Court Cites “Massive Overkill” Where Total Legal Costs Exceed $400,000, Judgment for Less than $30,000

In Dinsmore v. Southwood Lakes Holdings Ltd., Mr. Justice John H. Brockenshire had some interesting things to say about costs.

This action involved the cost of remedying a damp basement in a townhouse. It proceeded to trial under ordinary procedure, although the judgment was for damages of only $29,700, against one of two sets of defendants.

Each party asked for costs, in amounts which dwarfed the damages award:

Plaintiffs’ counsel have put forth a claim for $148,464.50 in fees plus $45,403.40 in disbursements plus GST of $11,611.85, totalling $205,479.75 on a substantial indemnity basis. Mr. Morga, for the builder, claims fees of $86,700 plus disbursements of $5,184.64 plus GST of $6,414.21, totalling $98,299.75, on a substantial indemnity basis. Mr. Shillington, for the Warranty Program, claims fees of $67,424.25 plus disbursements of $27,027.61, plus GST of $6,583.55, totalling $101,035.41 on a substantial indemnity basis.

If we add up these figures, we see that these parties apparently spent (or are about to spend) over $400,000 to litigate a claim worth less than $30,000.

Rule 76.13 

Not surprisingly, one argument that was made to Justice Brockenshire by the defence was based on the fact that the amount of the judgment was less than $50,000, that the action should have been brought under ordinary procedure and that therefore, Rule 76.13 meant that no costs should be awarded to the plaintiff.

His Honour did not accept this submission. However, the reasons for this aspect of his decision were, we think, not compelling:

This was an action seeking general damages, including the cost of remedying an admitted problem with the townhouse basement, which the plaintiffs’ experts put at well over $50,000, plus general, aggravated and punitive damages. The issue of Rule 76 was not raised before me during the trial. In the circumstances I do not think it was unreasonable for the plaintiffs’ counsel to have commenced and continued this as an ordinary action. I therefore do not see rule 76.13 as being an issue when dealing with these cost claims.

First of all, there would be no obvious reason to raise Rule 76 during the trial, so it seems rather harsh to penalize the defendants’ counsel on this score; what might they have said about Rule 76 during the trial, so as to inoculate their clients from criticism at the costs stage of the proceeding?

Secondly, the fact that general, aggravated and punitive damages were claimed (and all of which claims were dismissed in the judgment) is surely not a basis for relieving against the costs consequences of Rule 76. If plaintiffs choose to advance such claims under ordinary procedure, it ought to be at their own risk.

Perhaps the strongest plank in the plaintiff’s argument on this issue was the fact that their expert had estimated the cost of repairs to be in excess of $50,000. But even that seems a rather weak basis for departing from Rule 76.


Justice Brockenshire went on to consider who should receive what costs and on what scale. He ultimately concluded that the plaintiff and a successful defendant should have costs on a partial indemnity scale. But along the way, he made some fairly strong comments about the cost of this lawsuit: “I fail to see why anyone, at any stage in this proceeding, would see it as justifying legal bills in the amounts that have now been presented.” Judging by the figures above, it is hard to disagree.

He noted that he did not know whether the various parties had actually paid the legal fees which were the basis of the costs demands but that even if they had, the principle of indemnity in Rule 57.01(1)(0.a) “would be completely overridden by the principle of the consideration of what an unsuccessful party could reasonably expect to pay”.

The following are some of the interesting rulings made by Justice Brockenshire in the course of fixing costs:

  • he calculated the partial indemnity costs of the successful parties at 60% of what they described as their “substantial indemnity” costs, although it sounds like the latter might have represented the amount actually billed to the clients;
  • counsel from Toronto claimed his mileage and hotel costs for 16 nights in Windsor. Justice Brockenshire allowed these expenses on the basis that “if one sues a governmental or quasi governmental agency, it would be reasonably expected that counsel from out of town would appear”. This seems to us to be a rather questionable rationale (certainly, it would be in Ottawa). Perhaps the reasonableness of the expectation would vary, depending on where the action had been commenced;
  • he described the fees incurred on behalf of the plaintiff as “massive overkill”, involving two counsel charging hourly rates of $350 and $200 respectively. In the end result, he reduced the fees claimed from $148,464.50 for substantial indemnity to $36,000 for partial indemnity;
  • His Honour did not think it appropriate that two lawyers had represented the plaintiff. He noted that “this is the sort of case which I would expect would be handled by one lawyer, so that generally time docketed for discussions between various lawyers in the law office should be excluded. So should repeated administrative actions between law students, clerks, etc., which in my view should be treated as simple office overhead and not billed out to the client, much less to opposing parties”. He did not indicate what he meant by “this…sort of case”. Presumably, he meant one that involved a relatively small amount of money. However, his rationale for not imposing the costs sanctions of Rule 76 seemed to have been based on the opposite assumption (i.e., that the amount claimed had been large). However, he went on to say that “are many decisions frowning upon billing for two counsel representing a party at trial, including recent ones under the grid system where only one counsel fee would be allowed”;
  • Justice Brockenshire emphasized the principle of proportionality, whereby the amount of the costs should reflect the amount in issue;
  • many of the plaintiff’s disbursements were disallowed: “I reject the computer legal searches, the lunches, ‘miscellaneous expenditures during trial’ and the charges for clerical assistance at trial. I also disallow the fax charges, courier charges and long distance telephone charges. There is a charge of $2,147.50 for photocopies. For the purpose of fixing costs I simply reject $1,000 of that.”

This is another case (see Antorisa Investments Ltd. for a further recent example) in which the costs have ended up being much greater than the amount in issue. As did Justice Lax in Antorisa, Justice Brockenshire evidently viewed the “indemnity principle” that is contained in Rule 57.01(1) (0.a) to be very much subordinate to “the amount of costs that an unsuccessful party could reasonably expect to pay” (Rule 57.02(1)(0.b)).

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