SUPREME COURT OF PRINCE EDWARD ISLAND Senechal v MacPhee 2010 PESC 11 Date: 20100224 Docket: S1 GS- 22179 Registry: Charlottetown Between: Frank and Caron Senechal of the Cambridge Road Kings County, Province of Prince Edward Island Plaintiffs MacPhee Builders Ltd. Defendant Roy Mutch Construction Inc. Myles Gallant, Kris Flourier, doing business as Totally Tile, Paul Forsythe, Norman MacKinnon Third Parties And Between Frank and Caron Senechal of the Cambridge Road Kings County, Province of Prince Edward Island Plaintiffs Atlantic Home Warranty Program Defendant Before: The Honourable Justice Kenneth R. MacDonald James Macnutt, QC, for the plaintiffs Sophie MacDonald, for the defendant, Atlantic Home Warranty Place and Date of Hearing Place and Date of Judgment Charlottetown, Prince Edward Island October 7, 2009 Charlottetown, Prince Edward Island February 24, 2010
Senechal v MacPhee 2010 PESC 11 Date: 20100224 Docket: S1 GS- 22179 Registry: Charlottetown Between: And Between Frank and Caron Seneshal of the Cambridge Road Kings County, Province of Prince Edward Island MacPhee Builders Ltd. Roy Mutch Construction Inc. Myles Gallant, Kris Flourier, doing business as Totally Tile, Paul Forsythe, Norman MacKinnon Frank and Caron Senechal of the Cambridge Road Kings County, Province of Prince Edward Island Atlantic Home Warranty Program Supreme Court of Prince Edward Island MacDonald J Date of Hearing: October 7, 2009 Date of Judgment: February 24, 2010 (10 pages) Plaintiffs Defendant Third Parties Plaintiffs Defendant COSTS Substantial indemnity Summary judgment third parties Cases referred to: Lubrizol v Imperial Oil Ltd. [1996] F.C. 40; 67 C.P.R. (3d) 112 FTR 264 (F.C.A.); Ellen Creek Developments, Inc. v. the Charlottetown Area Development Corp. 2009 PESC 17; [2009] PEIJ No. 62; MacPherson v Ellis, 2005 PESCAD 19 (Can LII), 248 Nfld & PEIR 123; Roy Quieting Titles (2008) 275 Nfld & PEIR 215 (PESCTD);Oliver v Severance et. al. (2007) Nfld & PEIR 252 (PESCTD) Rules referred to: Prince Edward Island Rules of Civil Procedure: Rule 20.04; 57.01 Texts referred to: Mayne-McGregor on Damages, (12 th ed.) p. 207 James Macnutt, QC, for the plaintiffs Sophie MacDonald, for the defendant, Atlantic Home Warranty
MacDonald J.: [1] This was a motion pursuant to Rule 20 of the Rules of Court for summary judgment against the defendant, MacPhee Builders Ltd. ( MacPhee ) and the third parties. Since the date of the hearing, settlement has been reached with Roy Much Construction Inc. [2] The defendant, MacPhee, did not appear on the motion. Rule 20.04(1) and (2) read as follows: 20.04 (1) In response to affidavit material or other evidence supporting a motion for summary judgment, a responding party may not rest on the mere allegations or denials of his or her pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue for trial. (2) The court shall grant summary judgment if, (a) The court is satisfied there is no genuine issue for trial with respect to a claim or defence;... [3] The fact that the defendant has not appeared on the motion does not entirely relieve me of a duty to determine from the applicants claim that there is no genuine issue for trial. The evidence that has been filed clearly indicates that as a result of the defendant s breach of contract and negligence in the construction of the plaintiffs house, the plaintiffs have suffered damages in the amount of $284,794. Summary judgment against the defendant is awarded in the latter amount. [4] The plaintiffs also seek an award for exemplary damages. The plaintiffs state the defendant s action of filing 13 third party actions was abuse of process and an attempt to complicate the litigation or add additional costs to the plaintiffs. The plaintiffs state that deterrence is a key factor in determining whether exemplary damages should be allowed. [5] In Lubrizol v Imperial Oil Ltd. [1996] F.C. 40; 67 C.P.R. (3d) 112 FTR 264 (F.C.A.) the Court made the following comments about exemplary damages: Some general comments about the place of punitive or exemplary damages in Canadian law are required at this juncture. It is now clear that Canadian law recognizes three distinct types of damages. First, there are general or compensatory damages, which are meant to reimburse a victim of wrongdoing for any losses suffered, both pecuniary and non-pecuniary. Second, there are aggravated damages, which are also compensatory, but which may be awarded only in cases where "defendants' conduct has been particularly high-handed or oppressive, thereby increasing the plaintiff's humiliation and anxiety". To allow such damages there must be a finding that a defendant was "motivated by actual malice, which increased the
Page: 2 injury to the plaintiff... by increasing the mental distress and humiliation of the plaintiff". Aggravated damages express the "natural indignation of right-thinking people arising from the malicious conduct of the defendant". Third, punitive or exemplary damages, unlike general and aggravated damages, are not compensatory; their aim is "to punish" a defendant and to express "outrage at the egregious conduct of the defendant". They are akin to a civil fine which is meant to "act as a deterrent to the defendant and to others from acting in this manner". Exemplary damages may be awarded only "where the combined award of general and aggravated damages would be insufficient to achieve the goal of punishment and deterrence". In addition, it is necessary for such an award to "serve a rational purpose", that is, "was the misconduct of the defendant so outrageous that punitive damages were rationally required to act as deterrence"?... The standard of proof in punitive or exemplary damage cases is the civil standard of proof--on the balance of probabilities, not the criminal standard of proof--beyond a reasonable doubt. Nevertheless, an award of exemplary damages "should always receive the most careful consideration and the discretion to award them should be most cautiously exercised". Furthermore, according to Wilson J., the quantum awarded should not be "excessive", but should be "reasonable", "in keeping with the Canadian experience in the award of relatively modest punitive damages". [6] Again, while the defendant was not present on the motion it is still my duty to assure that the plaintiffs on the record before me have met the necessary standard of proof. [7] In Mayne-McGregor on Damages, (12 th ed.) p. 207, in reference to exemplary damages it is stated: They can apply only where the conduct of the defendant merits punishment, which is only considered to be so where his conduct is wanton, as where it disclosed fraud, malice, violence, cruelty, insolence or the like, or, as it is sometimes put, where he acts in contumelious disregard of the plaintiff s rights. [8] The plaintiffs state that most of the third party actions were settled as between the plaintiffs and the third parties, but without any benefit accruing tot he plaintiffs. [9] It was within the right of the defendant to join third parties. The fact that most were settled, although admittedly we do not know the terms, would indicate that the third party actions were not frivolous. Merely asserting that it was an
Page: 3 attempt to complicate the litigation, without more, is insufficient for the Court to conclude that the defendant should be punished. [10] The standard of conduct necessary to award exemplary damages has not been shown to be present in this matter and I would not allow an award of exemplary damages. Exemplary damages are not compensatory, rather they are punitive and only apply where the defendant s conduct merits punishment. [11] The plaintiffs have also asked for costs on a substantial indemnity basis. The fees sought are $73,393.21 plus taxes and disbursements, for a total of $90,672.10. [12] Because this matter never got to trial the fees at first glance seem high. The main basis which the plaintiffs argue drove up the costs is the defendant s filing the 13 third party notices to the subcontractors for the project. The plaintiffs state that all but three of the third parties were irrelevant to the proceeding, but nothing is said about why they were irrelevant. [13] The plaintiff states that they brought a motion to dismiss some of the third parties. The motion was dismissed, the trial judge saying the consequences of filing the third party notices and their substance would be left for future consideration. As I have stated, the plaintiffs have indicated that most of the third party matters have been settled, indicating to me that they must have had some substance. [14] The problem that the plaintiffs had with regard to the third parties was that many third party notices were issued several times. The plaintiffs had to serve the third parties with various documents, such as the affidavit of documents, and there was trouble finding some of the third parties in order to serve them. [15] Further, the plaintiffs state there were logistical problems in advancing their litigation because of the lack of cooperation from the defendant necessitated three planning conferences. The defendant refused to give undertakings or to comply with the undertakings when given. The plaintiffs state that during discoveries various undertakings were given by the defendant but not followed through. [16] The plaintiffs bill of costs is detailed listing all time entries, the lawyers who worked on a particular charged fee, the work for which the charge was made, the amount of time spent on a particular work and the amount charged for each entry. [17] In determining whether substantial indemnity costs should be awarded, Taylor J. In Ellen Creek Developments, Inc. v. the Charlottetown Area Development Corp. 2009 PESC 17; [2009] PEIJ No. 62 at para. 3, quoting from his decision in MRSB Chartered Accountants v Cardinal Packaging Ltd. et. al, (2006)
Page: 4 256 Nfld. & PEIR 61 (PESCTD) stated: [3]... 10 Trial or Appeal Division courts may award substantial indemnity costs in an appropriate case. Other than cases dealing with settlement offers, the circumstances giving rise to such an award are exceptional, and generally have to do with unacceptable conduct by a party. It is unacceptable for plaintiffs to make totally unsupported allegations of fraud or deceit against defendants. Courts award substantial indemnity costs against such plaintiffs to punish the plaintiffs' reprehensible conduct in making the allegations, discourage other plaintiffs from making false and harmful assertions about a defendant's character, and compensate the defendants for the expense incurred in answering the baseless attack on the defendants' integrity.... [67] In this case, Ellen Creek asserted deceit in its statement of claim, and continued its assertion through to closing submissions, adding bad faith as part of the deceit claim. The claims were unfounded and deserve censure. Having said that, not much of the case was spent on these assertions, likely because they were so obviously unfounded. Substantial indemnity costs on the entire action would be a very large sum, much larger than partial indemnity costs. Accordingly, I award substantial indemnity costs only in part and to the following extent: I award partial indemnity costs to the defendants on the entire action, plus $5,000 to censure the plaintiff's wrongful claim, this representing substantial indemnity costs on a significant part of the action. [18] Unacceptable conduct which results in an award of costs on a substantive indemnity basis has been described as conduct which is dishonest analogous to fraud, reprehensible conduct, perjury, outrageous conduct or bad faith. In MacPherson v Ellis, 2005 PESCAD 19 (Can LII), 248 Nfld & PEIR 123, McQuaid J.A. at para 19 stated that solicitor-client costs (substantial indemnity) were usually awarded only in those cases where there was some form of reprehensible conduct. At para. 21, Justice McQuaid further noted that reprehensible conduct can include lesser forms of misconduct. At para 22, Justice McQuaid stated: 22 The court should also look to consider whether the unsuccessful party should really have been put to the expense of bringing or defending a lawsuit and thus to the expense of paying costs in the circumstances. If the conclusion is that he or she should not have been, then this should be a factor in awarding costs which would indemnify the successful party on a higher scale than if he or she were simply successful. See: Apotex Inc. v. Egis Pharmaceuticals (1991), 4 O.R. (3d) 321 (Ont. Gen. Div.) at p. 325.
Page: 5 [19] In the present matter MacPhee vigorously opposed the plaintiffs action for two and one-half years, exposing the plaintiffs to considerable costs. The fact that MacPhee has now permitted summary judgment to go by default can only be an acknowledgement that the defendant s position had no merit: [20] As stated by McQuaid J.A. at para. 24 of the MacPherson case: 24... when the basis for bringing the matter before the court or the basis for defending an action is void of any degree of merit, parties cannot expect to escape the consequences of having to indemnify the party opposite against their costs. [21] In the circumstances, costs should be awarded to the plaintiffs on a substantial indemnity basis. [22] The final issue is the quantum of costs to be awarded. [23] In Roy Quieting Titles (2008) 275 Nfld & PEIR 215 (PESCTD), Cheverie J. analysed the decision of the Court of Appeal in MacPherson v Ellis, supra and Oliver v Severance et. al. (2007) Nfld & PEIR 252 (PESCTD). At paragraph 24 of his decision, Cheverie J. stated: [24] There are two decisions of the Appeal Division of this Court in recent years which provide guidance in the assessment of costs. The first is that of MacPherson v. Ellis 2005 PESCAD 19. Certain principles flow from that decision which are applicable to the case at bar and may be summarized as follows:... (3) Indemnification by way of costs on a substantial indemnity basis does not necessarily mean full, complete, and unquestioned reimbursement of the full amount paid by the party to his or her lawyer. There is always a question as to reasonableness. (See para. 28.) (4) The principles that apply to fixing costs on a solicitor-client basis are also applicable to fixing them on a substantial indemnity basis. The objective is that the successful party is entitled to be fully indemnified, but subject to the limitation that the level of indemnification shall not be unreasonable. (See para. 30.) (5) The objective is not to pronounce on the legitimacy of the fees that the solicitor for the successful party may charge his or her client, but rather to determine within the context of the motion the
Page: 6 amount the unsuccessful party should contribute toward the costs of the successful party. This objective applies when assessing costs on either a partial indemnity or substantial indemnity basis. (See para. 31.) (6) Further to the last principle, the Appeal Division in MacPherson stated that to accord with the fundamental objective of providing access to civil justice, the overriding principle in the assessment of costs either on a partial indemnity or substantial indemnity basis has to be reasonableness. To decide what is fair and reasonable in a given case, regard must be had to the reasonable expectation of the parties. (See para. 33.) [25] The second decision of the Appeal Division of this Court is that of Oliver v. Severance et al. 2007 PESCAD 21. As in the MacPherson case, the decision for the court in Oliver v. Severance was delivered by McQuaid J.A. He took the opportunity to again underscore what is at the root of all cost assessments by referring to his decision in MacPherson v. Ellis where he posed the question: "What would a successful party expect to receive as contribution toward costs from the unsuccessful party and what would the unsuccessful party expect to contribute toward the costs of the successful party?" He then goes on in para. 16 of Oliver v. Severance to set out four factors for consideration, which factors include: (1) The quantum of costs the parties could expect to pay as a reasonable and fair amount required to indemnify the successful party against the costs incurred as a result of participating in the litigation; (2) The assessment of the quantum of costs is not strictly an arithmetic exercise of calculating the number of hours billed by counsel for the successful party and multiplying that total by a selected hourly rate; (3) There isn't necessarily a direct connection between what counsel for the successful party has billed his or her client and what is recoverable from the unsuccessful party; (4) Notions of reasonableness and fairness which are imbedded in the common law are to prevail in the context of applying factors set out in Rule 57.01.... [26]... As I am advised by Oliver v. Severance, I should not apply a strict arithmetic calculation in order to determine costs, but it is a factor to consider. Likewise, what each of the solicitors in this case bill their clients is not necessarily determinative of recoverable costs from the unsuccessful party.
Page: 7 [27] Rule 57.01 lists a number of factors the court may consider in exercising its discretion under s. 53 of the Supreme Court Act, R.S.P.E.I. 1988, Cap. S-10, when awarding costs. These factors are in addition to the result in a proceeding and any offer to settle or to contribute made in writing. Not all of these factors are relevant in every case.... (Emphasis Added) [24] The factors set forth in Rule 57.01 which I find applicable to the present matter are: (1) The amount claimed and the amount recovered in the proceeding. The plaintiffs have recovered the amount they claimed by way of the summary judgment. (2) The complexity of the proceedings. This matter can not be considered as being overly complex, however, the amount of preparation involved was lengthy. (3) The importance of the issues. There was a lot at stake for the plaintiffs. They had entered into a contract with the defendant to construct a house for them at a price of $587,302.00. Numerous costly defects were later identified. The plaintiffs endeavoured for four years to have the defendant remedy the defects without success. (4) The conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceedings. The plaintiffs commenced their action in April, 2007. It has taken 2 ½ years to reach this stage with the defendant not contesting the motion for summary judgment. One can only conclude that MacPhee conduct lengthened these proceedings. (5) Whether any step in the proceedings was improper, vexatious or unnecessary. Because of the result of this matter, ie., summary judgment, one can only conclude that MacPhee conduct was improper or unnecessary. (6) A party s denial of or refusal to admit anything that should have been admitted. The defendant s failure to comply with undertakings would have undoubtedly caused delay. [25] In MacPherson v Ellis, McQuaid J.A. at para 40 stated it was not the role of
Page: 8 the Court to second guess the hours spent on a file, however, the Court should always be mindful of whether the party responsible for the payment of costs is obliged to indemnify the other party to the extent of the hours set forth in the bill of costs. It is therefore necessary to review the bill for the utilization of unnecessary resources and for duplication. [26] In the matter of Ellen Creek Developments, Inc., supra, Taylor J. stated: 30 Although there is no Practice Note for Substantial Indemnity Costs, Rule 1.03(1)(ff) states:... (ff) "substantial indemnity costs" means costs awarded in an amount that is 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A, and "on a substantial indemnity basis" has a corresponding meaning. 31 Part I of Tariff A (Rule 58) refers to s. 53(1) of the Supreme Court Act, R.S.P.E.I. 1988, Cap. S-10, (now s. 60(1) of the Judicature Act, R.S.P.E.I. 1988, Cap. J-2.1) and the factors set out in subrule 57.01(1). Since partial indemnity is conventionally accepted as being 60% of full indemnity, substantial indemnity is thus 90% of full indemnity. Using Practice Note 21, the suggested maximum substantial indemnity rate for lawyers with less than five years at the Bar is seen to be $135 per hour, while the suggested maximum substantial indemnity rate for lawyers with more than 10 but less than 20 years at the Bar is $210 per hour. [27] In the instant case, Mr. Macnutt has 40 years at the Bar so that his hourly substantial indemnity rate is $239.00 per hour. However, he has billed at a lower rate which I allow. Mr. Macnutt has billed for 308.7 hours at an hourly rate of $225 for 98.2 hours and $235 for 210.5 hours for total fees of $71,562.50. However, included in that amount are certain charges that were incurred by the defendant, Atlantic Home Warranty Program. In most instances, the charges to Atlantic Home Warranty Program are mixed in with the charges to the defendant, MacPhee Builders, Ltd., so that one can only make an estimate of the respective charges. It can be said that in making the estimate, I have in most instances been able to determine what Mr. Macnutt charged in other instances for a single item. [28] Between June 20, 2007, and August 19, 2007, there were a total of 37 different charges in relation to the defendant Atlantic Home Warranty Program for an estimated total of $7,120. This amount is to be deducted from the amount of costs allowed to Mr. Macnutt. [29] In addition, there are some lesser charges that must be deducted, namely, the
Page: 9 charges by Mr. Macnutt for photocopying documents (which charges are a clerical expense), attendances to pick up certain things (also a clerical duty), for a total of $885.25. [30] Therefore, from Mr. Macnutt s billed fees of $71,562.50, should be deducted the sum of $8,005.25 ($7,120 + $885.25 = $8,005.25), making his total fee $63,557.25. [31] Following the calculation method used by Taylor J. in Ellen Creek Developments Inc., Mr. Macnutt should have his full indemnity charge reduced by 10% ( $6,355.72). These calculations will leave Mr. Macnutt s fee at $57,201.53. [32] Mr. Macnutt also seeks costs for a lawyer in his office for 6.1 hours of work at the rate of $185.00 per hour or $1,128.50. Again, deducting 10% I would allow the amount of $1,015.65. A further item he requests is clerical times in the amount of $528.75. I would not allow this amount as clerical times is a charge within the lawyers fees. [33] Disbursements of $5,646.66 are allowed, as are GST and PST in legal fees and disbursements. Summary of Costs Legal Fees for Mr. Macnutt... 57,201.53 Legal fees for Paula MacFadyen... 1,015.65 Disbursements... 5,646.66 TOTAL FEES AND DISBURSEMENTS... 63,863.84 GST (5%)... 3,193.19 67,057.03 PST (7%)... 5,072.08 TOTAL FEES DISBURSEMENTS AND TAXES $72,129.11 Summary Judgment Against third Parties [34] The plaintiff seeks summary judgment against the remaining third parties. The plaintiffs cited three cases to support this claim but none are on point. In two cases it was the defendants who were seeking summary judgment against a third party and in the other case it was the third party seeking judgment against the defendant. Simply put, the plaintiffs have no action against the third parties so they are unable to claim summary judgment. February 24, 2010 MacDonald J.