Executive Summary: Key Legal and Evidentiary Issues

• Dispute arose from alleged negligent construction and negligent misrepresentation in connection with the sale of a residential property to the plaintiff.
• Determination that the plaintiff achieved a mixed result at trial, obtaining damages for some claimed structural issues in the property but not others.
• Consideration of the plaintiff’s August 15, 2023 offer to settle and the application of Rule 49.10 after the plaintiff exceeded this offer at trial.
• Application of s. 131 of the Courts of Justice Act and Rule 57.01 of the Rules of Civil Procedure to determine entitlement to, and the appropriate scale of, costs.
• Attention to the defendants’ asserted impecuniosity when deciding whether prejudgment interest and costs should nevertheless be awarded.
• Allocation of fees between partial and substantial indemnity costs and review of disbursements, including disallowance of the LSO Transaction Levy but allowing postage and courier expenses.

Background and facts

This matter arises out of a real estate transaction between the plaintiff, Joshua Connelly, and the defendants, Francies and Penelope Garito. The plaintiff purchased a residential property from the defendants. Within months of the purchase, he began to encounter difficulties with the property. He commenced an action seeking damages for negligent construction and negligent misrepresentation.
The action proceeded to a three-day trial. In the trial decision, the court awarded damages to the plaintiff in the amount of $41,383.67. The reasons characterize this as a mixed result for the plaintiff, because he was awarded damages with respect to some of the claimed structural issues in the property but not others.
In those reasons, the trial judge invited submissions regarding prejudgment interest and costs from the parties within 30 days of the decision. The costs decision now addresses those issues.
The plaintiff sought prejudgment interest in the amount of $6,233.45 from the commencement of the action, calculated in accordance with the Courts of Justice Act, R.S.O. 1990, c. C.43. He also requested substantial indemnity costs in the amount of $24,293.59, plus disbursements of $2,421.55.
The defendants, who were self-represented, asked that no prejudgment interest or costs be awarded. They submitted that they are impecunious and do not have the ability to pay the judgment, much less any additional amounts ordered by the court.

Legal framework for costs and interest

The court noted that, pursuant to s. 131 of the Courts of Justice Act, an award of costs is within the discretion of the court. The judge referred to the principle that costs must be fair and reasonable in light of the circumstances of the case and quoted authority emphasizing that costs are intended to indemnify a successful party for the expense of resorting to the court to resolve a dispute.
The decision identifies Rule 57.01 of the Rules of Civil Procedure as setting out the factors relevant to the exercise of this discretion. These include the amount claimed and recovered, the complexity and importance of the proceeding, the conduct of the parties, and whether any step was improper, vexatious, or unnecessary. The court also confirmed that, as a general rule, costs are awarded having regard to the principle of indemnity, meaning they are payable to the successful party by the unsuccessful party.
The reasons further note that offers to settle are a relevant consideration. The court referred to Rule 49.10, which provides that, subject to certain conditions, a party who obtains a judgment as or more favourable than their offer to settle is entitled to partial indemnity costs up to the date of the offer and substantial indemnity costs from the date of the offer.

Prejudgment and post-judgment interest

On prejudgment interest, the plaintiff had provided a chart calculating interest from the date of issuance of the claim, using the applicable Courts of Justice Act rates. The judge accepted this calculation and found that prejudgment interest in accordance with the statute was appropriate. Prejudgment interest was therefore awarded in the amount of $6,233.45 up to the date of judgment, November 18, 2025.
The reasons state that, after November 18, 2025, the judgment would be subject to post-judgment interest in accordance with the Courts of Justice Act. The decision does not set out a specific total amount for future post-judgment interest.

Offers to settle and entitlement to costs

In assessing costs, the court considered the plaintiff’s August 15, 2023 offer to settle. In that offer, the plaintiff proposed to resolve the action for $35,000 in damages plus costs fixed in the amount of $10,000. The reasons state that the plaintiff exceeded this offer at trial. The defendants did not make any offer to settle before the trial.
The judge acknowledged the defendants’ financial circumstances but noted that they made no effort to resolve the action short of trial and that their position was ultimately not accepted at trial. The court held that the plaintiff was presumptively entitled to costs pursuant to Rule 49.10 and concluded that there were no circumstances warranting departure from that rule. The reasons explain that the plaintiff conducted the litigation reasonably and made a reasonable offer to settle which reflected his risks at trial. The defendants elected to take a principled position based upon their view of the facts and were unsuccessful, and the court stated that they must now bear the consequences of that decision.

Assessment of the bill of costs

The plaintiff submitted a Bill of Costs in support of his position on costs. The court found that the hours and fees claimed for legal services were, overall, reasonable. However, the Bill of Costs did not distinguish between fees for services prior to the offer to settle and fees for services following the offer.
The decision notes that all pretrial attendances, including the pretrial conference, were conducted prior to service of the offer to settle. The reasons record that counsel Mr. Bragagnolo’s time was exclusively allocated to the trial, while Ms. Pelletier’s time covered all aspects of the file, including the trial.
The judge determined that Mr. Bragagnolo’s fees would be allowed on a substantial indemnity basis and found that his substantial indemnity rate of $450 per hour was reasonable. For Ms. Pelletier, who had claimed 39.1 hours, the court allowed two-thirds of that time (26.1 hours) on a partial indemnity basis and the remaining 13 hours on a substantial indemnity basis. The court found that Ms. Pelletier’s substantial indemnity rate of $337.50 per hour was reasonable and set a partial indemnity rate of $225 per hour.

Disbursements and recoverable items

With respect to disbursements, the decision states that all of the disbursements claimed would be allowed except for the Law Society of Ontario Transaction Levy of $100, which the judge held is not recoverable under the Tariff.
The court expressly allowed postage and Purolator costs, noting that some materials were required to be served on the defendants in this manner because they were self-represented. The recoverable disbursements, inclusive of HST, were fixed in the amount of $2,321.55.

Outcome and total amounts ordered

At the conclusion of the costs decision, the court ordered that the defendants pay the costs of the action to the plaintiff in the total amount of $21,034.36. This sum is broken down as follows: partial indemnity costs of $5,872.50 plus HST of $763.43 to the date of the plaintiff’s offer to settle; substantial indemnity costs of $10,687.50 plus HST of $1,389.38 from the date of the offer to trial; and disbursements of $2,321.55 inclusive of HST.
The reasons also confirm that, following the three-day trial, the plaintiff was awarded damages of $41,383.67 and prejudgment interest of $6,233.45 to November 18, 2025, together with post-judgment interest thereafter in accordance with the Courts of Justice Act. Based on the figures set out in the decision, the specified monetary components in favour of the plaintiff are: damages of $41,383.67, prejudgment interest of $6,233.45, and costs and disbursements of $21,034.36, which together total $68,651.48, plus post-judgment interest as provided by statute. The successful party in this case is the plaintiff, Joshua Connelly. The reasons for decision on costs do not contain any discussion of insurance policy terms or specific contractual policy clauses.