was tendered at trial of anyone raising misnomer at any point during the project.

[11] As stated at para. 74 of my reasons, lawsuits must be decided within the boundaries of the pleadings. In their statements of claim, the plaintiffs asserted recovery from SEMA in contract and on the basis of quantum meruit and unjust enrichment. They proceeded to trial solely on their contract claims and withdrew their claims in quantum meruit and unjust enrichment. In the absence of valid contract claims, the plaintiffs had no remaining cause of action against SEMA. As discussed at para. 87-88 of my reasons, they did not advance any argument or case law supporting a valid and subsisting lien in such circumstances.

[12] The plaintiffs suggest that I should consider that they may have had valid claims in quantum meruit and unjust enrichment and may have succeeded at trial had those claims not been withdrawn. I give that argument no effect. The plaintiffs did withdraw those claims, so whether they could or would have succeeded is not, in my view, relevant to costs.

Disputed Issues and Trial Conduct

[13] The plaintiffs further submit that SEMA expended unnecessary time and costs at trial addressing the industry standard applicable to the Granular B Type II aggregate material, which the plaintiffs conceded prior to trial. In my view, that characterization is not entirely accurate. While the OPSS 1010 standard was conceded, the plaintiffs disputed its applicability. Had I been required to engage in the analysis of whether the subject aggregate had to comply with OPSS 1010 (which was disputed by the plaintiffs, as acknowledged in their own responding costs submissions) and, if so, whether the aggregate actually did comply, then the evidence and argument tendered by SEMA would have been directly relevant to deciding those disputed issues.

[14] I also reject the plaintiffs’ submission that awarding costs against them would be “punishing” them for taking reasonable steps to enforce their lien rights and would “create a chilling effect to the construction industry – specifically for subcontractors.” That language is unwarranted hyperbole on the facts of these two cases.

[15] The plaintiffs advanced claims against SEMA asserting contracts that I found did not exist at law. No other basis for a claim was pursued at trial (at least until the plaintiffs sought unsuccessfully in closing submissions to resile from withdrawing their quantum meruit and unjust enrichment claims). I did not draft the Construction Act. It is not for me to strain its provisions to find valid liens where the plaintiffs themselves have not advanced a cogent argument for being entitled to a lien without a proven claim in either contract or quantum meruit.

[16] At trial in both actions, the plaintiffs failed to prove their claims. SEMA incurred costs in defending both actions. Unquestionably SEMA is entitled to a costs award.

Proportionality and Offers to Settle

[17] The plaintiffs submit that I must consider proportionality. They argue that the total costs incurred by SEMA dwarf the aggregate value of the two liens. They submit that SEMA chose to incur those costs rather than enter into a “reasonable resolution”. They point to the fact that the plaintiffs had offered to accept payment of less than $40,000 in 2022, which is less than half of what SEMA incurred in legal costs. SEMA correctly points out that the offer was, in fact, for $44,082.58. That represents only a modest reduction from the aggregate of both claims, which were ultimately both dismissed.

[18] The plaintiffs’ submission amounts to saying that SEMA should not have maintained its position that it had no liability and, moreover, that it was unreasonable for SEMA to have put the plaintiffs to proving their claims. Such an argument may have had some teeth if the plaintiffs had succeeded or there was divided success. However, it overlooks that SEMA was entirely successful in defeating both claims at trial. To accept the plaintiffs’ position would be tantamount to penalizing SEMA for maintaining its meritorious (and ultimately successful) position. I have no intention of setting a precedent whereby defendants to unmeritorious claims must consider paying them else may find their costs claims denied.

[19] I have considered s. 86(2) of the Construction Act, namely whether SEMA has taken the least expensive course during litigation, but am not convinced that the claimed costs are truly disproportionate in the circumstances. Proportionality considers more than just the quantum of a claim. The complexity of issues in dispute is also a relevant consideration. The technical disputes over both the contractual relationship between the parties and the composition of the Granular B Type II aggregate that was contractually required as compared to what was actually supplied were not straightforward. Those issues required time and expense to address, albeit that I ultimately found the latter issue to be rendered moot. Had I accepted the plaintiffs’ contractual arguments, though, it would not have been.

[20] SEMA also made two relevant offers to settle. The first was an offer made on August 29, 2022, prior to defending and any significant costs being incurred, to dismiss the actions without costs, discharge the liens, and return security. The second was an offer to settle made on November 28, 2022 to pay $15,000.00 to the plaintiffs, with costs agreed or decided by the court, the actions dismissed, and the security returned. That latter offer remained open until trial. Neither offer was accepted. SEMA prepared for and attended trial, at which SEMA was entirely successful. Given the result, both offers would have been more advantageous to the plaintiffs than proceeding to trial. Almost all of SEMA’s costs were incurred after both offers. The majority of SEMA’s costs were incurred in preparing for and attending trial.

[21] I note also that the plaintiffs’ bill of costs identifies substantial indemnity costs of $39,700.25, including HST and disbursements. The fee portion of those costs appears to have been calculated at 70% of the actual chargeable rate. Adjusting to full indemnity, the plaintiffs have themselves expended nearly $48,000, including HST, in actual legal fees advancing these actions to trial. That is nearly the same amount as their aggregate claims. The plaintiffs’ criticism of proportionality in SEMA’s costs further weakens in that light.

[22] In my view, overall, the hours spent and rates claimed by SEMA are reasonable and are not disproportionate given the complexity of issues, the positions taken (with SEMA’s position being vindicated at trial), and particularly given the offers to settle made. I do not fault SEMA for expending the time that it did to properly prepare for trial when the only offers from the plaintiffs (at least those put before me) were to pay substantially all of the plaintiffs’ disputed claims. The plaintiffs cannot reasonably have expected SEMA to do anything less than properly prepare for trial given the nature and extent of disputed issues. SEMA did so. The hours spent for trial preparation and attendance are reasonable and, given my decision, worthwhile.

Disposition

[23] Having considered the factors in subrule 57.01(1) of the Rules, including the offers to settle and SEMA’s complete success, I find that heightened costs are warranted. I fix costs payable by the plaintiffs to SEMA in respect of these actions in the substantial indemnity amount of $68,000.00, including HST, plus disbursements of $1,472.72, including HST, for a total of $69,472.72, which shall be payable within thirty (30) days following confirmation of my report from this reference.

[24] The parties have submitted a draft form of report for my review and signature. I will finalize and sign it early next week.

ASSOCIATE JUSTICE TODD ROBINSON

Released: May 30, 2025