) ) CHRIS NASH BUILDING INC. Plaintiff – v. –, 2010 ONSC 7076

CITATION : Chris Nash Building Inc. v. Buckland , 2010 ONSC 7076 COURT FILE NO.: 99-0071 DATE: 20101220 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ) ) CHRIS NASH BUILDING INC. Plaintiff – and – BARBARA ANN BUCKLAND, WELLINGTON INSURANCE COMPANY, AVCO FINANCIAL SERVICES REALTY LIMITED, G. EDWARD LLOYD Defendants ) ) ) ) ) ) ) ) ))))) Colin Wright, for the Plaintiff Keith L. Geurts and Alison McLean for the Defendant Lloyd ) ) ) HEARD: By Written Submissions decision as to costs BEAUDOIN J. [ 1 ] The defendant G.

Edward Lloyd (the defendant) was successful in the trial of this action and now seeks his costs of defending the claim.

He has calculated costs based on three possible costs calculations: Option 1: Partial indemnity costs, from the beginning of the action, to and including trial and closing submissions, plus GST and disbursements: $124,610.77 Option 2: Substantial indemnity costs from the date of the First Offer, to and including trial and closing submissions, plus GST and disbursements: $148,127.62 Option 3: Partial indemnity costs to January 26, 2010, plus substantial indemnity costs from January 27, 2010, to and including trial and closing submissions, plus GST and disbursements: $136,928.32 . [ 2 ] The Court notes with some dismay a gross miscalculation in the defendant’s claim for disbursements.

The total without GST does not come to $53,893.92, but rather to $6,417.48. If GST at 5% is added, that total is $6,738.48. An error of this magnitude undermines the court’s confidence in the submissions as a whole. [ 3 ] The defendant urges the court to award the substantial indemnity costs from the date of the defendant’s first offer, dated November 7, 2001.

In the alternative, the defendant submits that the costs be fixed on the basis of Option 3, on a substantial indemnity basis from a second offer dated January 27, 2010. [ 4 ] The defendant also asks that I consider the fact that the costs calculations do not include the costs to Mr. Lloyd’s firm, which

defended the action at the outset, nor do the calculations include the costs accrued when this matter was handled internally by the insurer LawPro from 2003 to 2004. The Bill of Costs only includes those costs invoiced by Gowlings from December 2002 and then again in 2004 when Gowlings re-commenced handling of the Action. Where Gowlings’ rates are below those set by the tariff, the Bill of Costs calculations contemplate the lower, invoiced rate. Additionally, no fees were invoiced for Ms.

McLean’s attendance at the trial of the action. [ 5 ] It is the defendant’s position that notwithstanding the relatively small amount of Mr. Nash’s claim, the Court should exercise its discretion to fix the costs on a substantial indemnity basis.

The plaintiff acknowledges that the value of the claim was for $40,000 plus post-judgment interest at 6% per annum from November 1996, which puts the total claim at the date of trial — including the principal and interest compounded annually — at about $87,500. [ 6 ] Rule 57.01 (1) of the Rules of Civil Procedure gives the Court discretion to consider a number of factors in determining an appropriate costs award. The issues raised in the actions were relatively complex, and required a careful analysis of construction lien law as well as the law of equity.

As for the defendant, the issues were extremely important as they touched on Mr. Lloyd’s reputation, as well as the broader potential liability for solicitors, and expansion of the duty of care owed by solicitors to parties other than their own clients. [ 7 ] The case was extremely slow-moving and protracted, having been served in 1999, and relating to events which occurred in 1994. Numerous defendants were included in the action originally, including Barbara Buckland who is now deceased.

This action was only commenced after the plaintiff was unsuccessful in collecting against a judgment he had obtained against Barbara Buckland. [ 8 ] The defendant attempted to settle the matter on at least two separate occasions. The defendant served two offers to settle on the plaintiff both of which exceeded the results of the judgment obtained at trial. a. The First Offer to settle was an offer to accept dismissal of the matter without costs delivered to the plaintiff on November 7, 2001. b.

The Second Offer to settle was an offer to pay $10,000, inclusive of costs, claims and interest delivered to the defendant on January 27, 2010. [ 9 ] By contrast, the plaintiff made an offer to settle on December 18, 2008 which proved to be for far more than the amount of the judgment.

I am referred to a number of decisions where it was held that Rule 57.1 gives discretion to courts to order substantial indemnity costs from the date of the settlement offer where an offer to settle is delivered by the defendant, rejected by the plaintiff, and the plaintiff’s claim is dismissed at trial. [1] The defendant states that this should particularly be true where the allegations against the defendant are based in cases of unfounded allegations of improper conduct. [ 10 ] If the Court is not prepared to order costs on a substantial indemnity basis from the date of the First Offer, then the defendant submits that costs should be fixed on a party and party basis until January 26, 2010, after which date should be fixed at a substantial indemnity basis.

The Plaintiffs’ Position [ 11 ] The plaintiff’s primary response to the claim for costs is that, despite the success achieved by the defendant, no costs should be awarded in this case because the key issues decided were both novel ones. Specifically, the court was asked to rule on the following questions: 1. Are fire insurance proceeds paid or payable to an owner impressed with an owner’s trust under section 7(1) of the Construction Lien Act , R.S.O. 1990, c. C. 30 (“the C.L.A.” ) for the benefit of the contractor(s)? 2.

If so, is a stranger to that trust liable for paying the proceeds to those who were not the beneficiaries? [ 12 ] The court was not offered any case which was squarely on point and the plaintiff concedes that a lack of direct authority is not by itself enough to justify a departure from the usual rule that the winning party should have his costs. He argues that the element of novelty goes to the reasonable expectations of the party about the litigation. If the issue is truly open, the litigant could reasonably say that he or she had no proper reason to expect to fail.

But if all the litigant can say is that there was no decided case directly on the point, that begs the question about reasonable expectations. [2] [ 13 ] Counsel for the plaintiff sought advice from Harvey Kirsh, an author and expert in the field of construction law. It was Mr. Kirsh’s view that there was a sustainable argument to support the position taken by the plaintiff at trial.

Nash’s counsel argues that given the positive support from a leading authority, he is not “vulnerable to the response” that he should have expected what he got and as a small contractor, he should not also have to pay the winner’s costs in such a precedent-setting case. He adds that Lloyd was insured by LPIC, and it will likely benefit from the decision. [ 14 ] If the court is inclined to award costs, the plaintiff makes a number of submissions as to quantum.

He notes that five lawyers are listed in Lloyd’s costs submissions, but only one of them, Keith Geurts, went on record when his firm did and was lead counsel at trial. Because the claim was modest and slow-moving, he submits that there was no need for the others to be involved. [ 15 ] Mr. Geurts claims partial indemnity costs at $200 an hour for himself and at $80 an hour for his law clerk. During the period of his involvement with the file, he had about five to 10 years experience. Mr.

Wright counters that for counsel in Brockville with such experience, the rates claimed are excessive. [3] He submits that an hourly rate of $150 for Mr. Geurts and of $40 for his law clerk would be more reasonable. [ 16 ] Mr. Geurts claims 13.7 hours for preparation of the statement of defence. The plaintiff notes that the statement of defence was already delivered when he came on record, and he did not amend it. Subject to that comment, the plaintiff considers the time claimed by Mr. Geurts and his law clerk reasonable, and calculating the hourly totals at “Brockville” rates, he arrives at total fees

including GST of $34,474.00. He also considers Mr. Geurts’s properly calculated disbursements of $6,738.48 to be reasonable. Thisresults in total fees and disbursements on a partial indemnity basis including GST $41,212.48. [17] In addition, the plaintiff argues that the bill of costs should be further reduced on the basis of the principle of reasonablenessand cites Boucher v. Public Accountants Council for the Province of Ontario, (ON CA), [2004] O.J.

No. 2634(C.A.), para. 37, where the court of Appeal affirmed that costs awards should reflect the amount that an unsuccessful party couldreasonably be expected to pay. [18] He also refers to Rule 1.04(1.1) which refers to the principle of proportionality: Proportionality –

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importanceand complexity of the issues, and to the amounts involved, in the proceeding. [19] In this case, the winning counsel’s bill is $41,212.48, or almost half the total at issue. Mr.

Wright also refers to the formerconstruction lien legislation where there was a bar to the unsuccessful plaintiff paying more than 25% of its claim to the other party infees. [4] Although the provision has not been carried forward directly, current legislation provides that a claim for lien may be vacatedon providing security for the full amount plus 25% for costs. The plaintiff suggests that the 25% rule has become a 25% guideline andapplying 25% to the total value of the claim results in fees and disbursements inclusive of GST of $29,707.48.

Decision [20] I am not satisfied that a 25% rule applies simply because the Construction Lien Act is invoked. This action also includedclaims based on common law trust principles. Costs orders must be primarily based on the general principles set out in Rule 57.01(1). Inthe Daubney decision cited by the plaintiff, Justice Spence said that a novel issue was not a rule requiring rejection of a costs award butsimply a consideration to be taken into account in determining if there should be an award and in what amount.

In that case he held theelement of novelty justified a reduction in the costs award. [21] If the defendant is to obtain an award of costs on a substantial indemnity basis after the date of either of his offers, he cannotrely on Rule 49 but on the general discretion conferred on the court by Rule 57.01 to consider any offer to settle. [22] As to principle of proportionality, it is not specifically referred to in Rule 57.01 and in my view that principle is embraced byRule 57.01(1) (0.

b) that refers to the reasonable expectations of the parties. In any event, the proportionality principle is not apercentage principle. It may very well be that a party will necessarily incur costs that exceed the amounts in issue and that fact in and ofitself does not result in an automatic reduction of a cost award. Rule 57.01(1)(0.

a) first refers to the principle of indemnity and thatprinciple is not abrogated by Rule 1.04(1.1). [23] This is an action that was drawn out over a period of 10 years and that was commenced nearly six years after the events thatgave rise to the claims in these proceedings. The plaintiff was unsuccessful in collecting a judgment and decided to look to others whomight respond to his claim. Faced with the clear language in the Construction Lien Act, he chose to attempt novel arguments to findliability on the part of a lawyer who held insurance proceeds in trust.

In the end, the Court concluded that the common law trustprinciples may have been applicable in circumstances similar to these but there was no factual basis to support the arguments that wereadvanced. [24] Since the result in this case may now provide a benefit to other lawyers that is a good reason to limit the award of costs to apartial indemnity basis. This is a case where there was no authority directly on point and where the possibility of success at trial was anopen question. The plaintiff was willing to risk an exposure to an award of costs in order to collect a principal sum of $40,000.00.

Tenlong years later, he now has his answer. I conclude that the partial indemnity amount of $41,212.48 as calculated by the plaintiff is thefair and reasonable amount that the plaintiff can be expected to pay. Mr. Justice Robert N. Beaudoin Released: December 20, 2010 [1] Gryglewicz v. Onyszko, [1999] O.J. No. 3390 (Sup. Ct.); Chrysler Canada Ltd. v. Rivercourt Developments Inc. [1995] O.J. No. 4384(Gen. Div.); S & A Strasser Ltd. v. Richmond Hill (Town), (ON CA), [1990] O.J. No. 2321 (C.A.).