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Costs - General

. Przyk v. Hamilton Retirement Group Ltd. (The Court at Rushdale)

In Przyk v. Hamilton Retirement Group Ltd. (The Court at Rushdale) (Ont CA, 2021) the Court of Appeal considered a costs appeal where the trial judge obviously felt sympathy with the 'David and Goliath' situation of the losing plaintiff. Here the appeal court reviews the discretionary nature of costs awards (and ultimately supported the zero costs award against the successful defendant):
(2) Depriving a Successful Party of Costs

[11] A successful party to civil litigation in Ontario is entitled to a reasonable expectation that it will receive an order for payment of its costs unless there are special circumstances[1]: Bell Canada, at para. 23; Lundy's Regency Arms Corp. v. Potato Factory Bar & Grill Corp, 2020 ONSC 238 (Div. Ct.) at para. 11.

[12] Although sometimes referred to as the “loser pays” costs rule, this approach is not, properly understood, a rule at all. Costs are in the discretion of the court, which may determine by and to whom costs are payable and in what amount: Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1). A court in the exercise of that discretion may consider, among other things, the result of the proceeding: Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 57.01(1). But the result is not the exclusive consideration, and thus a successful party does not have an entitlement to costs, but merely a reasonable expectation that they will be awarded, absent special circumstances.

[13] A judge may deprive a successful party of costs, or even order the successful party to pay costs, as long as the exercise of discretion to do so is not tainted by errors of law or principle, or does not result in a decision that is plainly wrong because it is based on irrelevant factors and overlooks relevant ones: rr. 57.01(4), 57.01(2); Bell Canada, at paras. 20, 41-42; Birtzu v. McCron, 2019 ONCA 777, 438 D.L.R. (4th) 141 at paras. 10-17, 20-21.
. Przyk v. Hamilton Retirement Group Ltd. (The Court at Rushdale)

In Przyk v. Hamilton Retirement Group Ltd. (The Court at Rushdale) (Ont CA, 2021) the Court of Appeal set out deference factors to be weighed in an appeal of a cost award (and ultimately supported the zero costs award against the successful defendant):
[9] An appellate court takes a deferential approach when reviewing a discretionary award of costs by a trial court (including a discretionary decision to deny costs). A costs award will only be set aside on appeal “if the trial judge has made an error in principle or if the costs award is plainly wrong”: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27.

[10] This deferential approach requires that attention be paid not only to the nature of any error affecting a costs decision, but also to its extent. It is insufficient to identify an error in principle in the course of the trial judge’s reasons without considering whether there is an independent basis to uphold the order. An appellate court should be reluctant to interfere with “the exercise of discretion by a trial judge who had a much better opportunity to acquaint himself with, and have a feeling for, all of the factors that formed the basis for the award of costs”: Bell Canada v. Olympia & York Developments Ltd., 1994 CanLII 239 (ON CA), 1994 ONCA 239, 111 D.L.R. (4th) 589 at para. 41. Even where a trial judge has relied on a factor that is unsupported by proper legal principles or considerations to deny costs to a successful party, an appellate court should not intervene unless it can “find nothing in the factual circumstances or argument to support the order”: Bell Canada at para. 42.

....

[33] As the decision in Bell Canada mandates, even where grounds relied upon by a trial judge to deny a successful party costs are tainted by error, the award may still stand if an independent ground exists to justify it.
. Bouragba v. Conseil Scolaire de district de l’est de l’Ontario

In Bouragba v. Conseil Scolaire de district de l’est de l’Ontario (Div Ct, 2021) the Divisional Court set out some basics of costs law:
[5] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 provides that costs are at the discretion of the Court.

[6] In exercising this discretion, the Court may consider the factors set out in Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”).

[7] The Court of Appeal has held that the overriding principles of fairness and reasonableness must be applied to each case (Boucher v. Public Accountants Council for the Province of Ontario, (2004) 71 O.R. (3d) 728).

[8] A successful party is presumptively entitled to costs and generally, they are awarded on a partial indemnity basis.
. Boucher v. Public Accountants Council for the Province of Ontario

In Boucher v. Public Accountants Council for the Province of Ontario (Ont CA, 2004) the Court of Appeal in a leading case sets down basic rules of awarding costs at the end of trial:
Did the motions judge err in fixing costs?

[14] The appellants accept that the respondents are entitled to their costs of the abandoned application pursuant to rule 37.09(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which provides: [page296]
37.09(3) Where a motion is abandoned or is deemed to have been abandoned, a responding party on whom the notice of motion was served is entitled to the costs of the motion forthwith, unless the court orders otherwise.
However, the appellants submit that those costs ought not to be fixed by a judge in accordance with the costs grid established by rule 57.01(3). The appellants rely upon rule 57.01(3.1), which states:
57.01(3.1) Despite subrule (3), in an exceptional case the court may refer costs for assessment under Rule 58.
Rule 58 sets out a code of procedure for the assessment of costs by an assessment officer.

[15] The motions judge concluded, correctly in my view, that there is now a presumption that costs shall be fixed by the court unless the court is satisfied that it has before it an exceptional case. The appellants submitted to the motions court and to this court that the case at bar is such a case. The motions judge, in deciding that this was not an exceptional case, said [at para. 52]:
Only if the assessment process will be more suited to effect procedural and substantive justice should the Court refer the matter for assessment. There must be some element to the case that is out of the ordinary or unusual that would warrant deviating from the presumption that costs are to be fixed. Neither complex litigation nor significant amounts in legal fees will be enough for a case to be exceptional. The judge should be able to fix costs with a reasonable review of the work completed without having to scrutinize each and every docket. If that type of scrutinizing analysis is required, then perhaps, the matter would fall within the exception and be referred to assessment: BNY Financial Corp.-Canada v. National Automotive Warehousing Inc., [1999] O.J. No. 1273
(Commercial List, Gen. Div.) (BNY Financial).
[16] I agree with the motions judge that if a judge is able to effect procedural and substantive justice in fixing costs, she ought to do so. See Murano v. Bank of Montreal (1998), 1998 CanLII 5633 (ON CA), 41 O.R. (3d) 222, 163 D.L.R. (4th) 21 (C.A.) at p. 245 O.R., per Morden A.C.J.O.

[17] The appellants argued before us that an abandoned motion falls into the category of an exceptional case because the judge fixing the costs does not have the benefit of a hearing involving the presentation of evidence and legal argument. While there is no doubt that the judge who has heard a case is in the best position to determine a just costs award, it does not follow, that in the circumstances which exist here, the motions judge was obliged to decline the task.

[18] I also observe that rule 57.01(3.1) is discretionary. It provides that in an exceptional case, the trial judge may refer costs for assessment. It is not required that she do so. This is a somewhat complex case with several parties and a number of counsel, [page297] including one party with two senior counsel. Although another judge might have exercised his or her discretion under rule 57.01(3.1) differently, I see no basis upon which to interfere with the motions judge's discretion not to refer the costs for assessment.

Was the costs award excessive?

[19] The motions judge's decision is entitled to a high degree of deference. The standard of review for interfering with the exercise of the discretion by a judge of first instance was articulated by Lamer C.J.C. in Canadian Pacific Ltd. v. Matsqui Indian Band, 1995 CanLII 145 (SCC), [1995] 1 S.C.R. 3, [1995] S.C.J. No. 1, at p. 32 S.C.R.:
This discretionary determination should not be taken lightly by reviewing courts. It was Joyal J.'s discretion to exercise, and unless he considered irrelevant factors, failed to consider relevant factors, or reached an unreasonable conclusion, then his decision should be respected. To quote Lord Diplock in Hadmor Productions Ltd. v. Hamilton, [1982] 1 All E.R. 1042, at p. 1046, an appellate court "must defer to the judge's exercise of his discretion and must not interfere with it merely on the ground that the members of the appellate court would have exercised the discretion differently".
[20] In a more recent case, Arbour J. said in Hamilton v. Open Window Bakery Ltd., [2004] S.C.J. No. 72, 2004 SCC 9, at para. 27:
A court should set aside a costs award on appeal only if the trial judge has made an error in principle or if the costs award is plainly wrong (Duong v. NN Life Insurance Co. of Canada (2001), 2001 CanLII 24151 (ON CA), 141 O.A.C. 307, at para. 14).
....

[24] The appellants submit that the motions judge accepted the bills of costs that were presented to her without any deductions. The bills were prepared in accordance with the calculation of hours times dollar rates provided by the costs grid. While it is appropriate to do the costs grid calculation, it is also necessary to step back and consider the result produced and question whether, in all the circumstances, the result is fair and reasonable. This approach was sanctioned by this court in Zesta Engineering Ltd. v. Cloutier, 2002 CanLII 25577 (ON CA), [2002] O.J. No. 4495, 21 C.C.E.L. (3d) 161 (C.A.) at para. 4 where it said:
In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.
See also Stellarbridge Management Inc. v. Magna International (Canada) Inc. (2004), 2004 CanLII 9852 (ON CA), 71 O.R. (3d) 263, [2004] O.J. No. 2102 (C.A.) at para. 97.

[25] Zesta Engineering and Stellarbridge simply confirmed a well settled approach to the fixing of costs prior to the establishment of [page299] the costs grid as articulated by Morden A.C.J.O. in Murano v. Bank of Montreal at p. 249 O.R.:
The short point is that the total amount to be awarded in a protracted proceeding of some complexity cannot be reasonably determined without some critical examination of the parts which comprise the proceeding. This does not mean, of course, that the award must necessarily equal the sum of the parts. An overall sense of what is reasonable may be factored in to determine the ultimate award. This overall sense, however, cannot be a properly informed one before the parts are critically examined.
[26] It is important to bear in mind that rule 57.01(3), which established the costs grid, provides:
57.01(3) When the court awards costs, it shall fix them in accordance with subrule (1) and the Tariffs.

Subrule (1) lists a broad range of factors that the court may consider in exercising its discretion to award costs under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The express language of rule 57.01(3) makes it clear that the fixing of costs is not simply a mechanical exercise. In particular, the rule makes clear that the fixing of costs does not begin and end with a calculation of hours times rates. The introduction of a costs grid was not meant to produce that result, but rather to signal that this is one factor in the assessment process, together with the other factors in rule 57.01. Overall, as this court has said, the objective 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.
....

[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.
. 1465778 Ontario Inc. v. 1122077 Ontario Ltd.

In 1465778 Ontario Inc. v. 1122077 Ontario Ltd. (Ont CA, 2006) the Court of Appeal commented on the development of the modern attitude to cost awards:
[25] By s. 131 of the Courts of Justice Act, costs of a proceeding are in the discretion of the court but that discretion, although very broad, is to be exercised in accordance with the provisions of an Act or the Rules of Civil Procedure. Section 131(1) provides:
131(1) 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.
[26] Traditionally the purpose of an award of costs within our "loser pay" system was to partially or, in some limited circumstances, wholly indemnify the winning party for the legal costs it incurred. However, costs have more recently come to be recognized as an important tool in the hands of the court to influence the way the parties conduct themselves and to prevent abuse of the court's process. Specifically, the three other recognized purposes of costs awards are to encourage settlement, to deter frivolous actions and defences and to discourage unnecessary steps [page765] that unduly prolong the litigation. See Fellowes, McNeil v. Kansa General International Insurance Co. (1997), 1997 CanLII 12208 (ON SC), 37 O.R. (3d) 464, [1997] O.J. No. 5130 (Gen. Div.), at pp. 467 and 472 O.R.

[27] In British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71 (CanLII), [2003] 3 S.C.R. 371, [2003] S.C.J. No. 76, at paras. 25 and 26, LeBel J. discussed the natural evolution of the law in recognizing these policy objectives:
As the Fellowes and Skidmore [infra] cases illustrate, modern costs rules accomplish various purposes in addition to the traditional objective of indemnification. An order as to costs may be designed to penalize a party who has refused a reasonable settlement offer[.] . . . Costs can also be used to sanction behaviour that increases the duration and expense of litigation, or is otherwise unreasonable or vexatious. In short, it has become a routine matter for courts to employ the power to order costs as a tool in the furtherance of the efficient and orderly administration of justice.

Indeed, the traditional approach to costs can also be viewed as being animated by the broad concern to ensure that the justice system works fairly and efficiently. Because costs awards transfer some of the winner's litigation expenses to the loser rather than leaving each party's expenses where they fall (as is done in jurisdictions without costs rules), they act as a disincentive to those who might be tempted to harass others with meritless claims. And because they offset to some extent the outlays incurred by the winner, they make the legal system more accessible to litigants who seek to vindicate a legally sound position. These effects of the traditional rules can be connected to the court's concern with overseeing its own process and ensuring that litigation is conducted in an efficient and just manner. In this sense it is a natural evolution in the law to recognize the related policy objectives that are served by the modern approach to costs.
. Net Connect Installation Inc. v. Mobile Zone Inc.

In Net Connect Installation Inc. v. Mobile Zone Inc. (Ont CA, 2017) the Court of Appeal briefly sets out the criteria required to award substantial indemnity costs in a civil proceeding:
[8] While we would not interfere with the costs award made by the motion judge, we would express a cautionary note on this issue. In this case, the motion judge awarded costs on a full indemnity basis. There is a significant and important distinction between full indemnity costs and substantial indemnity costs. An award of costs on an elevated scale is justified in only very narrow circumstances – where an offer to settle is engaged or where the losing party has engaged in behaviour worthy of sanction: Davies v. Clarington (Municipality) (2009), 2009 ONCA 722 (CanLII), 100 O.R. (3d) 66 (C.A.) at para. 28. Substantial indemnity costs is the elevated scale of costs normally resorted to when the court wishes to express its disapproval of the conduct of a party to the litigation. It follows that conduct worthy of sanction would have to be especially egregious to justify the highest scale of full indemnity costs.



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