) ) Construction Exedra Inc. Plaintiff/Responding Party – v. –, 2017 ONSC 965

CITATION : Construction Exedra v. Kingdom of Saudi Arabia , 2017 ONSC 965 COURT FILE NO.: 13-57135 DATE: 2017/02/09 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ) ) Construction Exedra Inc. Plaintiff/Responding Party – and – Kingdom of Saudi Arabia as represented by the Cultural Bureau of the Royal Embassy of Saudi Arabia Defendant/Moving Party ) ) ) ) ) ) ) ) ) ) ) ) ) Nadia J. Authier, for the Plaintiff John I.G. Melia, for the Defendant ) ) ) HEARD: In writing decision regarding costs COrthorn J. Background [ 1 ] The defendant’s motion for

summary judgment (the “motion”) raised issues of international law and diplomatic immunity, in particular with respect to disputes arising from the construction of premises owned by a foreign sovereign. The defendant was successful on the motion in obtaining an order that (

a) provides for the dismissal of the plaintiff’s lien claim, and (

b) requires the plaintiff to discharge the subject lien from the title to the defendant’s property. [ 2 ] The motion was originally returnable on February 25, 2016. The second of two affidavits relied on by the defendant in support of the motion was served on the plaintiff at most two days prior to the original return date. As a result, the motion was adjourned to allow the plaintiff an opportunity to (

a) deliver a responding affidavit, and (

b) cross-examine the affiant. The plaintiff did not take either of those steps. [ 3 ] The motion was argued on June 10, 2016. Positions of the Parties

a) The Defendant [ 4 ] The defendant seeks costs of the motion on a partial indemnity basis in the amount of $20,020.52. That figure is broken down as follows: Fees [1] Preparation etc. $ 17,866.32 Appearance (Feb./16) $ 1,103.45 Appearance (June/16) $ 630.54 Disbursements (incl. HST) $ 783.68

Total $ 20,383.99 [2] [ 5 ] The defendant submits that international and domestic law disputes are relatively complex. The issues determined on the motion are said by the defendant to be important because the decision sets a precedent for construction lien rights in respect of diplomatic property. [ 6 ] In response to the plaintiff’s position with respect to costs, the defendant submits that from the plaintiff’s perspective the overall result on the motion was not as favourable [as] or more favourable than the terms of the offer to settle.

In the alternative, if the plaintiff’s offer to settle is found to trigger costs consequences, then the defendant submits that the offer serves only to reduce the defendant’s costs entitlement from the figure set out above to approximately $14,200. In addition, the defendant relies on the timing of the plaintiff’s offer in addressing the consequences, if any, arising from the terms of the offer.

b) The Plaintiff [ 7 ] The plaintiff requests its costs of the motion on a substantial indemnity basis in the amount of $5,871.48. That amount is broken down as follows: Fees Preparation etc. $ 4,446.00 Appearances $ 750.00 HST on fees $ 675.48 Total $ 5,871.48 [ 8 ] The plaintiff does not include any amount for disbursements in the costs it is seeking. [ 9 ] In support of its request for costs on a substantial indemnity basis, the plaintiff relies on the terms of an offer made on February 26, 2016 (the “offer”). The terms of the offer are discussed in detail below. Analysis

a) The Offer to Settle [ 10 ] The first issue to be determined is whether the offer triggers any costs consequences. The offer is set out in an email sent by counsel for the plaintiff to counsel for the defendant. The relevant portions of the email are as follows: I have now received instructions from my client to make the following offer: Construction Exedra is prepared to register a discharge of its construction lien and vacate the certificate of action on the following condition: 1.

Within 7 days of the registration of the discharge on title, the Kingdom of Saudi Arabia shall deliver a proposal for the settlement of this action; 2. The motion shall be dismissed without costs; and 3. If following the receipt of the settlement proposal from the Kingdom, the parties are unable to reach a settlement, the action shall continue as a breach of the contract claim. The offer by Construction Exedra to discharge its construction lien is being made as a gesture of good faith and with a view to arriving at a settlement of this matter.

Construction Exedra does not accept or acknowledge that the Cultural Bureau is protected by State or Diplomatic Immunity. We continue to assert that by entering into the contract, the Kingdom of Saudi Arabia waived its immunity. [ 11 ] Counsel for the defendant responded by email on March 23, 2016. The response on behalf of the defendant was as follows: Your offer is incapable of being accepted by any foreign sovereign. The premises are diplomatic property and entitled to the full protection afforded by both Canadian and International Law.

Anything short of your client acknowledging same, simply defers the issue to a later date. We see no benefit to deferring the issue and, accordingly, we are instructed to proceed with the motion and have the diplomatic immunity issue settled by the Court now. While your client remains at liberty to unilaterally discharge the lien, if it chooses, we will, of course, proceed to seek our costs for the motion and argue that the discharge is an express acknowledgement of the diplomatic immunity afforded to the premises. [ 12 ] The hearing of the motion commenced on February 25, 2016.

It was not known until counsel appeared before me that day that the motion would be adjourned to June 2016 to permit the defendant to file additional evidence. [ 13 ] The defendant submits that the offer was not made “at least seven days before the commencement of the hearing” within the meaning of sub- rule 49.10(1) (

a) of the Rules of Civil Procedure . [3] However, the hearing of a motion begins when submissions or argument begin in respect of the issues raised by the motion. [4] [ 14 ] Argument on the motion did not commence until June 2016. As a result, I find that the offer was made at least seven days before the commencement of the hearing.

[ 15 ] It is therefore necessary to consider whether the outcome of the motion is as or more favourable to the plaintiff than were the terms of the offer. For the reasons which follow, I find that the outcome of the motion was less favourable to the plaintiff than were the terms of the offer. [ 16 ] I find that the offer was conditional. Had the defendant accepted the offer it was required to do two things:

a) deliver a proposal for settlement of the action; and

b) abandon any claim for costs of the motion, the latter even though the offer was not made until after the original return date for the motion. [ 17 ] The plaintiff submits that the offer, if accepted, did not require that the defendant acknowledge or accept that it had waived its immunity.

However, that particular submission concludes with the following statement, “Therefore, upon accepting the offer the defendant would continue to be able to assert a defence of state immunity with respect to the plaintiff’s claims for breach of contract.” I find that submission to be confusing in light of the final two sentences of the offer, which reference both state and diplomatic immunity. [ 18 ] I agree with the defendant that if the offer had been accepted there would have been no finding on the issue of diplomatic immunity and the action would have proceeded with the plaintiff continuing to assert that the defendant is not protected on the basis of either diplomatic or state immunity. [ 19 ] The plaintiff submits that the terms of the offer are “exactly what was ultimately ordered by the Court.” I disagree.

The order of the Court is unconditional with respect to the dismissal of the lien claim and the discharge of the lien from title. In addition, the order of the Court provides a determination of the issue of diplomatic immunity, as it relates to protection of the subject premises from attachment.

b) Factors re Costs

i) Timing of Offers Made [ 20 ] Although the offer does not fall within the scope of rule 49.01(1) of the Rules of Civil Procedure , the timing of the offer is a factor to be considered.

The offer was made three months after service of the defendant’s motion record, ten days following service of the defendant’s original factum, three days after service of the second affidavit relied on by the defendant, and one day after the original return date for the motion. [ 21 ] The defendant submits that by the date the offer was made, it had incurred partial indemnity costs in the approximate amount of $18,115. [ 22 ] In 2013 and 2015, the defendant offered to settle the issues related to the lien on the basis of discharge of the lien from the title to the subject property, an order dismissing the lien claim, and an order granting the plaintiff leave to amend the statement of claim to reflect the diplomatic immunity to which the defendant claims to be entitled.

The defendant does not rely on the offer made in 2013 and repeated in 2015 in support of a claim for costs on a substantial indemnity basis. The defendant does, however, highlight that acceptance by the plaintiff of the offer made in 2013 and repeated in 2015 would have avoided the necessity of the motion. ii) Complexity and Novelty of Issues Determined [ 23 ] The parties are in agreement that the issue of diplomatic immunity from attachment in the form of a construction lien was novel. The defendant submits that the novelty served to increase the complexity of the issues addressed on the motion.

The plaintiff submits that by reason of the novelty of the issue there should be no costs awarded on the motion. [ 24 ] From my review of the cases when determining the motion, it is clear that international law and issues of state immunity and diplomatic immunity are inherently complex. The complexity of the issues is such that disputes in the area of international law likely give rise to novel issues as, if not more frequently than, do disputes in other areas of the law.

It would, in my view, be unfair and unjust to disallow costs in this circumstance because the issues to be determined arise in the area of international law. iii) Importance of the Issues [ 25 ] The plaintiff’s claim is for compensation in the amount of or equivalent to approximately $1,000,000. The defendant submits that the decision on the motion creates a precedent for construction disputes involving foreign sovereigns. Without a full history of the law in this area, it is not possible for me to know the extent, if any at all, to which the decision on the motion creates such a precedent.

However, based on my review of the law when rendering the substantive decision, there did not appear to be an authority precisely on point. [ 26 ] I find that the issues determined were of importance for monetary reasons. [ 27 ] The plaintiff submits that the defendant was deliberate in its decision not to accept the plaintiff’s offer and to instead pursue the motion to a hearing. The plaintiff argues that the defendant chose to proceed to the motion specifically because it wanted a ruling on the issue regardless of the potential to settle the motion. There is no evidence to support a finding in that regard.

I find the plaintiff’s submission on this point to be without merit. iv)

Summary [ 28 ] I find that the complexity, novelty, and importance of the issues determined on the motion are such that the defendant is entitled to its costs of the motion on a partial indemnity basis payable forthwith.

c) Quantum of Costs Awarded [ 29 ] The defendant relies on the decision of Braid J. with respect to costs in Canadian Planning and Design Consultants Inc. v.

State of Libya [5] in support of its claim for costs in the total amount of $20,383.99. In that case, the defendant recovered costs in the amount of $100,000 with respect to five appearances to address issues of state immunity, diplomatic immunity, and Crown prerogative. The property in issue in Canadian Planning was bank accounts held by Libya in Canada. [ 30 ] The plaintiff submits that the costs claimed by the defendant are excessive generally. In addition, the plaintiff points to the fact that counsel for the defendant in Canadian Planning was also counsel for the defendant in the matter before me.

As a result, the defendant had the benefit of work previously done by its counsel.

The plaintiff submits that for reasons of efficiency the extent of the work required on the matter before me should therefore have been less than the work required on behalf of Libya in Canadian Planning . [ 31 ] The plaintiff also relies on its reasonable expectations given that the partial indemnity fees it incurred are in the amount of $3,915 and the substantial indemnity fees it incurred are in the amount of $5,871. [ 32 ] For the reasons set out immediately below, I fix the defendant’s costs on a partial indemnity basis in the amount of $16,885.00 [6] inclusive of fees, disbursements, and HST: • Counsel for the defendant is a lawyer with 15 years of experience.

His actual hourly rates of $450 (in 2015) and $465 (in 2016) are reasonable. • The partial indemnity rates for counsel for the defendant and for the two other timekeepers (a clerk and an articling student) are reasonable. • The appearance fee ($1,103.45) for February 25, 2016 is excluded. The adjournment of the motion was required specifically to permit the defendant to file additional evidence. • The total time for counsel for the defendant (53 hours) for preparation of the motion record, supplementary affidavit, and facta is slightly excessive. That time is reduced to 43 hours. The hours reduced are from 2016.

The fees allowed are calculated on the basis of 14.3 hours in 2015 and 28.7 hours in 2016. • The photocopy charges in the amount of $430 are excessive. The materials on the motion were not voluminous. It appears that the photocopy charge is in excess of $1.00 per page. A photocopy expense in the amount of $215 is allowed. That amount is subject to HST. • Costs for the work in relation to the costs submissions are fixed in the amount of $1,000.00. Costs Awarded [ 33 ] I order as follows: 1. The plaintiff shall forthwith pay to the defendant its costs of the

summary judgment motion, including the submissions with respect to costs, on a partial indemnity basis, in the amount of $16,885.00. ____________________________________ Madam Justice Sylvia Corthorn Released: February 9, 2017

CITATION : Construction Exedra v. Kingdom of Saudi Arabia. , 2017 ONSC 965 COURT FILE NO.: 13-57135 DATE: 2017/02/09 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: Construction Exedra Inc. Plaintiff/Responding Party – and – Kingdom of Saudi Arabia as represented by the Cultural Bureau of the Royal Embassy of Saudi Arabia Defendant/Moving Party DECISION REGARDING COSTS Madam Justice Sylvia Corthorn Released: February 9, 2017