CHIMO CONSTRUCTION MANAGEMENT LIMITED PLAINTIFF/DEFENDANT BY COUNTERCLAIM AND: CAPITAL MOTORS (2004) ltd. DEFENDANT /PLAINTIFF BY COUNTERCLAIM, 2018 NLSC 206

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Chimo Construction Management Limited v. Capital Motors

(2004) Ltd. 2018 NLSC 206 Date : October 19, 2018 Docket : 201101G7682 BETWEEN: CHIMO CONSTRUCTION MANAGEMENT LIMITED PLAINTIFF/DEFENDANT BY COUNTERCLAIM AND: CAPITAL MOTORS (2004) ltd. DEFENDANT /PLAINTIFF BY COUNTERCLAIM Before: Justice William H. Goodridge Place of Hearing: St. John's, Newfoundland and Labrador Dates of Hearing: September 11 and October 18, 2018

Summary: Chimo sought an increased cost award under Rule 20A on the basis that it obtained a judgment more favourable than the terms of an offer to settle. The application was granted. The Court exercised discretion and increased the costs awarded to Chimo for the post-offer time period.

Appearances: R. Paul Burgess, Q.C. Counsel for the Plaintiff/Defendant by Counterclaim Deborah L. J. Hutchings, Q.C. Counsel for the Defendant/Plaintiff by Counterclaim Authorities Cited: CASES CONSIDERED: Mega Roofing & Waterproofing Ltd. v. N.D. Dobbin Ltd. (1996), (NL SC), 143 Nfld. &P.E.I.R. 14, 448 A.P.R. 14 (Nfld. S.C. (T.D.)); Finn v. St. John’s (City), 2007 NLCA 46; Steele v. Rendell, 2017 NLCA 36; Burton v.Global Benefit Plan Consultants Inc. (1999), (NL SC), 183 Nfld. & P.E.I.R. 86, 556 A.P.R. 86 (Nfld. S.C. (T.D.)) RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch.

D REASONS FOR JUDGMENT GOODRIDGE, J.: INTRODUCTION [1] Chimo Construction Management Limited applies to invoke Rule 20A of Rules of the Supreme Court, 1986, S.N.L. 1986, c.42, Sch. D. It seeks an award of additional costs, over and above what it was awarded at trial, on the basis that it obtained a judgmentmore favourable than the terms of an offer to settle that it presented prior to trial. [2] Capital Motors

(2004) Ltd. opposes the application on the basis that the offer presented was ambiguous, was nominal in thecontext of the amount claimed, and was invalidated by pleading amendments. If the Court determines that the offer does attract Rule20A consequences, then Capital asks that discretion be exercised in awarding any additional costs on the basis of the interests of justiceand fairness after consideration of all of the relevant circumstances. BACKGROUND [3] Chimo had claimed $222,205.56 from Capital as the balance outstanding on a construction contract.

Capital initiallydisputed liability and counterclaimed for damages relating to allegedly deficient construction work. The counterclaim was for$556,182.49, based on Capital’s written submissions at trial. [4] On March 28, 2012, Chimo presented Capital with a lump sum offer to settle both the primary claim and the counterclaim.Chimo offered “to accept the sum of $147,205.65 in full settlement of its claim and costs and to settle the Counterclaim”.

The set-offdifference (the amount Chimo was offering to reduce what it was owed on the contract) was the equivalent of an offer on the counter-claim of approximately $75,000.

The relevant wording of the offer states: The Plaintiff/Defendant by Counterclaim, Chimo Construction Management Limited, offers to accept the sum of $147,205.65 in fullsettlement of its claim and costs and to settle the Counterclaim, on condition that payment of that amount be made in cash or by certifiedcheque at the time of acceptance of this offer, as well as receive a release in standard form acceptable to counsel for all parties, releasingthe Plaintiff/Defendant by Counterclaim from claims by you or any other person, corporation or entity who could claim contribution orindemnity or other relief against the Plaintiff/Defendant by Counterclaim in respect of the within proceeding. [5] At the outset of trial Capital advised the Court that it had conceded liability on Chimo’s claim.

There would be no dispute onthe balance outstanding on the construction contract. The trial would deal with Capital’s counterclaim. All of the Court time wasoccupied with the counterclaim. Capital assumed its role as a plaintiff and presented its case first, and Chimo assumed its role as adefendant and followed. [6] After trial Capital was awarded $78,722.17 on the counterclaim, resulting in a net judgment for Chimo after set-off(excluding interest and costs) of $143,483.39. Chimo was awarded 80% its party and party costs (column 3) on the basis that it was

successful, in large measure, resisting the counterclaim. [7] Chimo claims that, after interest is added, the judgment obtained is more favourable than the terms of the offer to settle, andthat it is entitled to party and party costs to date of offer, and thereafter double party and party costs. If the Court decides that doubleparty and party costs is not appropriate, then Chimo asks the Court to exercise discretion and make some other higher level cost award inits favour.

ISSUES [8] The issues include: • Was Chimo’s offer ambiguous? • Was Chimo’s offer nominal? • Did pleading amendments invalidate Chimo’s offer? • Did Chimo obtain a judgment more favourable than the terms of its offer? • Was Chimo a plaintiff or defendant, for the purposes of applying Rule 20A? • Are there unusual circumstances present which justify the Court exercising discretion to deviate from the presumptive rulesfound in 20A?

LAW [9] Rule 20A is designed to encourage settlements by imposing adverse costs consequences on a party who fails to accept anoffer which is less than the amount ultimately awarded, per Orsborn, J. at paragraph 8 of Mega Roofing & Waterproofing Ltd. v. N.D.Dobbin Ltd. (1996), (NL SC), 143 Nfld. & P.E.I.R. 14, 448 A.P.R. 14 (Nfld. S.C. (T.D.)). [10] If an offer to settle is made and not revoked or accepted prior to trial, and a Rule 20A application is made within 15 days of thedecision or order, then the trial judge’s decision dealing with costs is of no force and effect. At paragraphs 77 and 78 of Finn v. St.

John’s(City), 2007 NLCA 46, Cameron, J.A. stated that the cost order in the original judgment is of no force and effect if the preconditions toRule 20A are satisfied: 77 … The wording of subsection [20A.08] (3) directs that as a precondition to its operation there be an offer to settle which is notrevoked and the trial judge have made a decision including a determination as to costs. 78 … In my view, subsection (3) has the effect of declaring that where the preconditions are met and there is a Rule 20A application theoriginal order has "no force and effect". [11] The qualifying

preamble “unless ordered otherwise”, contained within Rules 20A.08 (1) and (2), reserves discretion with theCourt to vary the presumptive rules on cost consequences. However, the Court should adhere to these presumptive rules “in all but themost unusual circumstances”. In Steele v.

Rendell, 2017 NLCA 36, at paragraphs 30 and 31 White, J.A. found the following commentfrom the trial judge to be a correct explanation of the law: [P]redictability as to the cost consequences from the failure to accept an offer of settlement is a cornerstone to the Rule [20A]… Thepredictability of the cost consequences means that in all but the most unusual circumstances the Court should adhere to the costs set forthin the Rule … [12] In Burton v. Global Benefit Plan Consultants Inc. (1999), (NL SC), 183 Nfld. & P.E.I.R. 86, 556 A.P.R. 86(Nfld.

S.C. (T.D.)), the Court was asked to consider whether the presumptive rule applies in the context of a nominal offer that containedno element of compromise. After an extensive review of authorities from across the country Orsborn, J. determined that such offers fallwithin Rule 20A, but that the presumptive rules on cost consequences do not apply. In those types of cases, the post-offer costentitlement should be determined in the discretion of the trial judge based on the interests of justice and fairness. He summarized therelevant legal principles at paragraph 55: 1.

An offer to settle need not contain an element of compromise in order to be considered an offer to settle for the purposes of Rule20A. 2. For the purpose of Rule 20A.08, an offer to settle which does not contain an element of compromise, is nominal or which otherwiserequires capitulation, should not benefit from any presumptive rule of entitlement to post-offer costs on "some other greater basis" thanparty and party costs. 3. For the purpose of Rule 20A.08, in the context of an offer to settle which does not contain an element of compromise, is nominal or

which otherwise requires capitulation, the basis of post-offer costs entitlement of the party in question (unless ordered otherwise) should be determined on the basis of the interests of justice and fairness after consideration of all of the relevant circumstances. These circumstances will include at least the nature of the claim, the merits of the claim and any defence, and any opportunity for resolution which can be attributed solely to the offer.

ANALYSIS Was Chimo’s offer ambiguous? [ 13 ] Capital argued that the wording of the offer left ambiguity about whether the lump sum included interest, and that ambiguity should render the offer null and void. I reject that argument and find that the lump sum offer was clear and that it included interest. [ 14 ] The principal and interest components of Chimo’s claim were pleaded in sub-paragraphs 11(

a) and (

b) of the statement of claim. Both the principal and interest are captured within the lump sum offer “in full settlement of its claim”. The offer does not reference the interest component of the claim, but that is not necessary when making a lump sum all-inclusive offer in full settlement of the claim. [ 15 ] Capital also argued that the conditions within the offer (payment by cash or by certified cheque and a release in standard form) injected ambiguity. I also reject that argument. These conditions appear in most offers to settle, and do not give rise to ambiguity.

The standard form offer that is attached to the Rule 20A includes the same condition dealing with payment by cash or by certified cheque. Was Chimo’s offer nominal? [ 16 ] Capital argued that the lump sum offered by Chimo was so low, in the context of the amount claimed, that it should not benefit from any presumptive rule of entitlement to post-offer costs. Discretion must be exercised. [ 17 ] I find that Chimo’s offer does not qualify as a ‘nominal offer’, as that phrase is discussed in Burton supra. It was not an offer that required complete capitulation by Capital.

The offer was substantial, and was the equivalent of an offer of $75,000 on Capital’s counterclaim. This is a substantial sum, especially so in light of the ultimate assessment at trial, valuing the counterclaim at $78,722.17. It reflected a compromise by Chimo, to recognize merit in the counterclaim. It was proven at trial to be a reasonable offer. It was not close to a nominal offer. Did pleading amendments invalidate Chimo’s offer? [ 18 ] Capital argued that the pleading amendments made after the offer was received, which changed the nature of the claim, invalidated the offer.

That argument is rejected. [ 19 ] Chimo did not revoke or withdraw the offer to settle. It did the opposite. In letters dated June 18, 2015 and January 27, 2016, Chimo reminded Capital that the March 28, 2012 offer to settle was still operating as a formal offer under Rule 20A. These reminders were not necessary since pleading amendments by an opposing side do not operate to invalidate an offer to settle. However, the reminders make it clear that the Capital was not under any misunderstanding.

It had notice that the offer to settle was still operating. [ 20 ] The January 27, 2016 reminder was made in the context of ongoing negotiations during the last weeks preceding trial commencement. A further concession was being offered by Chimo but Capital was cautioned that “this [new] offer in no way affects the formal offer to settle previously made to your client”. [ 21 ] Under these circumstances the amendments to pleadings did not invalidate Chimo’s offer to settle.

Did Chimo obtain a judgment more favourable than the terms of its offer? [ 22 ] Chimo obtained a judgment for $143,483.39 plus interest and 80% of its taxed costs. The accruing interest to the date of judgment is approximately $86,151.49, resulting in a judgment of $229,634.88 plus costs. The judgment obtained by Chimo is more favourable than the terms of its offer. Was Chimo a plaintiff or defendant, for the purposes of applying Rule 20A ? [ 23 ] If Chimo is characterized as a plaintiff then Rule 20A.08 (1) of Rules of the Supreme Court , 1986, may apply.

Rule 20A.08 (1) awards a plaintiff party and party costs plus taxed disbursements to the date of the offer and thereafter double party and party costs, unless otherwise ordered. The relevant wording states: 20A.08

(1) Unless ordered otherwise, when an offer to settle was made by a plaintiff … and where that plaintiff obtains a judgment as favourable or more favourable than the terms of the offer to settle, that plaintiff shall be entitled to party and party costs plus taxed disbursements to the date of service of the offer to settle and thereafter to double party and party costs plus taxed disbursements. [ 24 ] If Chimo is characterized as a defendant then Rule 20A.08 (2) may apply. Rule 20A.08 (2) awards the plaintiff party and party costs to the date of offer, and the defendant party and party costs from the date of offer, unless otherwise ordered. The relevant wording states: 20A.08

(2) Unless ordered otherwise, when an offer to settle was made by a defendant … and where the plaintiff obtains a judgment no more favourable than the terms of the offer to settle, the plaintiff shall be entitled to party and party costs plus taxed disbursements to the date of service of the offer to settle, and the defendant shall be entitled to party and party costs plus taxed disbursements from the date of

service of the offer to settle. [ 25 ] The original claim of Chimo was conceded by Capital at the outset of trial. The 27 days in trial were occupied with the counterclaim. The cost consequences being addressed in this application relate almost entirely to Court time occupied with the counterclaim. Capital had the role of plaintiff for the counterclaim and Chimo had the role of defendant. In the circumstances, the more appropriate Rule for consideration of the application is 20A.08 (2). The presumptive rule in this context is party and party costs from date of offer and not double party and party costs.

Are there unusual circumstances present which justify the Court exercising discretion to deviate from the presumptive rule found in 20A.08 (2)? [ 26 ] In Steele , White, J.A. recognized that trial judges have discretion to vary the presumptive rules within 20A.08 on cost consequences, but indicated that the discretion should be exercised only in the most unusual circumstances. I find that the unusual circumstances that are present here are sufficient to permit an exercise of discretion to make an award outside the presumptive rule.

These unusual circumstances present here do not fall squarely within any of the scenarios contemplated by Rule 20A.08.

The unusual circumstances justifying an exercise of discretion include: liability was conceded by Capital at outset of trial; the trial proceeded solely on the counterclaim; Capital assumed the role of plaintiff and presented its case first; Capital was already penalized with an adverse cost award (allowed only 20% of its costs) despite the fact that the counterclaim was proven; Rule 20A.08 (2) does not contemplate the situation where an unsuccessful defendant (Chimo on the counterclaim) is awarded costs at trial. [ 27 ] Chimo’s post-offer costs entitlement should be determined on the basis of the interests of justice and fairness after consideration of the relevant circumstances.

The relevant circumstances include: 27 days in Court were occupied with the counterclaim; Chimo’s offer to settle allowed a compromise of $75,000; the actual award to Capital on the counterclaim was $78,722.17; an adverse cost award against Capital had already been made at trial. DISPOSITION [ 28 ] The cost award in the trial decision is varied for the time period following service of the offer to settle. After March 28, 2012, Chimo is entitled to 100% of party and party costs (column 3) and 100% of its taxed disbursements.

The cost award made at trial for the time period preceding service of the offer to settle is confirmed. [ 29 ] On this Rule 20A application, Chimo is awarded party and party costs (column 3). ______________________________ WILLIAM H. GOODRIDGE Justice