After a trial comes to a close and a court finds in favour of one party, one of the next steps in litigation is determining costs. A recent case before the Ontario Superior Court of Justice explains how costs work in construction lien actions where one party is self-represented.
The plaintiff was successful at trial
This case comes after the conclusion of a construction lien action. The facts of the dispute are not relevant to this article. What is important is that the action ended in favour of the plaintiff. The plaintiff was found to be entitled to a lien of $8,277.97, including HST. He was also awarded a judgment against the defendants in that same amount with pre-judgment interest. After making written submissions, the parties returned to court to conclude the dispute as it relates to costs.
The parties each demanded costs for the action from each other
The plaintiff’s bill of costs laid out $69,040.39 in partial indemnity costs, including disbursements. The plaintiff added $20,613.10 in interest charges at a rate of 6% per annum, which compounds monthly. After deducting interest, the plaintiff initially claimed costs should be awarded to him in the amount of $30,000. However, after some success discussing with the defendants, the plaintiff was willing to reduce this by $10,000 for a net costs award of $20,000.
The defendants, in turn, sought their own costs in the action. Starting from their offer to settle made in pre-trial proceedings to the end of the trial, the defendants claimed $62,328.37 on a partial indemnity basis. They also argued that the plaintiff was not entitled to any costs as he did not meet the requirements for self-represented litigants. They also submit he was not entitled to costs because recovery allegedly fell within Small Claims Court jurisdiction.
The court must follow specific rules when deciding costs in a construction lien action
Proceedings involving construction liens in Ontario are governed by specific legislation. Formerly, this was the Construction Lien Act, but as of the action in 2018, the Construction Act is the current operative law. As this matter took place before the amendments, the former Construction Lien Act applied. The reason being that it is not possible to apply laws retroactively. Instead, the law at the time the action-causing conduct occurs is most relevant.
Section 86 of the Construction Lien Act gives the court broad discretion when deciding costs. Under that section, it notes that if the least expensive course of action was not pursued, parties could not receive costs over whatever that option may have been. The law at the time also required that the amount and nature of the lien be assessed in determining costs. Where there is a conflict between this law and the Courts of Justice Act or the Rules of Civil Procedure, the Construction Lien Act prevails.
Finally, in deciding costs, the court should not award costs according to the exact measure of actual costs. Instead, it must be “a fair and reasonable amount that the unsuccessful parties should pay.”
The plaintiff met the conditions for self-represented litigants to receive costs
In this case, the defendants had argued that, because the plaintiff was self-represented, he was not entitled to the same benefit of costs. Ontario jurisprudence has set out two preconditions for courts to award costs to self-represented litigants:
- The self-represented litigant must have taken the time and effort to do the work that is usually done by a lawyer conducting the litigation, and
- By reason of that work, they must have missed out on potential gains by opting not to retain a lawyer.
The purpose of the first precondition is to ensure that litigants aren’t reaping benefits for time and effort that they would have devoted to the case regardless of having legal representation. In this action, the defendants claimed that the first precondition was not met as, to them, he would have incurred those costs if represented. They also claimed that his role in the trial would not have looked different.
The court disagreed with the defendant’s position. One reason was that the plaintiff did not endure the entire litigation without representation. He previously had a lawyer who helped him “to preserve and perfect his lien, close pleadings, and obtain a judgment of reference.” Next, the court found that the time required to prepare for trial management conferences, discoveries, the settlement conference, and the trial did require preparation beyond the ordinary represented litigant. Finally, as a sole proprietor, the plaintiff did miss out on potential gains by not hiring a lawyer (or, in the words of the court, “incurred an opportunity cost by foregoing remunerative activity”). The plaintiff had to give up two projects as a result of devoting time to the litigation.
The former Construction Lien Act did not permit actions to be transferred to Small Claims Court on a motion
The defendants finally argued that the plaintiff should have brought this action to the Small Claims Court as it falls within that court’s monetary jurisdiction. However, under the Construction Lien Act, this was not available to the plaintiff. The defendants relied on the new law, not the law that was operative at the time of the dispute. He did follow the proper procedure.
Similarly, the defendants had argued that the Rules of Civil Procedure applied in a way that would allow the court to bar the plaintiff from reaping costs. However, as stated above, this conflicts with the former Construction Lien Act (although it notably does not conflict with the current Construction Act). In this instance, the Construction Lien Act must prevail. As the court noted, “lien actions cannot be commenced in the Small Claims Court.”
The plaintiff successfully recouped his costs
With the arguments of the parties dealt with, the court then considered the amounts claimed by the parties. The plaintiff sued for $67,794.85 and was only able to recover $8,277.97. The defendants claimed $112,432.60 at trial but were entirely unsuccessful.
The court found that the case itself was of average complexity. Neither side was caused by any delay or extended duration in the trial. The parties also tried to cooperate through the process that involved remote hearings. Based on what was set out in the defendants’ bill of costs, the plaintiff’s claim was deemed to be within the defendants’ reasonable expectations. By contrast, the court held that the defendant’s costs were disproportionate and not reasonable for the case at bar.
The plaintiff’s claim for costs was clearly based on legal fees, hiring a bookkeeper, and his time as a self-represented litigant. The court only took issue with and denied his claim to costs to pay the bookkeeper and with some of the hours he claimed to have worked on the case.
In the end, the court again found his favour and awarded the plaintiff $15,000 on a partial indemnity basis plus disbursements of $4,374.21. In total, the plaintiff would have been awarded $19,374.21. However, because he refused an offer to settle of $20,000 pre-trial, this figure was reduced. Instead, his reward was reduced to $9,000, which included HST and disbursements.
Contact The Construction Lawyers at Tierney Stauffer LLP in Ottawa, Arnprior, Cornwall, Kingston, and North Bay for Advice on Construction Liens
It’s important when going to trial that you are prepared to consider all offers put forward by the other party. If not, it may cost you down the line. To help understand the potential consequences flowing from these decisions, it is helpful to hire legal representation to help with your dispute.The skilled construction lawyers at Tierney Stauffer LLP provide practical solutions to construction disputes that protect our client’s financial interests. We represent clients at all levels of the construction pyramid in all legal forums, including litigation and alternative dispute resolution. For advice on your construction project, including issues relating to liens and construction contracts, contact us online or by phone at 1-888-799-8057.