Case Name:

Ram Contract Carriers Ltd. v. Morris

Between

Ram Contract Carriers Limited, plaintiff, and

Keri Morris, Jamie McDermott, Kerrie Zeller, Bob Taylor,

1050758 Ontario Inc. operating as SM Freight and Scott

Mihalco, defendants,

And between

SM Freight Inc., plaintiff by counterclaim, and

Ram Contract Carriers Limited, Robin Miller, Norman Klein,

Sr., and Norman Klein, Jr., defendants by counterclaim

[2002] O.J. No. 3368

[2002] O.T.C. 633

116 A.C.W.S. (3d) 337

Court File No. 02-GD-53525

 Ontario Superior Court of Justice

Brockenshire J.

Heard: By written submissions.

 Judgment: August 9, 2002.

(40 paras.)

Practice -- Costs -- Taxation of costs -- Bill of costs -- Party and party costs -- Considerations.

Application by the defendants for costs. The individual defendants had been employed by Ram Contract Carriers. The defendant SM Freight was a competitor of Ram. The individual defendants left Ram and commenced work for SM. Ram sued and claimed that SM induced the individual defendants to breach their contracts with it. The claim against the individual defendants was that they breached their fiduciary obligations to Ram. They used information obtained from Ram for the benefit of SM. Ram obtained an interim interim injunction. It did not obtain an interim injunction. Ram intended to continue with this action. It would seek damages and injunctive relief at trial.

HELD: Application allowed in part. The court reviewed the bills of cost submitted by the defendants. It awarded costs on a partial indemnity basis. Such costs were to be paid within 30 days. This action would not proceed to trial for a long time. It was possible that a trial would not be necessary. The commercial situation of Ram and SM changed substantially. It was reasonable to expect further changes. The motions resolved most of the issues between the parties. Counsel were entitled to be compensated forthwith for the substantial work undertaken by them.

Statutes, Regulations and Rules Cited:

Ontario Rules of Civil Procedure, Rule 57.03(1).

Counsel:

David M. McNevin, for the plaintiff.

Gregory A. Campbell, for the defendants, Morris, McDermott and Taylor.

Raymond Colautti, for the defendants, Scott Mihalco and 1050758 Ontario Inc. o/a SM Freight.

Steven D. Bezaire, for the defendant, Kerrie Zeller.

1 BROCKENSHIRE J. (endorsement):-- I have received and have reviewed the bills of costs and written submissions by all of Mr. Colautti, Mr. Campbell, Mr. Bezaire, and Mr. McNevin. In this action, Ram was the plaintiff, suing SM Freight and the individual defendants, including Kerrie Zeller, who was added during the interlocutory proceedings. The basic situation had been that the individual defendants, except Scott Mihalco who is the president of SM Freight, had left Ram Contract Carriers and all of them except Zeller had gone to work for Ram's competitor SM Freight in circumstances that led Ram to sue, alleging that SM Freight had induced these people to breach their contracts and that the people were breaching their fiduciary obligations to Ram by using information from Ram for the benefit of SM Freight. These allegations carried the day on an "interim-interim" interlocutory injunction application, but when full responding materials were prepared and filed and some cross-examinations had taken place, and the matter came back to court on Ram's motion for an interim injunction, Ram did not succeed. I understand from the costs submissions that Ram intends however to carry on with the action seeking damages and perhaps injunctive relief at trial.

2     All of the defendants except Mr. Bezaire on behalf of Ms. Zeller sought costs on a partial indemnity basis. Mr. Bezaire seeks full indemnity due to Ms. Zeller's special circumstances. All ask that the costs be fixed and be payable within 30 days.

3     Mr. McNevin, in an extensive and carefully prepared brief, deals with the details of the various bills and also urges that in this case, justice calls for reserving the costs of these motions to the trial judge or making costs payable in the cause and not payable until after trial.

4     Rule 57.03(1), amended with the introduction of the new tariff, now provides that:

"on the hearing of a contested motion, unless the court is satisfied that a different order would be more just, the court shall ... fix the costs of the motion and order them to be paid within 30 days ....

I am not satisfied that a different order would be more just. In fact, in my view, both the equities and the practicalities call for fixing and imposing the costs now.

5     If this action should go ahead to a trial, it would be quite some time before it would reach the courtroom. The evidence on the motions indicated that in a few weeks the commercial situation of each of the two companies changed dramatically and it would be reasonable to expect further substantial changes in the future. The principle focus of a trial would be on claims for damages for breach of fiduciary obligations rather than on preventing commercial loss by injunctive relief. While the injunction motions did not, says SM Freight, resolve the action, the motions have certainly resolved a substantial part of the contest between the parties. These two trucking companies are not only competitors with each other - they have also in the past each acted as customers of the other, to their mutual benefit, and those relationships might well be re-built. As was suggested during the motions, the competing corporations, once tempers cool, might be better served by intensive negotiations or interest based mediation than they would be by the trial process. In short, there may well not be a trial, or a trial judge to whom the costs could be referred. In the meantime, there was substantial and intensive work done by counsel for the winning side that should be dealt with. Ram would not, I am sure, have launched these injunction motions without being well aware of the risks involved, the tests that had to be met, and the cost consequences that could follow on failure. I assume it made a business decision to take those risks.

6     I am going to proceed to fix the costs of the various defendants and order them paid within 30 days.

ACCOUNT OF STEVEN BEZAIRE

7     Mr. Bezaire was retained by Ms. Zeller part way through these proceedings. He presented a brief account of time spent totalling 17.9 hours. There is no objection to the time. Obviously he had to be in court during the argument on the interim motion, and for the giving of the judgment and submissions afterwards. He prepared himself very expeditiously for this matter.

8     The objection is on the proposed rate. Mr. Bezaire states that his hourly rate is $200 per hour which is the amount he will be charging her. He had 17.9 hours which will result in a bill to her of $3,580 plus GST of $250.60. He argues that on the particular facts Ms. Zeller should be entitled to costs on the substantial indemnity scale or, since a partial indemnity scale allows for fees of up to $225 per hour for a lawyer with less than 10 years experience (Mr. Bezaire's position) he should be allowed $200 per hour under the partial indemnity scale.

9     I accept Mr. McNevin's argument that partial indemnity means just that and assuming the $200 rate is reasonable to be charging his client, he should receive only two-thirds of that which on his calculation would be $132.

10     However, I see that two-thirds is actually $133.33. Further, I also see the bill is made up of two days plus a half day before the court and 5.8 hours of preparation. Even if Mr. Bezaire was awarded only $1,200 counsel fee for each of the two full days and $600 for the short half day, that plus two-thirds of his usual rate for the 5.8 preparation hours would result in an award higher than the amount claimed. That, together with the fact that Ms. Zeller was not shown to have any direct involvement in the issues between the other parties - she quit Ram rather than take the place of one of the others who had left, and was unemployed, but friendly with the defendants at the time of the motion - leads me to fix her costs in the amount claimed of $3,580 plus GST of $250.60 totalling $3,830.60.

ACCOUNT OF GREGORY CAMPBELL

11     Mr. Campbell acted for Morris, McDermott and Taylor. His bill is based on a hourly rate of $225 and a daily counsel fee of $1,800. Mr. McNevin raises issues in relation to both.

12     Mr. Campbell does not indicate, in his submissions or in the docket filed, the hourly rate which he proposed to charge to his clients. His argument in support of the proposed $225 fee is that the grid provides for up to $300 for lawyers of his experience. As is being pointed out more and more often, the new tariff provides for fees "up to" a certain amount, and the words "partial indemnity" should be taken to mean what they say.

13     Mr. McNevin's contention is that the preparation rate for Mr. Campbell should be $200 per hour. I am prepared to accept that.

14     Mr. McNevin disputes the 1.8 hours charged for attendances with Ms. Zeller, as Mr. Campbell did not ultimately act for her. From the docket, the contacts with Ms. Zeller were before she retained Mr. Bezaire. While undoubtedly she was seeking some information as to her own position, she also had information in relation to Mr. Campbell's three clients and in relation to the plaintiff. I accept that the time billed by Mr. Campbell was time spent for the potential benefit of his clients.

15     I see however that Mr. Campbell dockets an hour of preparation time on May 6, four hours on May 9 and one hour on May 10. These are court days, for which he is charging counsel fees. My understanding has always been that a counsel fee included the time spent in court and the time spent that day, or in a continuing matter the day before, preparing for such attendance. I therefore disallow those six hours of preparation, and allow 39.7 hours for fees other than counsel fees at $200 per hour or $7,940.

16     Mr. McNevin's position on the counsel fee claimed was that this should not exceed the hourly rate approved times the actual hours spent in court. In my view, a counsel fee takes in many more factors than simply time spent, including allowances for the difficulty of the matter, the importance to the client, the skill shown in the courtroom and without limiting the list, the item above referred to - preparation before or after court convenes. I accept the proposal of Mr. Campbell, to charge for three days at $1,800 a day or $5,400. I therefore fix his costs at the total of $13,320 plus GST of $932.40, totalling $14,252.40.

ACCOUNT OF RAYMOND COLAUTTI

17     Mr. Colautti and his firm present an account for $48,087.79. Ram objects to the number of lawyers involved, the time spent and the rates proposed.

18     Mr. Colautti put forth hourly rates of $350 per hour for himself and Mr. Wickett and $225 per hour for Ms. Chatterjee. Mr. Colautti and Mr. Wickett have both been called to the bar for over 20 years. Ms. Chatterjee was called to the bar three months before this motion. The submissions and the docket do not reveal the actual charges made or proposed to be made to the client. The rates proposed are simply the top rates permitted under the partial indemnity scale of the tariff. The tariff, of course, provides for amounts "up to" a certain figure, and I echo the comments of others, including Killeen J. who was on the rules committee when the tariff was adopted, that the top rates were intended for the situation where outstanding counsel achieve a perfect result in an extremely complicated case of huge importance. This dispute between two trucking companies, while of importance to them and the individuals involved, was not, in my view what the drafters of the tariff had in mind when they set the upper limits.

19     The cost grid approach developed from some studies initiated by Justice Chadwick in Ottawa of the actual costs of practicing law in that city, and the actual rates charged by lawyers there. I understand that the debate over this cost grid received a lot of input from Toronto lawyers as to their costs, with other bar associations doing the same. I accept Mr. McNevin's submission that there has been no empirical evidence gathered as to the costs of practice in Windsor and Essex County. Mr. McNevin suggests $250 an hour, which per the two-thirds rule would reflect an actual solicitor-client rate of $375 per hour, which he submits is more in keeping with the realities of practice in this area, for Mr. Colautti and Mr. Wickett. Mr. Colautti does not directly challenge this but simply argues that this type of motion is by its very nature time consuming and demanding so that the rate he proposed is appropriate.

20     I accept Mr. Colautti's reply submission that injunction matters can be time consuming and demanding, often calling for immediate responses. However, in the absence of information on what was proposed to be actually charged to the client, or information on other work which had to be set aside, or for that matter information on why the retainer had to be accepted, I adopt Mr. McNevin's suggested rate of $250 per hour for Mr. Colautti and Mr. Wickett for preparation work, being two-thirds of a suggested appropriate substantial indemnity rate of $375 per hour.

21     Mr. Colautti makes no reply submissions regarding the rate for Ms. Chatterjee. Per the detailed bill of costs, her role in this matter was a supporting one. I am prepared to accept Mr. McNevin's suggestion of $100 per hour as an appropriate partial indemnity rate for her, and in the absence of other information, I am prepared to accept his suggestion that that is consistent with the realities of practice in Windsor and Essex County. I agree with Mr. McNevin that it would be most helpful to the local judiciary to have available some empirical evidence concerning the cost of practice, and the rates actually being charged by lawyers doing litigation work in the Windsor-Essex County area.

22     Mr. Colautti proposes that counsel fees be granted to Mr. Wickett for a full day at $2,100 plus a half day at $1,400, to Mr. Colautti for three full days at $2,100 and a half day at $1,400 and Ms. Chatterjee for two full days at $1,100 plus two half days at $550. The total claim for counsel fees is $14,500.

23     Mr. McNevin raises a number of objections. The first is that Mr. Wickett's actual attendances before the court were for less than two hours on each of the two days on which he appeared. On the second day Mr. Colautti also appeared and he suggests Mr. Wickett be awarded $500 for two hours on the first day, and nothing for the second day.

24     Mr. McNevin suggests Mr. Colautti was not before the court for three full days plus two half days but rather for two full days and two half days in total. He suggests Mr. Colautti be awarded costs for that time at an hourly rate of $250, which in his calculation would total $4,500 as opposed to the $7,700 he is requesting.

25     Mr. McNevin submits that there should be no costs recovery for Ms. Chatterjee as she made no submissions to the motions court and took no active role in the advocacy process. He suggests she was there as a learning experience as she had only been at the bar for three months.

26     Mr. Colautti responds that Mr. Wickett docketed 6.8 hours on April 22nd meaning he would "have to immerse himself in the case both before and after the court hearing" so should be allowed a full day counsel fee. On May 6th, both he and Mr. Colautti were present and while the matter was simply adjourned Mr. Colautti argues it would have been possible for the matter to have gone on at that time and Mr. Wickett had to attend for continuity.

27     Mr. Colautti argues that his own time on May 6th was taken up not only at court but also later for cross-examinations. Additionally, there was preparation time in the morning. He puts it that his understanding of his bill (which frankly is a bit confusing on these points) was that he had docketed nine hours for that day, two of which were allocated to the court attendance. He was clearly in court all day on May 9th and 10th. In his reply he says he was at court for more than two hours when the court reasons were delivered on May 13th but the bill and dockets indicate two hours even.

28     Mr. Colautti responds that the defendant should be compensated for the assistance of Ms. Chatterjee both in preparation and in note taking on the return of the motions.

29     My conclusion is that Mr. Wickett should receive a half day counsel fee for April 22nd. He should also receive a half day counsel fee for May 6th. His attendance was necessary for the reasons given by Mr. Colautti. Mr. Colautti should also receive a half day counsel fee for May 6th, full days counsel fees for May 9th and May 10th and a half day counsel fee for May 13th. I fix the rate for both Mr. Colautti and Mr. Wickett at $2,000 for a full day and $1,200 for a half day.

30     As to Ms. Chatterjee, I note that the new tariff makes no provision whatever for "junior counsel", a position that in the past used to command, if justified, a separate but lower counsel fee. Here, I have no indication of whether the client is actually to be charged anything for Ms. Chatterjee's attendances. On my observation, and Mr. Colautti's admission, her position at the counsel table was essentially that of a note taker. She had only been at the bar for three months and I think there is much to be said for Mr. McNevin's observation that her attendance would be "significantly weighted towards a learning experience". In my view, while providing such learning experiences is indeed commendable, and of great value in the development of the bar, it should be done out of the general overhead of the law firm rather than being charged to either the retaining client or the opposing party as a separate billable item. I decline to award costs for the court attendances of Ms. Chatterjee in this case.

31     On charges for preparation time, Mr. McNevin has a number of objections. Briefly, they relate to a duplication of effort, excess of time, and travel time.

32     I accept Mr. Colautti's response that time travelling to Chatham was billed at one-half and it was reasonably necessary for him to go there. I would take it Mr. Wickett did the same on his attendances in Windsor. Charging one-half for necessary travel is a common and, in my view, acceptable practice.

33     I also accept the explanation that Mr. Wickett was the lawyer dealing with the client and who made the initial response on behalf of the client. His initial involvement and continuing involvement in reviewing affidavits etc. was in my view appropriate and would have resulted in more expeditious preparation than would otherwise have been possible.

34     I do not agree with Mr. McNevin's criticisms of the time spent in preparation on the facts, the law, or the factum and other documents. The result achieved bears evidence to the value of the preparatory work. It has been observed more than once that preparation efforts should not be judged in hindsight, but on the basis of what appeared reasonable to counsel at the time.

35     Mr. McNevin specifically addresses the hours spent by Ms. Chatterjee. He correctly observes that a large portion of her efforts was dedicated to research and the drafting of the factum, etc. and suggests that the hours spent on these efforts should in part be treated as a learning experience.

36     In my view, it may well be true that the person in a law office that is best able to research the law may well be the person who was last in law school, where such research is done daily. If the recent graduate is not able to draft documents as quickly as senior counsel, that differential is recognized in the differential in rates. I am prepared to accept her attendance at cross-examinations with counsel actually carrying out the cross-examination, to keep notes of the proceeding, as this matter was moving very rapidly, so that further preparations could not be held off waiting for transcripts.

37     I am however reducing the hours of preparation by Mr. Colautti by the seven hours spent before the hearing on May 6th, the 2.3 hours spent before May 9th and the 1.5 hours spent before May 10th. I do this because my understanding has always been that the counsel fee awarded for time in court was intended to include waiting time and preparation time specifically devoted to that day's court attendance, either on that day, or in continuing matters in the afternoon and evening of the day before. Other than for those three deductions I would allow the preparation time claimed in full, at the rates previously approved.

38     There is no objection to the disbursements claimed and they don't seem unreasonable in the circumstances. The disbursements totalling $621.86 shall be allowed as claimed.

39     In summary, I fix and allow partial indemnity costs as follows:

Preparation

James D. Wickett

29.3 hours @ $250.00/hr.

$ 7,325.00

Raymond G.	55.9 hours less 10.8 hours	$11,275.00
Colautti	@ $250/hr.

Anita Chatterjee

20.1 hours @ $100.00/hr.

$ 2,010.00

Counsel Fee

James D. Wickett

2 half days @ $1,200

$ 2,400.00

Raymond D.	2 full days @ $2,000 each	$ 6,400.00
Colautti	and 2 half days @ $1,200
	each

TOTAL FEES

$29,410.00

Disbursements

$

621.86

G.S.T.

$ 2,102.23

TOTAL

$32,134.09

40     The foregoing total amount should be due and payable within 30 days.

BROCKENSHIRE J.

cp/e/nc/qlgkw