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Appeal Court Dicta

Civil Litigation - Costs - Contractually-Determined

. Burr v. Tecumseh Products of Canada Limited

In Burr v. Tecumseh Products of Canada Limited (Ont CA, 2023) the Court of Appeal considered the situation when litigation costs are anticipated in a contract:
3. The Effect of a Contract in the Assessment of Costs

[129] Ontario courts have consistently held that contractual terms that touch on the issue of costs do not bind the court in the exercise of judicial discretion to determine a costs award: Alie v. Bertrand & Frere Construction Co. Ltd., 2002 CanLII 31835 (ON CA), 62 O.R. (3d) 345 (C.A.), at para. 267; Darling v. Kay (1993), 1993 CanLII 5448 (ON SC), 15 O.R. (3d) 299 (Gen. Div.); Coventree, at para. 1; and Xpert Credit Control Solutions Inc. v. Borges, 2015 ONSC 6505, at para. 5; see also, United Soils Management Ltd. v. Mohammed, 2019 ONCA 128, at para. 42.

[130] Justice Morden, writing for this court in Bossé v. Mastercraft Group Inc., 1995 CanLII 931 (ON CA), 123 D.L.R. (4th) 161, leave to appeal refused, [1995] S.C.C.A. No. 205, recognized that:
As a general proposition, where there is a contractual right to costs the court will exercise its discretion so as to reflect that right. However, the agreement of the parties cannot exclude the court's discretion; it is open to the court to exercise its discretion contrary to the agreement.
[131] Where the court has “good reason”, it may refuse to enforce a contractual term. This includes circumstances where the prevailing party has engaged in “inequitable conduct” or there are “special circumstances” where imposing costs would be “unfair or unduly onerous”: Bossé at page 15 of 17.

[132] Thus, while a contractual provision is a factor that may be considered in awarding costs, s. 131 of the CJA provides that,
Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.
[133] This court has recently reaffirmed the principle in Bossé and Boucher in 7550111 Canada Inc. v. Charles, 2020 ONCA 505, at para. 4:
Notwithstanding the contractually agreed upon scale of costs, the quantum of the respondent’s costs must be fair, reasonable and proportionate having regard to the circumstances of the case.

[145] In making this order, I note that while the indemnity clause in the Contract provides for “the costs of litigation and attorney’s fees”, it does not plainly and expressly stipulate the costs and, even if it did, this is not determinative. In Heliotrope Investment Corporation v. 1324789 Ontario Inc., 2022 ONCA 411, at para. 6, for example, this court exercised its discretion to reduce the costs awarded on appeal despite contractual language requiring payment of full indemnity costs, where “some discretionary adjustment” is warranted given “the circumstances of this difficult and overly complex litigation”.

[146] I also note that Fasco’s reliance on British Columbia jurisprudence to argue that a contract “is entirely independent” of the court’s rules and that “[n]othing in [the rules] purports to override any such [contractual] obligation” is unhelpful in light of the well-established statutory and common law authorities in Ontario that clearly vest the determination of the appropriate costs award in the court. Indeed, the British Columbia Court of Appeal has acknowledged that “the Ontario [costs] regime is different than British Columbia’s” costs regime: West Van Holdings Ltd. v. Economical Mutual Insurance Company, 2019 BCCA 110, [2019] 10 W.W.R. 53, at paras. 74-76.
. Everest Finance Corporation v. Jonker

In Everest Finance Corporation v. Jonker (Ont CA, 2023) the Court of Appeal holds that 'full indemnity' contractual litigation costs, here in a mortgage context, will be respected:
[3] We do not see any basis to deny the appellant its full indemnity costs. That is the relief that the respondents agreed to when they signed the mortgage. Contractual provisions stipulating entitlement of a mortgagee to costs of enforcement on the basis of costs actually expended will generally be enforced, absent misconduct or unfairness on the part of the party claiming costs: MCAP Financial Corp. v. George Fernicola in Trust and Carrington Homes Ltd., 2010 ONSC 148, at para. 18.
. Hume v. 11534599 Canada Corp.

In Hume v. 11534599 Canada Corp. (Ont CA, 2022) the Court of Appeal allowed an exception to the general rule that when a contract (here, a mortgage) set the litigation costs between the parties, the contract terms ruled:
[6] Before addressing each set of costs at issue, we address the appellant’s submission that it should recover all of its costs on a full indemnity basis based on the terms of the mortgage agreement. As held in Bossé v. Mastercraft Group Inc., 1995 CanLII 931 (ON CA), 123 D.L.R. (4th) 161 at paras. 62-69, and Chong & Dadd v. Kaur, 2013 ONSC 6252, [2013] O.J. No. 4531, at para. 40, the entitlement to costs in proceedings involving a mortgagor and mortgagee are not always to be based on the terms of the mortgage agreement. In circumstances such as here where, as reviewed below, the appellant’s success was very moderate, in large part based on its own conduct, we find that it is appropriate not to apply the contractual provision to the award of costs.

[7] Therefore, in exercising our discretion on the issue of costs, we have applied the factors set out in r. 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, including the parties’ relative success in the proceedings and their conduct.
. Professional Court Reporters Inc. v. Pistachio Financier Corp.

In Professional Court Reporters Inc. v. Pistachio Financier Corp. (Ont CA, 2022) the Court of Appeal allowed an appeal on the basis that trial costs were to be contractually determined:
Costs on the motion

[16] The motion judge found that the appellant’s costs were reasonable having regard to the factors set out in Boucher et al. v. Public Accountants Council for the Province of Ontario et al. (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) and the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, but awarded them only on a partial indemnity basis. The costs award is for the appellant’s summary judgment motion as well as its success in having the respondents’ action dismissed.

[17] The appellant argues that it was entitled to costs on a higher scale pursuant to the terms of the head lease, which applied to the subtenant under the Sublease. The motion judge gave no reason for not enforcing the terms of the head lease, which clearly entitles the appellant to costs on a higher scale. Accordingly, the appellant is entitled to costs of the appellant’s summary judgment motion and dismissal of the respondents’ action, which we fix at $75,279, all inclusive.
. MDS Inc. v. Factory Mutual Insurance Company

In MDS Inc. v. Factory Mutual Insurance Company (Ont CA, 2021) the Court of Appeal awarded costs of a trial at a contractually-determined rate:
[106] For the reasons set out above, I would allow the appeal and deny coverage. In keeping with this court’s decision in St. Jean v. Cheung, 2009 ONCA 9, at para. 4, and Hunt v. TD Securities Inc. (2003), 2003 CanLII 3649 (ON CA), 229 D.L.R. (4th) 609 (Ont. C.A.), at para. 188, since the appeal is allowed, I would set aside the trial judge’s decision with costs. In accordance with the agreement between the parties, costs of this appeal to the appellant in the amount of $35,000 inclusive of disbursements and HST.


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