Executive Summary: Key Legal and Evidentiary Issues

• The court previously dismissed the plaintiff’s environmental claim against Canadian Pacific Railway due to expiry of the six-year limitation period.

• Canada Colors and Chemicals Limited (CCCL), a third party, sought costs from the plaintiff despite not being directly sued by them.

• The court ruled that the plaintiff’s conduct effectively necessitated CPR’s third-party claim, justifying a departure from the usual rule against awarding third-party costs against a plaintiff.

• CCCL’s cost request was reduced due to excessive legal fees and unreasonable disbursements, including costs related to non-testifying experts and inflated billing for cost submissions.

• The plaintiff was ordered to pay a portion of CCCL’s costs, with a blend of 50% liability before one defendant discontinued and 100% thereafter.

• CCCL was required to recalculate its cost claim in line with the court’s findings and submit a revised amount by June 27, 2025.

Background and procedural history

This case arises from a long-running environmental dispute. The plaintiff, 863880 Ontario Limited, alleged that land owned by Canadian Pacific Railway (CPR) was contaminated and initiated legal action. During the litigation, the plaintiff amended its claim in 2013 to assert that the contamination originated from a separate site operated historically by Canada Colors and Chemicals Limited (CCCL), referred to as the CCCL Lands. However, the plaintiff did not add CCCL as a defendant at that time. Instead, CPR and its co-defendant Oxford Properties each issued third-party claims against CCCL in 2013, based on the plaintiff’s own pleadings.

In 2021, the plaintiff attempted to formally add CCCL as a defendant, but this effort was rejected on the grounds that the claim was statute-barred under the two-year limitation period. In December 2024, the court granted CPR’s summary judgment motion, dismissing the plaintiff’s action against CPR entirely, also due to limitations. Costs between CPR and the plaintiff were settled, but CCCL pursued a separate claim for costs and asked the court to determine whether it was entitled to recover from the plaintiff or CPR.

Costs decision and analysis

Justice Parghi examined whether it was fair for the plaintiff to bear the costs of CCCL, a third party it had not formally sued. Generally, plaintiffs are not responsible for the legal costs of third parties brought into a case by a defendant. However, the court found that this case warranted an exception. The plaintiff had clearly identified CCCL as a central figure in the alleged contamination but failed to name it as a defendant in a timely manner. That failure effectively forced CPR to bring CCCL into the litigation through a third-party claim. The court concluded that this conduct made CCCL a necessary party, and CPR had no real alternative but to involve it.

Because the plaintiff’s own actions necessitated CCCL’s involvement, the court held that fairness justified ordering the plaintiff to pay CCCL’s costs. However, the court also found that the amount CCCL was seeking—over $810,000 on a partial indemnity basis—was excessive. CCCL’s legal fees were nearly equivalent to those of CPR, even though CCCL had been in the case for only 12 years compared to CPR’s 20, and had undertaken far fewer steps.

Cost allocation and required adjustments

The court reviewed CCCL’s billing records and concluded that too many senior partners had billed time intensively throughout the litigation, driving costs unreasonably high. Additional concerns included a $108,000 disbursement for an expert who never testified, and inflated charges for preparing CCCL’s bill of costs. Justice Parghi reduced or denied these amounts, finding them outside the scope of what the plaintiff should reasonably be expected to pay.

To fairly allocate the costs, the court adopted a blended approach. The plaintiff was held responsible for 50% of CCCL’s legal fees incurred before Oxford Properties discontinued its third-party claim in February 2024, and 100% of the fees incurred after that point, when CPR was the sole third-party claimant. The same apportionment was to be applied to disbursements.

Next steps and conclusion

Rather than fix the costs outright, the court ordered CCCL to revise its cost breakdown based on the court’s directions, including the 20% discount on fees and the adjusted treatment of certain disbursements. CCCL was directed to recalculate and circulate the revised cost figures by June 27, 2025. Once agreed upon by the parties, a final costs order would be issued.

This ruling highlights how plaintiffs can, through their own litigation conduct, become liable for third-party costs even if they never formally named that party. It also reinforces the court’s insistence on cost submissions being reasonable, proportionate, and grounded in fairness.