COURT FILE
NO.: 02-GD-53338
DATE:
January 26, 2007
ONTARIO
SUPERIOR COURT OF JUSTICE
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JAMES DINSMORE & BARBARA DINSMORE |
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Raymond G. Colautti and Owen D. Thomas, for the
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Plaintiffs |
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SOUTHWOOD LAKES HOLDINGS LTD., MASTERPIECE HOMES
(1997) LTD., THE CORPORATION OF THE CITY OF WINDSOR and the ONTARIO
NEW HOME WARRANTIES PLAN |
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Gino Morga, Q.C., for the Defendant Southwood
Lakes Holdings Ltd. and Masterpiece Homes (1997) Ltd.
Montgomery Shillington for the Defendant Ontario
New Home Warranties Plan
No one representing the Defendant the Corporation
of the City of Windsor |
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Defendants |
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HEARD: Written submissions |
Brockenshire J.
COSTS DECISION
[1]
This action was
tried in May of 2006. The 40 page long reserved judgment was released July
12, 2006. At the end I asked counsel, if the issues of costs and
pre-judgment interest could not be resolved, to make submissions to me. I
have now received submissions from Mr. Morga, counsel for Southwood and
Masterpiece, from Mr. Shillington, counsel for the Ontario New Home
Warranty Program, and from Mr. Colautti, counsel for the plaintiffs.
[2]
The claim herein
related to a damp basement in a new townhouse purchased from, and
constructed by the defendants Southwood and Masterpiece. The purchase was
completed in 1997. There was no question but that there was dampness in
the basement, and that the basement floor was not as thick as it should
have been under the Building Code provisions. The issue was how the
defects should be dealt with. The evidence, which I accepted, was that
Southwood and Masterpiece, with the help of their co-defendant the
Warranty Program, had tried to negotiate or mediate these issues. However,
despite the input from a number of experts, differences of opinion
continued to exist through to the end of the trial, when plaintiffs’
counsel sought $200,000, and counsel for the developers suggested $20,000
was more appropriate.
[3]
I ordered damages
of $29,700. I concluded that the damages should be assessed as of 2004,
when the reasonableness of using sealants on the floor had been confirmed.
My award covered the estimated costs of sealing the floor, removing
standpipes various engineers had put through the floor, putting clay plugs
in the utility trenches, grading the lot away from the foundation walls,
pumping out standing water under the basement floor, and $14,000 for
engineering investigations prior to litigation. I dismissed the claims
for loss of enjoyment of life, emotional upset, reduction in the resale
value of the home, and for aggravated and punitive damages.
[4]
I now find that
the defendants Southwood and Masterpiece had made settlement offers of
$20,000 on January 31, 2005 and $30,000 on April 26, 2006. The defendant
Warranty Program offered to let the plaintiffs off without costs if they
dismissed against it on April 11, 2003, and then on May 3, 2006 offered to
contribute a $15,000 payment to the plaintiffs as part of any global
settlement of the proceedings.
[5]
I find that
although the earlier offers by both defendants were individual, the later
offer of $30,000 on behalf of the developers was a general offer to
“settle this proceeding”, which generality was fleshed out by the later
offer to contribute $15,000 from the Warranty Program. Mr. Morga argued in
his submissions that the damages of $29,700 were substantially less than
the combined offer, and the provisions of rule 49.10 should apply. Mr.
Colautti, for the plaintiffs, argues however that costs and pre-judgment
interest should be added to the plaintiffs’ judgment, and that the
totality of damages, costs and interest would greatly exceed the $45,000
offered.
[6]
The statement of
claim claimed general and aggravated damages, punitive damages, costs, and
interest. All of those claims were alive through the trial. The offer to
settle of the builders was to pay $30,000 “on account of all claims”. The
offer of the Warranty Plan was to “contribute a $15,000 payment to the
plaintiffs as part of any global settlement of the proceedings.” That
offer further provided terms that all parties to the proceedings would
exchange mutual releases, and that the action, cross-claims and third
party claim would be dismissed without costs. Clearly the offer was not to
settle the damage claims only. The offer was on an “all in” basis, to
absolutely end the action, including the continuance of any claims for
pre-judgment interest, costs and disbursements. It is clear from the
detailed dockets of plaintiffs’ counsel that by May of 2006 the
plaintiffs’ claim for fees and disbursements, and indeed for disbursements
alone, because a lot of the investigative engineering work was done early,
would, when added to the damage award, bring the figure well over the
$45,000 offered.
[7]
I therefore find
that the offers, and Rule 49, have no effect on the cost issues before me.
[8]
Further, Mr. Morga
raises an issue under rule 76.13, namely that this action proceeded to
trial under the ordinary procedure, the monetary judgment was less than
$50,000 and therefore, under rule 76.13(3), the plaintiff cannot recover
any costs unless the court is satisfied that it was reasonable for the
plaintiff to have commenced and continued the action under the ordinary
procedure.
[9]
This was an action
seeking general damages, including the cost of remedying an admitted
problem with the townhouse basement, which the plaintiffs’ experts put at
well over $50,000, plus general, aggravated and punitive damages. The
issue of Rule 76 was not raised before me during the trial. In the
circumstances I do not think it was unreasonable for the plaintiffs’
counsel to have commenced and continued this as an ordinary action. I
therefore do not see rule 76.13 as being an issue when dealing with these
cost claims.
GENERAL COMMENT ON QUANTUM
[10]
This action started
with a claim for $350,000 for breach of contract and negligence, and
$150,000 for punitive damages. It ended with a judgment for $29,700 for
damages against the builders, a complete dismissal of the claim for
punitive damages, and a dismissal of the action as against the Warranty
Program. Plaintiffs’ counsel have put forth a claim for $148,464.50 in
fees plus $45,403.40 in disbursements plus GST of $11,611.85, totalling
$205,479.75 on a substantial indemnity basis. Mr. Morga, for the builder,
claims fees of $86,700 plus disbursements of $5,184.64 plus GST of
$6,414.21, totalling $98,299.75, on a substantial indemnity basis. Mr.
Shillington, for the Warranty Program, claims fees of $67,424.25 plus
disbursements of $27,027.61, plus GST of $6,583.55, totalling $101,035.41
on a substantial indemnity basis.
[11]
I do not know whether
bills in those amounts have actually been given to, and paid by the
respective clients. Even if they had been, it would seem to me that in
this case the principle of indemnity under rule 57.01 would be completely
overridden by the principle of the consideration of what an unsuccessful
party could reasonably expect to pay. I am very mindful of the statements
in Boucher v. Public Accountants’ Council
2004 CanLII 14579 (ON C.A.), (2004), 71 O.R. (3d) 291 (C.A.) to the
effect that the fixing of costs does not begin or end with the calculation
of hours times rates since the overall objective is to fix an amount that
is fair and reasonable, having regard to the broad range of factors in
rule 57.01, for the unsuccessful party to pay, rather than an amount fixed
by the actual costs incurred by the successful party.
[12]
I am also cognizant of
the statement, quite telling in this case, of Madam Justice Feldman in the
Court of Appeal, in paragraphs 36 through 39, of Amherst Crane Rentals
Ltd. v. Perring
2004 CanLII 18104 (ON C.A.), (2004), 241 D.L.R. (4th) 176,
187 O.A.C. 336 (C.A.). This involved an application by a creditor against
a bankrupt estate, and so presumably did not involve all of the procedural
work that goes into an ordinary action. However, the claim included one
for $1.27 million in life insurance, as well as a claim for over $50,000
of RRSP proceeds. The application judge awarded fees of $30,000. In the
Court of Appeal Madam Justice Feldman noted that the claim for life
insurance was abandoned shortly before the hearing, and so should not have
counted directly in fixing the amount of costs and that:
“…the first
factor to be taken into account in considering the appropriate amount to
award for costs is the amount in issue. The rule reflects the principle
that the cost must be commensurate with the value of the lawsuit to the
parties.”
She therefore
concluded that the $30,000 award constituted an error in principle, and
reduced the award to the estate, against the unsuccessful applicant, to
$15,000. This was in a case where, as the court noted in the first
paragraph, the issue of the proper treatment of RRSP proceeds following
the death of the owner was being addressed for the first time by the Court
of Appeal.
[13]
Here, the townhouse
was purchased for $177,000. It, and many others in the same development,
were constructed on a production basis, in which it was anticipated that
there could and would be problems, which the builders would rectify on a
systematic basis. Although some years went by trying to determine exactly
why this basement was damp, and in determining definitively what would fix
the dampness and what if anything had to be done about the basement slab
not being as thick as it should have been, I fail to see why anyone, at
any stage in this proceeding, would see it as justifying legal bills in
the amounts that have now been presented. Further, while uncertainty
continued for many years as to why the problem existed and precisely what
to do about it, it seemed clear to me at trial that the reports of
Construction Control Inc., the last of which was billed out in February of
2005, left the plaintiffs with an uphill battle to try to recover anything
anywhere close to the plaintiffs’ estimate of their damages. Unfortunately
this action was not settled, and the evidence at trial indicated it was
not for lack of trying by both the builders and the home warranty plan.
THE COST CLAIM OF THE HOME WARRANTY PLAN
[14]
The position of the
Plan from the beginning was that it had no direct responsibility at all to
the plaintiffs. It would have been directly involved if the builders
absconded, could not pay for repairs, or refused to carry out appropriate
repairs. None of these happened. While it might have made some sense, as a
precaution and for tactical reasons, to have involved the Plan in the
beginning, it seemed to me there was little point in holding the Plan into
the action until the bitter end. In fact the Plan, through the experts it
retained, provided the answers to the issues that I accepted. The claims
made against the Plan by the plaintiffs of negligence, failure to fulfill
statutory duties, offending community standards, and of acting in a high
handed and insulting manner were not supported by the evidence, and in my
view would have, at the discovery stage, been found to be obviously
baseless.
[15]
The Plan succeeded
completely at trial, with all claims against it being dismissed.
[16]
Mr. Shillington claims
firstly for costs throughout on a substantial indemnity basis. He
indicates an hourly rate of $157.50, a special reduced rate for this
client, until April of 2006 when it increased to $171. Other counsel have
not objected to those rates and neither do I. However, the general
entitlement of a defendant who succeeds at trial is to costs on a partial
indemnity basis. Mr. Shillington argues that the allegations of improper
conduct, above referred to would raise this to entitlement to substantial
indemnity costs. I do not agree. As above indicated, it seems to me that
it would have been clear very early in the game that the plaintiffs had
nothing to substantiate those allegations except personal, and
unsupported, perceptions of entitlement and of being somehow wronged.
[17]
I accept most of the
number of hours docketed by Mr. Shillington. A lot of time was spent with
his experts, but as above indicated that was time well spent. My concerns
are with the preparation time and trial time that was docketed. I do not
doubt that the hours recorded were actually spent in connection with this
case. However, I see that while Mr. Shillington docketed 121 hours in
trial preparation, Mr. Morga, who had in my view a more difficult case,
docketed only 63 ¼ hours for trial preparation. Mr. Shillington docketed
160.3 hours for attending at trial and preparation during trial. Mr. Morga
docketed only 140 hours. I appreciate Mr. Morga has many more years of
trial experience, but here, in my view, he had the more difficult case. I
also appreciate Mr. Shillington would have had considerable travel time
included in his amounts, but the usual practice is to bill travel time at
half rates. My conclusion is that Mr. Shillington’s preparation time
should be reduced by 30 hours, at $157.50, and his trial time by 15 hours
at $171.00. Those deductions, at 60% of the substantial indemnity basis
would total $4,374, bringing his partial indemnity fees, claimed at
$40,454.55, down to $36,080.55, with the GST thereon to be $2,525.64. The
total, which I fix as partial indemnity costs is $38,606.19.
[18]
His taxable
disbursements total $26,626.61, with GST of $1,863.86 plus non-taxable
disbursements of $401. The principle disbursements were to his experts
from Construction Control Inc., for reports and witness fees of over
$16,000. Other counsel have not objected to that and as they had to be
brought in from Toronto, repeatedly, I do not either. Mr. Shillington
himself claims for mileage and 16 nights in a hotel in Windsor. Other
counsel did not raise the question of why out of town counsel was retained
to defend this action. In my view, if one sues a governmental or quasi
governmental agency, it would be reasonably expected that counsel from out
of town would appear and I accept the disbursements as put forth, which
together with GST total $28,891.47. The resulting total of fees and
disbursements would be $67,497.66.
COST CLAIM OF THE BUILDERS
[19]
Mr. Morga presented
bills of cost prepared on a substantial indemnity and partial indemnity
basis, as well as bills of cost based on Rule 49.
[20]
The arguments in
relation to Rule 49, and rule 76.13 have been dealt with above.
[21]
Additionally, Mr.
Morga argued that the builders should have costs from the commencement of
this action because the plaintiffs failed to mitigate, failed to cooperate
with the defendants to find solutions to their problems, elected a
significantly more expensive trial procedure, and made serious allegations
of improper conduct against he builders.
[22]
I have commented above
on the reasonability of proceeding with an ordinary action, and the
obvious impossibility of the plaintiffs succeeding on their allegations of
impropriety and wrongdoing. The figures of the plaintiffs to proceed on
their own to do repair work, should not reflect on their claim for costs,
but is a factor I will consider later re the claim for interest. It seems
to me, with the advantage of hindsight, that it was indeed unfortunate
that the plaintiffs did not come to some co-operative agreement with the
builders to remedy their problems. However, I know of no principle of law
which would require a person, alleging to have been wronged, to cooperate
with the alleged wrongdoer, or suffer cost consequences.
[23]
I find that the
builders are not entitled an award of costs against the plaintiffs.
COST CLAIMS OF THE PLAINTIFF
[24]
Plaintiffs’ counsel
filed, as a bill of costs, a detailed list of disbursements, and a
complete listing of all docketed hours by everyone in the law firm that
was involved with the file. The total fees claimed, at rates ranging from
Mr. Colautti’s at $350 per hour to law students and clerks at $60 per hour
is $148,464.50. No attempt was made to group the hours spent into the
usual recognizable items in litigation, as both Mr. Morga and Mr.
Shillington had done. However, a cursory examination of the detailed
dockets would indicate that most of the work done on the file was by Mr.
Colautti and Mr. Thomas. Mr. Colautti has over 29 years of experience. Mr.
Thomas has nine, and claims fees of $200 per hour. It appears that in the
preparation for trial, as well as the trial itself, Messrs. Colautti and
Thomas worked together, so that at that time the client was purportedly
being billed $550 per hour, plus, at trial, disbursements of some $1,635
to a Catherine Colautti for “clerical assistance”. For a case which I
found in the end was worth less than $30,000, this is massive overkill.
[25]
I have no intention of
going through, in detail, what appears to be over 20 pages of dockets. The
case law is replete with statements that a trial judge is called upon to
fix costs, not to assess costs. I would however observe that this is the
sort of case which I would expect would be handled by one lawyer, so that
generally time docketed for discussions between various lawyers in the law
office should be excluded. So should repeated administrative actions
between law students, clerks, etc., which in my view should be treated as
simple office overhead and not billed out to the client, much less to
opposing parties. As an example, I note with interest an entry of October
18, 2004 for “office conference with Mr. Colautti in efforts to locate
file and bring downstairs and instructions received to prepare settlement
conference brief”. This was billed out at .4 hours by Pat Boyd, apparently
a law clerk in the office, at $90 per hour. She later, after finding the
file spent 12 hours to prepare a settlement conference brief.
[26]
In my view, the
overriding principles in a case such as this are those laid down in the
two Court of Appeal decisions above cited. In addition to those, there are
many decisions frowning upon billing for two counsel representing a party
at trial, including recent ones under the grid system where only one
counsel fee would be allowed. I feel it is commendable if a senior counsel
takes on a case of this kind, and the Bench is grateful for the assistance
of such counsel, but such counsel have to clearly understand that no one,
including of course the trial judge, would expect such counsel to bill in
a $30,000 case as he or she would in a $3 million case.
[27]
Amherst Crane
Rentals, supra, made clear that the legal costs have to be
commensurate with the value of the lawsuit. In this case, I do not find
the dockets filed by plaintiffs’ counsel to be helpful in arriving at a
fair and proper figure. That is especially true here, where the plaintiffs
lost against one defendant, but won against the builders, and the dockets
do not distinguish between the defendants. What I find to be most helpful
is the billing of Mr. Shillington. He worked at a special reduced rate,
which I think would be appropriate in this case, he worked alone, and he
had to deal, at least indirectly, with all of the issues raised in the
case. He was completely successful in his position. Plaintiff’s counsel
were partially successful. I fixed Mr. Shillington’s costs at just over
$36,000. I see no reason why plaintiff’s counsel should be entitled to
more.
[28]
For all of the reasons
above listed, I conclude that plaintiffs’ counsel are not entitled to
costs on a substantial indemnity basis, but are entitled to costs on a
partial indemnity basis. I fix the partial indemnity costs of the
plaintiffs, payable by the defendant builders, at $36,000. GST thereon
would be $2,520, and the total for costs would be $38,520.
[29]
Plaintiffs’ counsel
filed a three-page list of disbursements, totalling $45,403.40, $337.
dollars of which are indicated to be non-taxable. Some of them are
obviously overhead expenses of the law office. I reject the computer legal
searches, the lunches, “miscellaneous expenditures during trial” and the
charges for clerical assistance at trial. I also disallow the fax charges,
courier charges and long distance telephone charges. There is a charge of
$2,147.50 for photocopies. For the purpose of fixing costs I simply reject
$1,000 of that. I would accept the expert reports in full, except for that
of Boscariol & Associates Limited, shown here as $14,152.35. In the damage
judgment I awarded $14,000 on account of engineering work for Mr.
Boscariol, and would deduct that $14,000 from the disbursements claimed
here. Those deductions, on my account, total $18,721.89. When that is
subtracted from the $45,403.40 claimed, I get $26,681.51. Three hundred
and twenty-seven of that is shown as non-taxable. GST on the balance would
be $1,844.12. The total allowed for disbursements is $28,525.62.
Prejudgment Interest
[30]
Mr. Morga, in his
submissions, argues that the court should disallow any prejudgment
interest, as it is entitled to do under s.130(2) of the Courts of
Justice Act. He argues that the defendants offered viable solutions to
the plaintiff’s problems that were unreasonably refused. They made a
claim for half a million dollars and received a judgment for only 6% of
that. The purpose of prejudgment interest is to compensate for the loss of
the use of the money. Up to the trial the plaintiffs had not made any
repairs. The damage award made by the court was based on the current costs
of repair and not the cost at the time claim arose.
[31]
Plaintiff’s counsel
argues that prejudgment interest should commence from the date the cause
of action arose, October of 1997, at the then prevailing rate of 3.5%. The
whole cause of the problem was faulty design, and faulty work by the
builder’s sub-trades. The builders admitted liability but failed to pay
over, or pay into court at an amount appropriate to remedy the problem and
had the use of those funds over a period of 8 years.
[32]
The background history
of this litigation, as it was unfolded before the court, was quite
unusual. The builders admitted liability for the problem early on.
However, their obligation was not to pay money – it was to fix the
problem. They immediately offered to tear out and replace the entire
basement floor. The plaintiffs did not want that for personal reasons –
concern over dust etc., during the work. At the time the builders could
have had the sub-trades who caused the problem, come back and replace the
basement floor at minimal cost. The plaintiffs wanted a less intrusive
repair, and the builders sought one out in the form of various sealants
and floor coverings which the plaintiffs rejected. The plaintiffs then
wanted the basement floor, and all of the partitions etc., they installed
after they were aware of the problems replaced on a custom construction
basis. The builders now did not now have the former sub-trades available
and argued the plaintiff’s proposal was out of line for a reasonable
repair to the problem. During all of those negotiations, neither side knew
exactly what caused the problem or what would solve it, but throughout the
warranty’s plan was indicating that if a builder’s proposal did not work,
the obligation would be on the builders to try again, with the warranty’s
plan backing up the cost of a second repair effort.
[33]
In my view, during
that entire negotiating period, although an action had been commenced
sometime before, the claim had not turned into one for money. The
plaintiffs did not put out any money of their own in attempting to get
repair work done and the builders could not do anything because the
plaintiffs would not let them into the home. When the reports of
Construction Control Inc., had all arrived, the parties could or should,
have seen the nature of the work required to remedy the problem, and could
quantify the reasonable cost thereof. I would fix the date for this as
January 31, 2005, by which time the final report of the Engineers was on
hand.
[34]
I find in the special
circumstances of this case that prejudgment interest should not start to
run until February 1, 2005 and that it should run from that date to the
reasonable date for judgment which I would fix as the end of July 2006 as
my reasons issued on July 12th. The prejudgment interest should
be at the rate for the first quarter of 2005 which was 2.8%. The figure I
get is $1,178.10.
Conclusion
[35]
For the foregoing
reasons I conclude that the plaintiffs are entitled to judgment against
the defendant’s Southwood Lakes Holdings Ltd., and Masterpiece Homes
(1997) Ltd. for costs in the total amount of $67,045.62, made up of fees
of $36,000.00, disbursements of $26,681.51 and the applicable G.S.T.
thereon. The plaintiffs are also entitled to judgment against those
defendants for prejudgment interest in the amount of $1,178.10.
[36]
The defendant the
Ontario New Home Warranty’s Plan is entitled to judgment against the
plaintiffs for costs in the amount of $67,497.66 made up of fees of
$36,080.55, disbursements of $27,027.61 plus applicable G.S.T.
[37]
The claim by the
builders for costs is dismissed.
(original
signed by Brockenshire J.)
_____________________________
John H.
Brockenshire, Justice
Released: January 26, 2007
COURT FILE NO.: 02-GD-53338
DATE:
|
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
JAMES DINSMORE & BARBARA DINSMORE
Plaintiffs
- and –
SOUTHWOOD LAKES HOLDINGS LTD., MASTERPIECE HOMES (1997) LTD., THE
CORPORATION OF THE CITY OF WINDSOR and the ONTARIO NEW HOME WARRANTIES
PLAN
Defendants
Brockenshire J.
|
Released: January 26, 2007
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