Law of Costs on a Notice of Application (ROCP)

Smiles First Corporation v. 2377087 Ontario Ltd., 2017 ONSC 5081 (CanLII)

[3] The Applicants submit that, in accordance with the decision of the Court of Appeal for Ontario in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291, the guiding objective for the court when deciding costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant. The Applicant submit that they had prepared a Bill of Costs to be submitted that the hearing of the application in an amount, on a partial indemnity scale, of $27,075.28 inclusive of disbursements and HST. They submit that an award of partial indemnity costs of $27,000 represents a fair and reasonable amount of costs that the applicants could reasonably have expected to pay in this application as the unsuccessful litigant. They deny that 237 incurred unnecessary costs as a result of steps taken by the Applicants which are alleged to have been improper or unnecessary.

Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579 (ON CA)

[28] With respect, I disagree with the motions judge. The total amount of $187,682.51 was not a fair and reasonable sum to award in the circumstances of this case, even given the respondents' separate bills of costs, which produced totals of $88,896.45, $60,033.96, and $38,752.10. It is my view that the costs awards in this case are so excessive as to call for appellate interference.

[29] While I accept that the bills of costs accurately reflect the time spent by all of the lawyers in this matter, it is inconceivable to me that the total amounts claimed are justifiable. In this regard, I accept the submission of the appellants that:

(a) the record in this application was the same record filed in the earlier proceedings;

(b) the respondents filed no evidence;

(c) the respondents conducted no cross-examination of any witness;

(d) the notices of motion to stay filed by the respondents were substantially the same; and

(e) the arguments to be advanced on the return of the motions to quash were substantially the same.

[30] In addition, I note that the amount claimed on a substantial indemnity scale, including disbursements and Goods and Services Tax, was in total only $14,528.86 more than the total partial indemnity award. In the result, the respondents received an award which is tantamount to a substantial indemnity award. This is significant in view of the fact that the motions judge expressly rejected the respondents' submission that they be awarded their costs on a substantial indemnity basis. [page301]

[35] In Wasserman, Arsenault Ltd. v. Sone, 2002 CanLII 45099 (ON CA), [2002] O.J. No. 3772, 164 O.A.C. 195 (C.A.), at para. 4, this court referred to a judgment of the Superior Court in Lawyers' Professional Indemnity Co. v. Geto Investments Ltd., [2002] O.J. No. 921, 17 C.P.C. (5th) 334 (S.C.J.), where Nordheimer J. observed at para. 16:

As a further direct consequence of the application of the indemnity principle, when deciding on the appropriate hourly rates when fixing costs on a partial indemnity basis, the court should set those rates at a level that is proportionate to the actual rate being charged to the client in order to ensure that the court does not, inadvertently, fix an amount for costs that would be the equivalent of costs on a substantial indemnity basis when the court is, in fact, intending to make an award on a partial indemnity basis.

[36] In my view, the granting of an award of costs said to be on a partial indemnity basis that is virtually the same as an award on a substantial indemnity basis constitutes an error in principle in the exercise of the motions judge's discretion, particularly when the judge rejected a claim for a substantial indemnity award. This court took a similar view in Stellarbridge at para. 96. [page302]

[37] The failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice. The costs system is incorporated into the Rules of Civil Procedure, which exist to facilitate access to justice. There are obviously cases where the prospect of an award of costs against the losing party will operate as a reality check for the litigant and assist in discouraging frivolous or unnecessary litigation. However, in my view, the chilling effect of a costs award of the magnitude of the award in this case generally exceeds any fair and reasonable expectation of the parties.

[38] In deciding what is fair and reasonable, as suggested above, the expectation of the parties concerning the quantum of a costs award is a relevant factor. See Toronto (City) v. First Ontario Realty Corp. (2002), 2002 CanLII 49482 (ON SC), 59 O.R. (3d) 568, [2002] O.J. No. 2519 (S.C.J.) at p. 574 O.R. I refrain from attempting to articulate a more detailed or formulaic approach. The notions of fairness and reasonableness are embedded in the common law. Judges have been applying these notions for centuries to the factual matrix of particular cases.