Court File and Parties

Court File No.: CV-15-523995 Date: 2025-10-07 Ontario Superior Court of Justice

Between:

BUILDING FAILURES INC. Plaintiff – and – 1168812 ONTARIO INC., MICHAEL ROCHON, VINCENT ROCHON and ROCHON ENGINEERING CORPORATION Defendants

AND BETWEEN:

1168812 ONTARIO INC., MICHAEL ROCHON, VINCENT ROCHON Plaintiffs by Counterclaim – and – BUILDING FAILURES INC., T. SMITH ENGINEERING INC., TERRY SMITH, MARKO MILICEVIC and ROCCO MAZZONE Defendants to the Counterclaim

AND BETWEEN:

ROCHON ENGINEERING CORPORATION Plaintiff by Counterclaim – and – BUILDING FAILURES INC., T. SMITH ENGINEERING INC., TERRY SMITH, MARKO MILICEVIC and ROCCO MAZZONE Defendants to the Counterclaim

Counsel

M. Gosia Bawolska and Maneka Kaur, for the Plaintiff/Defendants to the Counterclaim, Building Failures Inc.

James M Regan KC and Peter D. Regan, for the Defendants/Plaintiffs by Counterclaim 1168812 Ontario Inc. and Rochon

Heard: In writing

CALLAGHAN J.

Costs Endorsement

Background

[1] This is the costs endorsement following the decision in this matter. The trial of this matter was heard February 12 – 23, 2024, and December 18, 2024.

[2] The plaintiff was partially successful in its claim. It was awarded $430,809. Its claim for additional amounts based on oral agreements was dismissed.

[3] The counterclaim by the defendants was dismissed.

[4] Both sides seek costs based on various theories. The plaintiff seeks partial indemnity costs in the amount of $301,046.33 (fees) and $62,210.53 (disbursements) for a total of $363,256.86.

[5] I will refer to both the plaintiff and defendants by counterclaim as the plaintiff. Similarly, I will refer to both the defendants and plaintiffs by counterclaim as the defendants.

Which Side is Entitled to Costs?

[6] The Court has discretion in the determination of costs: Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.4. As to which side is entitled to costs, absent special circumstances, "costs follow the event": Bell Canada v. Olympia & York Developments Ltd. (1994), 111 D.L.R. (4th) 589 (Ont. C.A.); Yelda v. Vu, 2013 ONSC 5903, [2013] O.J. No. 4246, at para. 11, leave to appeal refused, 2014 ONCA 353; St. Jean v. Cheung, 2009 ONCA 9, [2009] O.J. No. 27, at para. 4.

[7] Where there is success by both parties in respect of the issues in dispute, the court does not make distributive cost awards. Distributive costs awards apportion costs based on the perceived success of the individual issues raised in the litigation.

[8] Since Oakville Storage and Forwarders Ltd. v. C.N.R. (1991), 5 O.R. (3d) 1 (Ont. C.A.), the general rule is that "costs are not to be determined by considering success on an issue-by-issue basis": Fram Elgin Mills 90 Inc. v. Romandale Farms Limited, 2021 ONCA 381, at para. 10. Rather, costs are to be awarded based on the overall success achieved by a party: Wesbell Networks Inc. v. Bell Canada, 2015 ONCA 33, at para. 21; Fram Elgin Mills 90 Inc. v. Romandale Farms Limited, 2021 ONCA 381, at para. 10. Accordingly, the fact that a party was not successful on all elements of its claim does not disentitle it to costs. The time spent on unsuccessful issues may be considered in assessing the amount of costs.

[9] In this case, there is both the claim and counterclaim to consider. The plaintiff was successful in respect of the claim, although not on all issues. The plaintiff was wholly successful in respect of the counterclaim. In my view, the plaintiff is entitled to costs.

[10] The defendants raised the fact that they made an offer of $375,000 in November 2023 and that the offer ought to be considered in deciding costs after that period as the judgment was not a great deal more than the offer and, in doing so they cite rule 49.13 of the Rules of Civil Procedure, RRO 1990, Reg 194. While the offer was a rule 49 offer, pursuant to rule 49, it did not trigger the cost consequences of rule 49.10 as it did not exceed the judgment. Cost shifting is a feature of the rules that is designed to encourage settlement by penalizing a successful party that fails to accept an offer greater than the success achieved at trial. As stated by Rosenberg, JA, "A party that comes close to meeting the judgment is not thereby entitled to an award of costs as if they did provide a successful offer": Elbakhiet v. Palmer, 2014 ONCA 544, at para. 31; Thomas Andreas Klatt v. La Toc Holdings Limited, 2021 ONSC 3598, at para. 22. Rule 49.13 does not shift costs in those circumstances. In this case, the defendants' rule 49 offer is less than the judgment. As the plaintiff was more successful at trial than the offer, the rejection of the rule 49 offer ought not to result in the plaintiff being deprived of its entitlement to costs.

[11] It was also argued that the defendants should receive an award of costs due to allegations made by the plaintiff during trial. The plaintiff made allegations against the Rochons regarding the state of the defendants' records that resulted in allegations of impropriety which the defendants assert should warrant a sanction of costs: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 SCR 303, at para. 26. Indeed, both sides made similar allegations. The records on both sides were lacking and warranted serious inquiry. I do not find the plaintiff's allegations warrant the sanction of the court, including cost shifting as argued by the defendants: Davies v. Clarington (Municipality) et al., 2009 ONCA 722, at para. 40.

Quantum of Costs

[12] The exercise now 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": Apotex Inc. v. Eli Lilly Canada Inc., 2022 ONCA 587, [2022] O.J. No. 3632, at para. 61, citing Boucher v. Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (C.A.). This is not a mechanical exercise but rather involves consideration of the criteria set out in rule 57.01 and an exercise in judgment.

[13] As to the scale of costs, there is no basis to deviate from the standard scale, being partial indemnity, although there were several arguments by both sides to increase or decrease costs: McBride Metal Fabricating Corp. v. H. & W. Sales Co. (2002), 59 O.R. (3d) 97, [2002] O.J. No. 1536 (C.A).

[14] Like the defendants' request for costs, the plaintiff seeks an elevated award of costs due to allegations made by the defendants. The allegation in the counterclaim that the plaintiff breached its fiduciary duties does not warrant the sanction of the court or an increased order of costs. In my view, while unsuccessful, the claim was made in good faith. Nor do I think that the allegations made at trial by the defendants that the plaintiff's accounting records were suspicious and dubious warrant an increased award of costs. As mentioned, like the defendants' records, the state of the plaintiff's records was less than adequate and thus begot questions by the defendants that I do not think warrant any sanction by way of costs.

[15] In considering the criteria in rule 57.01, there are three factors that weigh heavily on this assessment of costs: i) the complexity of the matter; ii) the success of the plaintiff including the amount claimed, and the amount recovered and iii) conduct that shortened or lengthened the proceeding including the unsuccessful allegations: Eastern Power Limited v. Ontario Electricity Financial Corporation, 2012 ONCA 366, at para. 20. Of course, the amount must be reasonable and within the expectations of what a losing party might expect to pay in the circumstances.

[16] Leaving aside the unsuccessful allegations by the plaintiff of an alleged oral agreement and the unsuccessful allegations of breaches of fiduciary duty in the counterclaim, this case was of average complexity. The successful allegation was that there were unpaid accounts owed to the plaintiff, which was a straightforward claim. The records required review by experts but there was minimal dispute as to the amounts owed, aside from the oral agreements. Much of the trial time was spent on the unsuccessful allegations, rather than the successful allegations. The unsuccessful allegations were more complex involving more difficult and factual legal issues.

[17] As such, both parties lengthened the proceeding with unproven allegations, although I accept that the plaintiff's allegations of an oral agreement took more of the trial time than the counterclaim.

[18] The defendants state that I should have regard to the offer made in November 2023 and rule 49.13 when setting the amount of costs. Rule 49.13 allows a settlement offer to be considered even where it does not trigger the cost shifting in rule 49.10: Elbakhiet v. Palmer; Lawson v. Viersen, 2012 ONCA 25, at para. 45; Wilson v. Cranley, 2014 ONCA 844, at para. 27; Baker v. Blue Cross Life Insurance Company of Canada, 2023 ONCA 842, at para. 46.

[19] In addressing the "holistic approach" discussed in Elbakhiet v. Palmer, the unsuccessful offer is something that may be considered in exercising my discretion. Under rule 49.13, the offer was made a few months before the defendant's expert report was prepared. The defendants' expert largely accepted the position of the plaintiff's expert. The delta between the defendants' offer, and the trial judgment was largely the failure to account for the $94,399.80 cheque that was never cashed. In my view, it was abundantly clear that the $94,399.80 amount was never paid and would have been apparent when the defendant's expert could not locate any record of a debit of that amount in the corporate records. In the circumstances, the defendants could easily have revised their offer to account for this amount. As such, after receipt of their expert's report, I do not see the offer as being one that was intended by the defendants to make the plaintiff whole. I note that in the defendants' reply cost submission that they assert that the offer contained "a real and substantial monetary offer" in respect of the counterclaim, although it is not clear what amount that might be. Nonetheless, I acknowledge in considering the issue of success and proportionality, rule 49.13 allows me to consider that the judgment exceeded the November offer by only $55,809.

[20] Defending the counterclaim increased the exposure and cost incurred to the plaintiff. The counterclaim sought damages of $5 million, and an accounting and disgorgement of an undisclosed amount of revenue. There was no expert report served detailing this claim. In its closing submissions, the defendants requested $136,000 in expectation damages, a far cry from the claimed amount. The defendants called very little evidence relating to the counterclaim. Nonetheless, I accept that the plaintiff was required to spend time both before and at trial addressing what was a very significant claim.

[21] The above factors lead me to conclude fixing costs for the proceedings at $150,000 in fees is appropriate. This amount is a proportionate amount of costs reflecting the ultimate award, the counterclaim exposure and the offer. It also takes into consideration the unsuccessful issues on both sides. Given their own bill of costs, it is an amount that the defendants could expect to pay in the circumstances.

[22] In respect of disbursements, there was a concern raised by the defendants about the expert fees and charges related to legal research. I have no issue with the expert fees. The plaintiff's expert carried a significant load. The plaintiff's expert was the expert that waded through the records to arrive at a report that was largely agreed upon by the opposing expert. I have no doubt that he did only the work that was necessary and I have no issue with his account. There is also a complaint about a disbursement for legal research which I take to be computer assisted research. It is suggested that this is lawyer's work and ought not form a separate charge. In my experience, electronic legal research tends to save money on legal fees when used properly, as appears to be the case here. I see no issue with the charge for legal research in this case.

[23] Accordingly, I accept that the amount of $62,210.53 in disbursements inclusive of taxes is appropriate.

[24] Finally, it is necessary to "step back and consider the result produced and question whether, in all the circumstances, the result is fair and reasonable": Apotex Inc., at para. 60, applying Restoule v. Canada (Attorney General), 2021 ONCA 779, 466 D.L.R. (4th) 2, at para. 356. Having considered the factors above and the success achieved, I am of the view that the proposed cost award is fair and reasonable.

[25] I fix the costs at $150,000 in fees and $62,210 of disbursements, all amounts inclusive of taxes.

Callaghan J.

Released: October 7, 2025