



COURT OF APPEAL FOR ONTARIO

CITATION: Benarroch v. Fred Tayar & Associates P.C., 2019
    ONCA 228

DATE: 20190322

DOCKET: C65599

Rouleau, Trotter and Zarnett JJ.A.

BETWEEN

Georges Benarroch, Credifinance Capital Corp.,
    and Donabo Inc.

Applicants (Appellants)

and

Fred Tayar & Associates P.C., Fred Tayar,
    Colby Linthwaite

Respondents (Respondents)

Eli Karp, for the appellants

Colby Linthwaite, acting in
    person and for the respondents Fred Tayar & Associates P.C. and Fred Tayar

Heard: February 22, 2019

On appeal from the costs order of Justice Markus Koehnen
    of the Superior Court of Justice, dated March 3, 2018.

Rouleau J.A.:

OVERVIEW

[1]

The appellants appeal, with leave, from a costs award of $60,583.05, awarded
    on a partial indemnity basis. The award was made against them following the
    dismissal of their application to assess the accounts of the respondents (their
    former lawyers) after they had been paid and over a year after some of the
    accounts were issued.

[2]

The appellants maintain that the application judges award is excessive
    because it did not take into account the fact that the respondents were
    representing themselves on the application. Had the application judge properly
    applied this courts decision in
Fong v. Chan
(1999), 46 O.R. (3d) 330
    (C.A.), he would have awarded a lower amount for costs.

[3]

For the reasons that follow, I would allow the appeal. Although I agree
    with the appellants that the application judge misapplied
Fong
, I
    disagree that the award should be nominal. As I will explain further,
Fong
provides that, in cases such as this one, a moderate or reasonable
    allowance should be made to account for the loss of time related to the preparation
    and presentation of the case.

FACTS

[4]

On February 7, 2018, the application judge dismissed the appellants
    application to assess the accounts of the respondents. Following the dismissal
    of the application, submissions on costs were sought and received.

[5]

The respondents prepared a costs outline in which they claimed, on a
    partial indemnity basis, $60,583.05 in fees, disbursements, and HST.

[6]

In their written submissions, the appellants argued that, absent
    evidence of opportunity costs due to the time they spent responding to the
    application, the respondents could not recover any amount as costs.

[7]

The respondents then filed reply submissions in which they included the
    affidavits of two lawyers who had been involved in the response to the
    application. The lawyers deposed that they had to turn away remunerative work
    because of the time they spent on their defence to the application.

[8]

After receiving the respondents affidavits, the appellants filed a
    sur-reply, in which they argued that the respondents had not proved that they
    had incurred opportunity costs, as the affidavits vague statements were
    insufficient. They claimed that the respondents had not demonstrated that the
    work required to respond to the application could not have been carried out
    during evenings and weekends. Had this been the case, there would have been no
    reduction in the hours available to serve clients during the business days and
    clients would not have been turned away. The appellants also challenged the
    costs sought for tasks that would have been performed by a client. They did not,
    however, seek to cross-examine the lawyers on their affidavits on either ground.

[9]

During their submissions to the application judge, the appellants
    maintained that if costs were to be awarded, they should total no more than
    $5,860.

[10]

In
    a response to the sur-reply, the respondents claimed solicitor-client privilege
    to explain why they could not give additional details on the opportunity costs
    they incurred.

THE COSTS DECISION

[11]

The
    application judge disagreed with the appellants. He accepted that the
    respondents had lost the opportunity to bill other clients because of the time
    they spent responding to the application. He rejected a never ending forensic
    inquiry into the time the lawyers could have spent working on evenings and
    weekends: at para. 10. He also found that partial indemnity rates between $300
    and $350 per hour were moderate or reasonable, per
Fong
, given the
    lawyers experience.

[12]

The
    application judge further rejected the submission that some of the time claimed
    in the bill of costs should be excluded because it was for work that would
    normally be carried out by a client. The application judge found that all of
    the work devoted to the file was appropriately carried out by a lawyer. He went
    on to add, however, that if some of the time should have been discounted
    because it was in fact time that would normally be expended by a client rather by
    a lawyer, he would nonetheless make the same award on the basis that substantial
    indemnity costs would normally apply in the circumstances. The justification
    for a higher scale of costs, in his view, was the fact that the application was
    entirely without foundation: at para. 20.

ISSUES

[13]

The
    appellants argue that the application judge erred in:

(a)

accepting that there had been any lost opportunity costs; and

(b)

his interpretation of
Fong
.


As a result, the appellants maintain that the costs
    award ought to be set aside or reduced to a nominal amount of $5,000.

STANDARD OF REVIEW

[14]

A
    costs award is entitled to deference, as the trial judge is best placed to make
    this determination. An appellate court can only set such an award aside if the
    trial judge has made an error in principle or if the costs award is plainly
    wrong:
Hamilton v. Open Window Bakery Ltd.
, 2004 SCC 9, [2004] 1 S.C.R.
    303, at para. 27.

[15]

As
    I will explain below, the application judge erred in principle when he treated
    the respondents as counsel rather than as self-represented litigants.

ANALYSIS

(a)

Did the application judge err in accepting that there were lost
    opportunity costs?

[16]

The
    appellants maintain that the application judge should not have allowed the
    respondents to file reply affidavits in which they claimed to have suffered lost
    opportunity costs. Further, as in their sur-reply, they submit that even if
    received in evidence, the affidavits did not establish lost opportunity costs.
    According to the appellants, the respondents could have done much of the work to
    respond to the application during the evenings or weekends. Had they done so, they
    would not have had to turn away clients, as the billable time available during
    business hours would not have been reduced.

[17]

I
    would dismiss this ground of appeal. It was open to the application judge to
    accept the reply evidence tendered by the respondents. The appellants suffered
    no prejudice, as they were given the opportunity to cross-examine on the
    affidavits and to make submissions in response.

[18]

I
    also see no basis to interfere with the application judges finding that the
    respondents had suffered lost opportunity costs.
Fong
and later cases,
    such as
Mustang Investigations v. Ironside
, 2010 ONSC 3444, 103 O.R.
    (3d) 633 (Div. Ct.), stipulate that self-represented litigants must show that
    they incurred an opportunity cost by forgoing remunerative activity. In doing
    so, they do not suggest that claims for lost opportunity costs should become
    complex hearings where the self-represented claimant is called upon to account
    for every minute of the day and prove every penny of revenue that was lost. On
    the record before him, it was open to the application judge to find that the
    respondents had in fact turned away business and suffered a loss of revenue as
    a result.

(b)

Did the application judge err in his interpretation of
Fong
?

[19]

In
Fong
, this court explained that self-represented litigants do not have
    an automatic right to recover costs. The trial judge retains a discretion to
    make the appropriate costs award, including denial of costs: at para. 25. The
    court went on to hold as follows:

[S]elf-represented litigants, be
    they legally trained or not, are not entitled to costs calculated on the same
    basis as those of the litigant who retains counsel.  [A]ll litigants suffer a
    loss of time through their involvement in the legal process. The
    self-represented litigant should not recover costs for the time and effort that
    any litigant would have to devote to the case. Costs should only be awarded to
    those lay litigants who can demonstrate that they devoted time and effort to do
    the work ordinarily done by a lawyer retained to conduct the litigation and
    that, as a result, they incurred an opportunity cost by forgoing remunerative
    activity: at para. 26.

[20]

In
    its discussion of the appropriate award that should be made in these
    circumstances, the court stated:

[A] self-represented lay litigant
    should receive only a moderate or reasonable allowance for the loss of time
    devoted to preparing and presenting the case. This excludes routine awards on a
    per diem basis to litigants who would ordinarily be in attendance at court in
    any event. The trial judge is particularly well-placed to assess the
    appropriate allowance, if any, for a self-represented litigant:
Fong
, at
    para. 26.

[21]

The
    appellants argue that, since
Fong
, the case law has evolved such that only
    a nominal amount of costs is to be awarded to a self-represented litigant, even
    where lost opportunity costs have been proven. In that regard, the appellants rely
    on the statement in
Mustang Investigations
that, [s]imply stated, no
    proof of opportunity costs, no nominal costs available: at para. 27; see also
Tiago
    v. Meisels
, 2012 ONSC 5090, at para. 9, leave to appeal refused, 2012 ONSC
    6829 (Div. Ct.). The appellants submit that the rates between $300 and $350 per
    hour awarded by the application judge are anything but nominal.

[22]

In
    the alternative, the appellants argue that, even if self-represented litigants are
    entitled to a moderate or reasonable amount for lost opportunity costs
    rather than a nominal amount, the application judges award of $60,583.05 does
    not qualify as moderate or reasonable. That figure represents reimbursement for
    all of the time spent by the lawyers, at rates as high as $350 per hour. The
    appellants submit that what is moderate or reasonable should be assessed in
    light of costs that could be awarded to self-represented lay litigants in
    similar circumstances.

[23]

For
    their part, the respondents maintain that all the time included in the bill of
    costs was spent working on the application as lawyers and that the rates
    claimed are appropriate partial indemnity rates. In the respondents submission,
    partial indemnity rates are, by definition, reasonable.

[24]

In
    my view, the application judge erred in his interpretation and application of
    this courts decision in
Fong
. His award thus cannot stand.

[25]

As
Fong
makes clear
,
    self-represented litigants, including lawyers, are not entitled to costs calculated
    on the same basis as those of the litigant who retains counsel: at para. 26. By
    awarding the respondents their costs on a partial indemnity basis, without making
    any adjustment for time that the respondents would have had to devote as
    clients if they had hired external counsel, the application judge effectively
    treated the respondents as counsel rather than as self-represented litigants. This
    approach constituted an error for several reasons.

[26]

A
    basic principle in civil litigation is that successful litigants are normally
    awarded costs to indemnify them for the expenses they sustained: see
British
    Columbia (Minister of Forests) v. Okanagan Indian Band
, 2003 SCC 71,
    [2003] 3 S.C.R. 371, at para. 21. Litigants receive no compensation for the
    time that they have devoted to the case or to the preparation of materials
    necessary to instruct the solicitor retained for the file. Similarly, litigants
    are not compensated for the time they may spend attending the proceedings.

[27]

Fong
explained that, where a litigant is self-represented, some compensation
    may be awarded for lost opportunity costs, even in the absence of payments made
    to a lawyer. That compensation, however, is not for the time and effort that
    any litigant would have devoted to the case. It is only for the work done by
    the self-represented litigant over and above the normal involvement of a client,
    and provided it concerns work that would ordinarily be accomplished by a lawyer.
    The self-represented litigant must also show that an opportunity cost was
    incurred because some remunerative activity was forgone.

[28]

Where
    the self-represented litigant is a lawyer, he or she will not recover anything
    for the time spent on the matter that would necessarily have been devoted to the
    case had outside counsel been retained. There will likely be no clear way to
    differentiate between time devoted by the lawyer that would have been spent on
    the matter as client and time devoted in lieu of retaining an outside lawyer
    to deal with the matter. Some time is clearly either client time or lawyer
    time, but much of the time will be a blend of both.

[29]

For
    example, in the present case, the respondents devoted considerable time to the reconstruction
    of the complete file, as the original file for which the appellants sought an
    assessment was no longer available. This function would normally be undertaken
    by the client. Indeed, the client will typically assemble the materials related
    to the claim and deliver the file to the lawyer.

[30]

At
    the other end of the spectrum, the time devoted to a cross-examination on an
    affidavit filed by the opposing party is a function usually carried out by the retained
    lawyer, with limited involvement from the client.

[31]

Other
    categories of work are more difficult to label, as they have elements of both
    client involvement and lawyer work. One such category is the drafting of
    affidavits. This task typically involves time spent by the client providing the
    factual information that will go into the affidavit. However, it also involves the
    lawyer drafting and reviewing the affidavit, as well as filing it in court. Where
    the lawyer is self-represented, it will be impossible to determine with
    mathematical precision how the time spent by the lawyer is to be allocated as
    between his or her role as client and lawyer. This difficulty is one of the
    reasons why, in
Fong
, this court suggested that a trial judge, or in
    this case the application judge, is better placed than an assessment officer to
    set the amount of costs for a self-represented party: at para. 26. It also
    explains the courts
use
of an
    allowance rather than an award based on an hourly rate.

[32]

A
    further caution made in
Fong
is that an award of lost opportunity
    costs should be only a moderate or reasonable allowance for the loss devoted
    to preparing and presenting the case: at para. 26. This signals that the court
    should avoid a straight application of a lawyers hourly rate. Regular hourly
    rates are of course relevant, as would be the daily rate of a self-represented
    labourer or the lost profits of a self-employed business person. These amounts
    should be taken into account in the analysis of a proper costs award, but they
    cannot be recovered as they would if a lawyer had been hired as external counsel.

[33]

In
    summary, as explained in
Fong
, a trial or application judge retains
    the discretion to award or not to award costs. Where the judge determines that
    an award is warranted and, based on the record, the judge is satisfied that lost
    opportunity costs have been suffered because the self-represented party has
    forgone remunerative activity, the judge is either to assess and fix moderate
    or reasonable costs, or to provide clear guidelines to an assessment officer
    as to the manner in which costs are to be assessed.

[34]

Where,
    as here, the self-represented party is a lawyer, the lawyer will be treated in
    substantially the same way as any other self-represented litigant. In other
    words, the self-represented lawyer will receive no compensation for the time
    that the lawyer would have devoted to the matter as a client if external
    counsel had been retained. In addition, the lawyer will not necessarily recover
    his or her regular or even partial indemnity rate for all of the time devoted
    to the work ordinarily done by a lawyer retained to conduct the litigation. He
    or she will only get an allowance for the lost opportunity to devote the time
    to remunerative activities.

[35]

As
    is clear from the preceding discussion, although I have concluded that the
    award cannot stand, I disagree with the appellants submission that only
    nominal costs should be awarded. The case law cited by the appellants, which refers
    to nominal costs, does not signal a change in the law since
Fong
. Where
    there is little evidence of lost opportunity costs, any award the court may
    decide to make will likely be in a nominal amount. However, where the self-represented
    party has demonstrated that the lost opportunity costs were significant, as
    here, an award for an amount greater than mere nominal costs is justified.

REMEDY

[36]

As
    I have determined that the application judges award of costs cannot stand, a
    new amount for costs needs to be determined. In my view, it is preferable that
    this court set the amount rather than returning the matter for a new hearing.

[37]

Having
    reviewed the materials filed, I am of the view that a significant amount of the
    time being claimed was for the participation of the respondents as parties to
    the proceeding. In addition, although the accounts that the appellants were
    seeking to have assessed involved a significant amount, the issues involved in
    the proceeding were relatively straightforward. Taking this into account, and
    weighing it against the fact that considerable time was in fact devoted by the
    self-represented lawyers on this matter, I consider that a costs award of $20,000,
    all-inclusive, is appropriate in the circumstances.

DISPOSITION

[38]

As
    a result, I would set aside the application judges costs award and substitute
    a costs award to the respondents in the amount of $20,000, inclusive of
    disbursements and HST. The appellants are entitled to their costs of the appeal,
    including the costs for the leave application. Although the parties agreed to a
    different amount, in my view, given that the appellants were not entirely
    successful, an appropriate award of costs to the appellants is $10,000,
    inclusive of disbursements and HST.

Paul
    Rouleau J.A.

I agree G.T. Trotter
    J.A.

I agree B. Zarnett
    J.A.

Released: March 22, 2019

PR


