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 Succinct, Practical Approach to Fixing Costs

In Mudford v. Smith, Belobaba J. reiterated  a very practical approach to the fixing of costs which was originally set forth by Power J. In Rodriguez Holdings v. City of Vaughan, and which can be summarized as follows:

(i)                  review the costs outline to ensure that the hourly rates fall within the Practice Direction (e.g. 1 to 10 years, max. $225; 10 to 20 years, max. $300; over 20 years, max. $350) and make any necessary adjustments;

(ii)               make any required adjustments in the number of hours charged for various categories of work or in the amounts charged for the various types of disbursements;

(iii)               apply the factors set out in rule 57.01, paying particular heed to the admonition in Boucher that the costs award should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs to the successful litigant;

(iv)              basing your decision primarily on the principle in Boucher, determine the appropriate costs amount on a partial indemnity basis;

(v)               if substantial indemnity is justified, multiply the partial indemnity amount, as determined above, by 1.5 as per the definition of “substantial indemnity” that is set out in rule 1.03.

Click here to review the full text of Mudford v. Smith (November 12, 2009 Belobaba J. (Ont. S.C.J.))
 

Court Should Not Second Guess Hours Spent By Successful Counsel In Absence Of Dockets From Opposing Party’s Counsel

Although counsel for an unsuccessful party is not required to produce dockets,  the relative expenditures, at least in terms of time, by adversaries on opposite sides of a proceeding, while not conclusive as to the appropriate award of costs, is still, nonetheless, a relevant consideration where there is an allegation of excess in respect of a particular matter.    This proposition was recently applied by Newbould J. In Fraleigh v. RBC Dominion Securities Inc..  Newbould J.  quoted from Winkler J. (as he then was) in Risorto v. State Farm Mutual Automobile Insurance Co. (2003), 64 O.R. (3rd ) 135, who stated:

“The attack on the quantum of costs, insofar as the allegations of excess are concerned, in the present circumstances is no more than an attack in the air. I note that State Farm has not put the dockets of its counsel before the court in support of its submission. Although such information is not required under Rule 57 in its present form, and the rule enumerates certain factors which would have to be considered in exercising the discretion with respect to the fixing of costs in any event, it might still provide some useful context for the process if the court had before it the bills of all counsel when allegations of excess and "unwarranted over-lawyering" are made. In that regard, the court is also entitled to consider "any other matter relevant to the question of costs". (See rule 57.01(1)(i).) In my view, the relative expenditures, at least in terms of time, by adversaries on opposite sides of a motion, while not conclusive as to the appropriate award of costs, is still, nonetheless, a relevant consideration where there is an allegation of excess in respect of a particular matter.”

Rule Against Recovery of Costs in Excess of Amounts Actually Billed to Client Not Applicable Where Fee Not Yet Charged to Client

While the Court of Appeal in Stellarbridge Management Inc. v. Magna International (Canada) Inc. et al [2004] O.J. No. 2102 (C.A.) held that it was not appropriate for a successful litigant to receive an award of costs in excess of the amounts actually charged to it, this principle should have no application where no fee has yet been charged to the client.

Click here to review the full text of Appleyard v. Earl (Earl’s Heating) (November 2, 2009 Mulligan J. (Ont. S.C.J.))
 

COURT OF APPEAL REITERATES NARROW JURISDICTION TO AWARD SUBSTANTIAL INDEMNITY COSTS

In Davies v. Clarington (Municipality) (October 16, 2009 (Ont. C.A.)) the Court of Appeal considered the limits of the court's discretion to award costs on either a substantial indemnity or full indemnity scale.   The court was asked to consider a costs award in the amount of $509,452.18, payable by a number of defendants to a defendant against which the action was dismissed. The award was notable not only for its considerable quantum, but also for the trial judge's decision to fix a large portion of the costs on a full indemnity basis absent a finding of sanction-worthy conduct on the part of the party against which the cost order was made. Specifically, full indemnity costs were ordered for the period following the delivery of an offer to settle the claims of the plaintiff and other defendants on a without-costs basis.

The Court set aside the costs award, substituting an award in the amount of $300,000.00 plus disbursements and G.S.T..

The Court noted the well established jurisprudence that elevated costs are warranted in only two circumstances. The first involves the operation of an offer to settle under rule 49.10, where substantial indemnity costs are explicitly authorized. The second is where the losing party has engaged in behaviour worthy of sanction.

After reviewing some leading cases, including the Strasser and Scapillati decisions regarding offers to settle, the Court concluded:

“In summary, while fixing costs is a discretionary exercise, attracting a high level of deference, it must be on a principled basis. The judicial discretion under rules 49.13 and 57.01 is not so broad as to permit a fundamental change to the law that governs the award of an elevated level of costs. Apart from the operation of rule 49.10, elevated costs should only be awarded on a clear finding of reprehensible conduct on the part of the party against which the cost award is being made. As Austin J.A. established in Scapillati, Strasser should be interpreted to fit within this framework - as a case where the trial judge implicitly found such egregious behaviour, deserving of sanction.”

Finally, the Court pointed out that a distinction must be made between hard-fought litigation that turns out to have been misguided, on the one hand, and malicious counter-productive conduct, on the other. The former, the thrust and parry of the adversary system, does not warrant sanction: the latter well may. 

Readers should note that the decision also includes a useful reference to the  2006 decision of Andersen v. St. Jude Medical Inc.  in which  the Divisional Court set out several principles that must be considered when awarding costs.

Click here to review the full text of the decision in  Davies v. Clarington (Municipality) (October 16, 2009 (Ont. C.A.)).

 Dockets or "Other Evidence" Ordered Produced

Animal House Investments Inc. v. Lisgar Development Ltd., (August 27, 2009 Marrocco J. (Ont. S.C.J.))

 Following a trial, the parties against whom costs may be ordered wished to examine all of the original dockets created by counsel for the plaintiff.  The request was based on rule 57.01(5) and Form 57A which is referred to in that sub rule.  Noting that Form 57A indicates that a bill of costs should contain "copies of the dockets or other evidence" in support of the claim for fees, Marrocco J. found that the form does not require the production of the party's dockets. It requires either the dockets or “other evidence.” 

After reviewing three other relevant decisions, the judge ordered the plaintiff to dockets or other evidence in support of the fees it was claiming. If the plaintiff chose to submit its dockets, it was permitted to redact the dockets to delete all privileged or otherwise sensitive information

To review the full decision, click here: Animal House Investments Inc. v. Lisgar Development Ltd., (August 27, 2009 Marrocco J. (Ont. S.C.J.))

Motion to Consolidate:  $90,000.00

Costs of an interlocutory motion to consolidate two actions were awarded in the amount of $90,000.00.   Yes, $90,000.00.   The successful party sought costs in the amount of $410,000.00 partial indemnity. See 1632842 Ontario Ltd. v. Great Canadian Gaming Corp. (April 14, 2009 Morawetz J. (Ont. S.C.J.))

 
Costs Reduced in “Over Lawyered” Case - Should Have Moved For Summary Judgment?

In 914904 Ontario Ltd. v.  1374377 Ontario Inc. (May 21, 2009 Whitten J. (Ont. S.C.J.), Whitten J. dismissed the plaintiff's action with respect to a lease option after a nine-day trial.  The Defendant submitted bills of costs of $124,776.45 (substantial indemnity) and alternatively, $100,893.67 partial indemnity.  The reduction was based on Whitten J.’s view that the proceeding was “over lawyered”, and did not represent “clean efficient litigation”.   The judge was also critical of the billing format and the difficulty in determining whether there was a duplication of services.

Such criticisms from the Bench are not uncommon.  However, one should be concerned about Whitten J.’s view that the matter “could have been resolved by a motion” [i.e. Rule 20 (summary judgment) or Rule 21 (trial of an issue)]. 

While one should always consider whether a costly trial could be avoided by a pre-trial motion, one must also consider that Rule 20.06 provides potential costs sanctions for unsuccessful summary judgment motions.   This Rule will be toned down a bit as of January 1, 2010, but the point is that Rules 20 and 21 motions are not brought without risk.   It is usually the case that such motions are dismissed where there are credibility issues, which seemed to be present in this proceeding.  Furthermore, Rule 20 motions can trigger cross-examinations on affidavits, and there could be appeals, all of which can lead to a costly and time consuming distraction from the main litigation.

There is never certainty of success with respect to pre-trial motions and the cost consequences for being unsuccessful can be substantial.   Accordingly, with great respect to Whitten J., it is submitted that a judge in fixing costs should be wary of discounting bills of costs by suggesting that certain interlocutory motions should have been brought despite the presence of credibility issues and no clear probability of success.  When fixing costs, Courts should be quite wary to second guess counsel on their litigation strategy: Hodgson v. Canadian Newspapers Co (July 2, 20003 Lane J. (Ont. S.C.J.), at para. 25); Sharma v. Dewett (January 21, 2005 Belleghem J. (Ont. S.C.J.)), at par. 61.

- Ken Peacocke

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