SUPREME COURT OF NOVA SCOTIA Citation: Southwest Construction Management Ltd. v. EllisDon Corporation, 2018 NSSC 270 Date: 20181024 Docket: Hfx. No. 440897 Registry: Halifax Between: Southwest Construction Management Limited Plaintiff/ Defendant by Counterclaim and EllisDon Corporation and Defendant/ Plaintiff by Counterclaim Southwest Properties Limited EllisDon Corporation and Third Party Plaintiff Southwest Construction Management Limited, Southwest Properties Limited and Summer Wind Partners II Limited Defendants Judge: The Honourable Justice D. Timothy Gabriel Heard: By written submissions Last written submission: September 7, 2018 Counsel: John Shanks for Southwest Construction Management Ltd., Southwest Properties Ltd., and Summer Wind Partners II Ltd. C.C. Robinson, Q.C. and Kevin Gibson, Q.C. for EllisDon Corporation
Page 2 By the Court: Background [1] This will be the third decision in this matter, which started out as a motion in Chambers brought by the Respondent, EllisDon Corporation ( EllisDon ). The previous two decisions are reported in Southwest Construction Management Ltd. v. EllisDon Corporation, 2018 NSSC 25 ( Southwest #1 ) and Southwest Construction Management Ltd. v. EllisDon Corporation, 2018 NSSC 162 ( Southwest #2 ). [2] In the first decision, I determined that it was necessary for Southwest Construction Management Ltd. ( Southwest ) to provide the court with certain documents for review, prior to ruling on the issues of privilege that it had raised in response to EllisDon s motion for production. I also made determinations with respect to questions which had been posed at discovery and/or undertakings which had been provided at discovery and had not been fulfilled. These latter have not formed the basis of any subsequent controversy between the parties, and hence have not been addressed in Southwest #2, nor will I address them in these reasons. [3] Briefly put, the parties to this proceeding had executed an agreement on August 21, 2013, pursuant to which EllisDon was to provide construction management services to Southwest in connection with a project to be developed on Hollis Street called The Maples. The Maples was to be a multi-story apartment building. There were delays encountered during the construction, and Southwest and ElllisDon each blame the other for those delays. Southwest commenced legal action against EllisDon on July 2, 2017, and EllisDon filed a Defence and Counterclaim on August 6, 2016. It also has registered a Builders Lien against the property. [4] On November 2, 2017, Mr. Jim Spatz, the Chairman and CEO of Southwest, attended discovery examinations and brought with him a black binder containing certain materials and handwritten notes. On November 3, 2017, Mr. Morgan Allaway, Southwest s Director of Project Management with respect to the construction, attended discoveries and brought with him a series of pages and a sheet. Both men referred to the materials that they brought to the discovery, during the course of it. EllisDon made a motion for an order requiring Southwest to produce copies of what each man brought to the discovery with him.
Page 3 [5] Relevance of these materials was admitted by Southwest by necessary implication: it simply argued that the documents were privileged and that litigation privilege and/or solicitor/client privilege excused them from production. [6] One day prior to the motion (Southwest #1) being heard, an affidavit was filed by Mr. Allaway saying that his materials (which I will refer to as the Allaway materials ) could not be found. This was despite the fact that counsel for Southwest, Mr. William L. (Mick) Ryan, had been advised at the discoveries in early November 2017, that these materials, as well as the Spatz materials, would be the subject of this motion. [7] In Southwest #1 I deliberately did not deal with the contention that these materials had been lost, concluding rather at para. 38: In order to conduct the analysis required of me, I will require that counsel for Southwest provide the black binder [the Spatz binder] and the Allaway notes in a sealed envelope within 30 days... the documents themselves will be generally described and summarized in an affidavit of each of Messrs. Spatz and Allaway, which affidavits will be filed with the Court and (of course) provided to opposing counsel. [8] I described the aftermath of that direction in Southwest #2: 11. On March 28, 2018, I received some correspondence from counsel for Southwest. Included therewith was a copy of the Spatz s binder, and an affidavit of Mr. Spatz in summary of what was contained therein. Also provided was a supplemental affidavit of Morgan Allaway confirming that he had again reviewed all of his file materials in this matter and had been unable to locate the materials which he had brought with him to his discovery examination. 12. The required affidavit in summary of what had been contained in Mr. Allaway s materials was not provided. It was not until June 8, 2018, that the court received another supplementary affidavit from Mr. Allaway containing the required information. [9] In Southwest #2, I arrived at the following conclusions which are principally relevant to this costs determination: 25. I conclude my review of the Spatz binder with the observation that the overwhelming majority of the notes and/or materials attached thereto have the appearance of having been collected and prepared by Mr. Spatz to assist him with his recollection of certain facts and/or matters that were pertinent to the anticipated subject matter of the questions that he would be asked on discovery examination.
Page 4 26. Regardless of the contentions as contained in his affidavits, the binder patently consists of substantive information upon which he relied at discovery with only two exceptions. Other than these two exceptions, all of this material should be disclosed. 27. The two pages to which privilege would attach, in my view, are found at tab 1, page 6 thereof, which corresponds to page 4 of Southwest s Notice of Action. This page appears to have (as its sole purpose) the notation of certain questions which were to be put by Mr. Spatz to counsel, William L. Ryan. There is nothing in the notes on this page which could or would have been used to assist his testimony at discovery. They were more in the nature of remember to ask Mick about this. They were simply questions and would not have had any other function. 28. The other excepted document would be the final one in the binder, which appears as the last page of tab 7. This is a letter from Mr. Ryan to an individual at Southwest properties seeking further information to assist him in gathering information so that he could prepare the Statement of Claim. It contains no substantive information and has no handwriting or other markings superimposed upon it. 29. These are the only two pages that I would consider to be protected by solicitorclient or any other type of privilege. The remainder must be disclosed and that would include the document inside the plastic folder on the inside cover of the binder entitled Maple Delay Loss revised November 1, 2017. [10] In relation to the Allaway materials I noted: 30. I have previously noted that Mr. Allaway provided an affidavit which was dated and filed on January 9, 2018. In the aftermath of my decision in Southwest #1 he filed two others. The first of these was filed on March 29, 2018. The second was the supplementary affidavit of Morgan Allaway filed on June 8, 2018. 31. Paras. 6, 7, 8 and 9 of Mr. Allaway s second supplementary affidavit read as follows: 6. I have reviewed the correspondence from the Honurable [sic] Justice Gabriel dated May 8, 2018 in which his Lorship [sp] requests a summary of the notes that I had prepared in anticipation of my discovery examination in the this proceeding. 7. The notes made by me during my preparatory meeting with William Ryan, Q.C. were of dates of significantce [sic] within the proceeding to allow me to have easy access to these dates without having to review large numbers of documents.
Page 5 8. My notes contained the dates of the following 5 events: (a) My Start Date at Southwest, (b) Ellisdon Proposal Date, (c) Ellisdon Contract Date, (d) Ellisdon Site Mobilization Date, and (e) Ellisdon Termination on Site Date. 9. I do not believe that my notes contained any other dates or information other than the five dates listed above. I have not seen those notes since my discovery in November 2017. 32. Obviously, the information referred to above was prepared as an aide memoire in anticipation of his discovery examinations. There is nothing about the nature of the information described above which renders either type of privilege applicable. The information, thus described, is clearly not privileged on either of the bases contended, is not protected and should have been disclosed from the outset. [11] I then went on to note in paras. 34 and 36: 34. For the materials to go missing and for the affidavit disclosing this fact not to be filed until one day before the motion referenced in Southwest #1 was heard, is unacceptable. 36. At a minimum, there must be cost consequences to Southwest as a result of the loss of these materials under these circumstances. [12] My conclusion, on the basis that EllisDon had been almost entirely successful was that it should have its costs on that basis alone. I also determined that there should be an amount included in those costs to address the fact of the lost Allaway materials. Issue [13] Therefore, I provide these reasons to address the cost award which I will make in these circumstances. Analysis [14] The relevant provisions of Civil Procedure Rule 77, as they relate to the issue of costs, are as follows:
Page 6 77.02 (1) A presiding judge may, at any time, make any order about costs as the judge is satisfied will do justice between the parties. (2) Nothing in these Rules limits the general discretion of a judge to make any order about costs, except costs that are awarded after acceptance of a formal offer to settle under Rule 10.05, of Rule 10 - Settlement. 77.03 (3) Costs of a proceeding follow the result, unless a judge orders or a Rule provides otherwise. (4) A judge who awards party and party costs of a motion that does not result in the final determination of the proceeding may order payment in any of the following ways: (a) in the cause, in which case the party who succeeds in the proceeding receives the costs of the motion at the end of the proceeding; (b) to a party in the cause, in which case the party receives the costs of the motion at the end of the proceeding if the party succeeds; (c) to a party in any event of the cause and to be paid immediately or at the end of the proceeding, in which case the party receives the costs of the motion regardless of success in the proceeding and the judge directs when the costs are payable; (d) any other way the judge sees fit. 77.05 (1) The provisions of Tariff C apply to a motion, unless the judge hearing the motion orders otherwise. 77.07 (1) A judge who fixes costs may add an amount to, or subtract an amount from, tariff costs. (2) The following are examples of factors that may be relevant on a request that tariff costs be increased or decreased after the trial of an action, or hearing of an application: (a) the amount claimed in relation to the amount recovered; (b) a written offer of settlement, whether made formally under Rule 10 - Settlement or otherwise, that is not accepted; (c) an offer of contribution; (d) a payment into court;
Page 7 (e) conduct of a party affecting the speed or expense of the proceeding; (f) a step in the proceeding that is taken improperly, abusively, through excessive caution, by neglect or mistake, or unnecessarily; (g) a step in the proceeding a party was required to take because the other party unreasonably withheld consent; (h) a failure to admit something that should have been admitted. 77.08 A judge may award lump sum costs instead of tariff costs. [Emphasis added] [15] Since this was a motion, I then proceed to consider Tariff C : For applications heard in Chambers the following guidelines shall apply: (1) Based on this Tariff C costs shall be assessed by the Judge presiding in Chambers at the time an order is made following an application heard in Chambers. (2) Unless otherwise ordered, the costs assessed following an application shall be in the cause and either added to or subtracted from the costs calculated under Tariff A. (3) In the exercise of discretion to award costs following an application, a Judge presiding in Chambers, notwithstanding this Tariff C, may award costs that are just and appropriate in the circumstances of the application. (4) When an order following an application in Chambers is determinative of the entire matter at issue in the proceeding, the Judge presiding in Chambers may multiply the maximum amounts in the range of costs set out in this Tariff C by 2, 3 or 4 times, depending on the following factors: (a) the complexity of the matter, (b) the importance of the matter to the parties, (c) the amount of effort involved in preparing for and conducting the application. (such applications might include, but are not limited to, successful applications for Summary Judgment, judicial review of an inferior tribunal, statutory appeals and
Page 8 applications for some of the prerogative writs such as certiorari or a permanent injunction.) Length of Hearing of Application Range of Costs Less than 1 hour $250 - $500 More than 1 hour but less than ½ day $750 - $1,000 More than ½ day but less than 1 day $1000-$2000 1 day or more $2000 per full day [16] This motion was originally set down by the Respondent, EllisDon, for ordinary Chambers. Despite misgivings expressed by the court prior to hearing Southwest #1, and upon receipt of assurances from counsel that the matter could be heard in the proper amount of time, the court allowed the motion to proceed. It ended up taking much longer than an ordinary Chambers matter should. However, Southwest #1 did end up consuming less than one-half day. [17] After delivery of the first decision, Southwest #2 necessitated more written briefs from counsel (albeit without the need of a further court appearance). Now we deal with the costs. This has again necessitated briefs from both sides although, once again, without the necessity of a further hearing. [18] First, I begin with the uncontroverted position taken in virtually all of the authorities that have interpreted Civil Procedure Rule 77 and the Tariffs pertinent thereto. This is to say, that while the court s discretion as to the amount of costs that it may award is unfettered, the opening presumption is that justice may be done between the parties by having recourse to the Tariffs. [19] It is also clear that the court may depart from the amounts specified in the Tariff. The threshold for such a departure, however, must be set sufficiently high so that (one of) the primary objectives of the Tariffs in the first place, which is to say, predictability of the results to the litigants beforehand, is not impaired. [20] EllisDon contends that Tariff costs, which in this case would prescribe a maximum of $1,000.00 inclusive of disbursements, are not sufficient to do justice between the parties, and that the court should order a lump sum award instead. In this respect, it cites what it regards as the substantial success of its motion, and the misconduct of Southwest in not being sufficiently careful with the Allaway materials which went missing, despite the knowledge that these materials were to be the subject of the motion in Southwest #1. As a consequence of this lack of care, these
Page 9 materials could not be produced for inspection by the court, in conformity with the direction that I rendered in Southwest #1. [21] EllisDon also reminds me of my comments in Southwest #2, in which I indicated that there ought to be an amount included in the costs award against Southwest to reflect the loss of these materials. They contend that an award of a significant lump sum in relation to this motion is the appropriate mechanism by which to do justice between the parties. [22] As counsel for EllisDon puts it: 7. EllisDon respectfully submits that a lump sum award of $10,000, payable forthwith, is appropriate in light of the time and expenditure consumed in the making of a motion EllisDon should not have been required to make. The amount would incompletely indemnify EllisDon for the costs of bringing this motion, which significantly exceed $10,000. (Costs brief) [23] In Armoyan v. Armoyan, 2013 NSCA 136, Fichaud, J.A. stated: 15. The tariffs are the norm, and there must be a reason to consider a lump sum. 16. The basic principle is that a costs award should afford substantial contribution to the party's reasonable fees and expenses. In Williamson, while discussing the 1989 tariffs, Justice Freeman adopted Justice Saunders' statement from Landymore v. Hardy (1992), 112 N.S.R. (2d) 410:... The underlying principle by which costs ought to be measured was expressed by the Statutory Costs and Fees Committee in these words: "... the recovery of costs should represent a substantial contribution towards the parties' reasonable expenses in presenting or defending the proceeding, but should not amount to a complete indemnity." 17. The tariffs deliver the benefit of predictability by limiting the use of subjective discretion. This works well in a conventional case whose circumstances conform generally to the parameters assumed by the tariffs. The remaining discretion is a mechanism for constructive adjustment that tailors the tariffs' model to the features of the case.
Page 10 18. But some cases bear no resemblance to the tariffs' assumptions. A proceeding begun nominally as a chambers motion, signalling Tariff C, may assume trial functions, contemplated by Tariff A. A Tariff A case may have no "amount involved", other important issues being at stake. Sometimes the effort is substantially lessened by the efficiencies of capable counsel, or handicapped by obstructionism. The amount claimed may vary widely from the amount awarded. The case may assume a complexity, with a corresponding workload, that is far disproportionate to the court time, by which costs are assessed under provisions of the Tariffs. Conversely, a substantial sum may turn on a concisely presented issue... [24] In Big X Holdings Inc. v. Royal Bank of Canada, 2015 NSSC 350, Justice Campbell stated with respect to Rules 77.07 and 77.08: 43. Rule 77.07 provides that a judge can increase or decrease the amount of costs established by the application of the tariff and Rule 77.08 provides that a judge may depart entirely from the tariff and award lump sum costs. That discretion is of course to be judicially exercised, with reference to some factors that are noted as being potentially relevant. The judge can consider the amount claimed in relation to the amount recovered. The conduct of a party affecting the speed or expense of the proceeding is also relevant. Similarly, parties who take unnecessary steps or cause others to take steps that would otherwise not be necessary should suffer the consequences of their actions. Parties who fail to make admissions that should have been made will be required to bear the costs of their stubbornness. [25] I have concluded that the Tariff costs (maximum $1,000.00) would not do justice between the parties in this instance. For example, although some concessions were made by Southwest with respect to provision of answers and information in response to questions at discovery, my determination in Southwest #2 was that the overwhelming bulk of the material in the Spatz binder and virtually all of the Allaway materials ought to have been provided upon request. [26] Indeed, only two pages in the Spatz binder were determined to be privileged from production. Moreover, although the Allaway materials were never produced, from the description provided by Mr. Allaway in his supplementary affidavit, it was very clear that no issue of privilege should have been invoked in relation to this information. [27] EllisDon says that it has spent over $10,000.00 in legal fees and disbursements in relation to this motion. It says an award in the amount of $10,000.00 would provide substantial recovery. [28] Because of the presumptive applicability of the Tariffs, the amounts noted therein are presumed to do substantial justice between the parties and to represent a
Page 11 substantial contribution to the costs incurred by the victorious party. I am not in a position, nor am I required to, tax EllisDon s bill as incurred from start to finish. [29] Justice Wood made much the same observation in Homburg v. Stichting Autoriteit Financiele Markten, 2017 NSSC 52 where, at para. 9 he stated: It is important to recognize that the substantial contribution principle underlies the tariffs but does not supersede them. Most cost matters should be disposed of based upon an application of the tariffs with the built in discretion to adjust amounts for the factors identified in Rule 77. The mere fact that the party's actual legal account is significantly more than the tariff does not automatically justify a departure. To suggest otherwise would turn the court into a taxing master whose function is to first assess the reasonable solicitor client account and then apply some percentage recovery between 50% and 100%. [Emphasis added] [30] I agree that this motion, which (arguably) ought not to have been necessary in the first place, took on a life of its own after commencement and has now generated its third decision (including this one). I am prepared to recognize this in the size of the award granted. First, however, I will focus upon the Tariffs and the considerations expressed in Rule 77.07, which provide some examples of factors that may be relevant on a request that Tariff costs be increased. [31] I parenthetically note that, since this motion was not determinative of the entire matter at issue between the parties it is not open to me to simply use a multiplier in accordance with the criteria specified in Tariff C, subparagraph 4. I further consider that the amount of paperwork generated by this motion has been equivalent to what would be produced in three hearings, resulting in three rulings, all necessitated by the original motion. I also take note of the misconduct or carelessness associated with the loss of the Allaway materials, and the fact that EllisDon s position was (almost) completely vindicated by the result. [32] I also consider the position of the parties on costs, as expressed in their respective memoranda. That of EllisDon has already been discussed. Southwest s position is that award of $2,500.00 would be appropriate. They point out that this is two and one-half times of the upper limit of the relevant Tariff. [33] As I said earlier, I am of the view that justice cannot be done between the parties utilizing the Tariffs. I consider that an award of costs in the circumstances of this case, sufficient to do justice between the parties, having regard to the
Page 12 considerations noted above, would involve an award of costs to EllisDon in the amount of $5,500.00 inclusive of disbursements. Payable forthwith? [34] EllisDon seeks payment of its costs forthwith. On this point, Southwest submits that: Having regard to Tariff C the award should be made payable in any event of the cause, thus preserving EllisDon s cost entitlement to be accounted for in the final disposition of the overarching proceeding. Tariff C, subparagraph 2, states that unless otherwise ordered, the costs assessed following an application shall be in the cause and either added to or subtracted from the costs calculated under Tariff A. [35] It is obvious, however, that under Rule 77.03(4)(c), I have authority to make an award to a party: in any event of the cause and to be paid immediately, or at the end of the proceeding, in which case the party receives the costs of the motion regardless of success in the proceeding and the judge directs when the costs are payable. [36] I conclude from this, therefore, that Tariff C(2) sets forth the default position rather than the presumptive one, since it is couched in terms of unless otherwise ordered, the costs assessed following an application shall be in the cause and either added or subtracted from the costs calculated under Tariff A. (Emphasis added) [37] This view would seem to be more consistent with Justice Wright s comments in Amaratunga v. Northwest Atlantic Fisheries Organization, 2011 NSSC 3 in which he stated at para. 22: The court recognizes that the most common basis in the case law for an award of costs to be payable forthwith is the situation where the court thereby reflects its disapproval of some conduct on the part of the unsuccessful party. However, in light of the wide discretion that the court has when it comes to costs, it is my view that that is not the sole situation in which an award of costs payable forthwith can be justified. The Salvage Association case, in my view, does not stand for such a broad proposition. [Emphasis added]
Page 13 [38] The reference to The Salvage Association Case relates to Salvage Association v. North America Trust Company, 1998 NSCA 210 where Bateman, J.A. noted at para. 49: His [the trial judge s] award of costs to the successful party on the application accords with the common law and the provisions of Rule 63.03. It is reasonable to concluded, as well, that Justice Davison, in ordering costs payable forthwith, was expressing his disapproval of the Applicant s resistance to discovery, which has necessitated the Respondent s application to the court. [39] Similarly, Justice Gogan, in Baird v. Barkhouse, 2014 NSSC 74, in ordering that the successful Applicant ought not have to wait for his costs until the conclusion of the proceeding, as an alternative, ordered an on or before date by which time the costs award was to be paid: 23. In the present case, Mr. Baird was non-compliant with the Rules of disclosure and discovery. His conduct resulted in a motion for production. Explicitly, Mr. Baird's conduct delayed the disclosure required to move the proceeding forward in a timely fashion. Implicitly, the conduct delayed the entire proceeding and resulted in unnecessarily increased costs for Mr. Barkhouse. [40] My conclusion that Southwest s conduct was subpar is clear. This is particularly so with respect to the loss of the Allaway materials, its failure to provide the Allaway affidavit until well after the date stipulated in Southwest #1, and its position taken by an assertion of privilege, when there was literally no basis for such a position in relation to the overwhelming majority of the materials contained in the Spatz binder, and in relation to virtually all of the Allaway materials as described in Mr. Allaway s supplemental affidavit. This resulted in much unnecessary time and expense being incurred. [41] As a consequence, to direct that the costs simply be dealt with in the cause, or in any event of the cause but paid at the end of the proceeding (as I interpret Southwest s position to be) does not do justice between the parties, in my view. [42] In the result, Southwest shall pay costs to EllisDon in the amount of $5,500.00, inclusive of disbursements, forthwith and in any event of the cause. Gabriel, J.