Executive Summary: Key Legal and Evidentiary Issues

• The decision addresses costs following a bifurcated trial arising from the defendants' early closure of retail operations at the Rainbow Value Centre, allegedly in breach of a lease agreement.
• Damages of $580,600.63 plus prejudgment interest of $352,973.37 had previously been awarded to the plaintiffs, with the interest fixed by agreement of the parties.
• Rule 49.10 of the Rules of Civil Procedure was engaged because the plaintiffs made an offer to settle for $950,000 (inclusive of damages, interest, and costs) that they exceeded at trial, while the defendants made no offer.
• HBC's insolvency counsel, appearing for the defendants following Zellers Inc.'s amalgamation with Hudson's Bay Company, argued that HBC is stayed from making any payment under a creditor-protection order dated March 21, 2025, and took no position on the quantum of costs.
• The Court fixed costs regardless of the stay, at the plaintiffs' request, to crystallize their claim against the defendants.
• A courier disbursement of $1,914.27 to "return file to client" was disallowed as not an appropriate assessable disbursement; the remaining fees and disbursements were found reasonable.

Facts of the case

This action arose from a lease agreement between the plaintiffs, Vista Sudbury Hotels Inc. (carrying on business as Rainbow Value Centre) and Vista Sudbury Complex Inc., and the defendants, The Oshawa Group Limited, Oshawa Holdings Limited, and Zellers Inc. On May 15, 2004, the defendants closed their retail operations in the Rainbow Value Centre. The plaintiffs commenced proceedings alleging that this early closure violated the lease agreement and caused them damages. The litigation was lengthy, and the trial was bifurcated: the liability phase was conducted over three days in 2017, and the liability decision was subsequently overturned on appeal in favour of the plaintiffs, with costs reserved to the judge hearing the damages phase. The damages phase was conducted over seven days in 2023 and 2024, in addition to written arguments. Following the damages phase, Cullin J. awarded the plaintiffs damages of $580,600.63, plus prejudgment interest of $352,973.37, the interest having been fixed pursuant to an agreement between the parties. The present decision, heard in writing, deals solely with costs.

Contractual clauses and rules at issue

Although the underlying dispute concerned an alleged breach of the lease agreement through the early closure of the defendants' retail operations, this costs decision does not reproduce or quote the specific lease clauses at issue. The provisions central to this decision are instead procedural. Section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 places the award of costs solely within the Court's discretion. Rule 57.01 of the Rules of Civil Procedure enumerates the factors guiding that discretion, including the amount claimed and recovered, the complexity of the proceeding, the importance of the issues, the conduct of the parties, and whether any step was improper, vexatious, or unnecessary. Rule 49.10 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 thereafter. Relying on that rule, the plaintiffs claimed partial indemnity costs to February 7, 2017, and substantial indemnity costs thereafter, based on an offer to settle for $950,000 inclusive of damages, interest, and costs, seeking a total of $908,618.60 inclusive of fees, disbursements, and taxes.

The court's reasoning and analysis

Cullin J. began from the principle that a costs award must be fair and reasonable in the individual circumstances of the case, citing Boucher v. Public Accountants Council (Ontario), 2004 CanLII 4579, and that costs are intended to indemnify a successful party for the expense of being compelled to seek the Court's assistance, citing British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71. It was clear that the plaintiffs had made an offer to settle which they exceeded at trial, and there was no evidence of any offer by the defendants, so the Court found it appropriate to award costs having regard to Rule 49.10. A complicating factor was the defendants' position: Zellers Inc. had amalgamated with Hudson's Bay Company ("HBC") in or around 2014, and HBC was granted protection from its creditors by order of the Ontario Superior Court of Justice (Commercial List) dated March 21, 2025. HBC's insolvency counsel submitted that HBC is stayed from making any payment to the plaintiffs, including costs, and took no position on the quantum or appropriateness of the costs claimed, given their limited access to the litigation file. The plaintiffs asked the Court to fix costs regardless, to crystallize their claim against the defendants, and the Court proceeded to do so. Reviewing the plaintiffs' Bill of Costs, which clearly distinguished between fees before and after the offer to settle, the Court found the hours and fees claimed to be reasonable overall. On disbursements, the Court disallowed a courier charge of $1,914.27 to "return file to client" as not an appropriate assessable disbursement, but was otherwise satisfied that the disbursements were reasonable, particularly given the extent of the documentary record and the travel from Toronto to Sudbury for the bifurcated hearings.

Ruling and outcome

The decision concluded in favour of the plaintiffs, who were the successful party both in the underlying action and on this costs motion. Cullin J. ordered the defendants to pay the plaintiffs costs totalling $906,704.33, allocated as $54,745.90 (inclusive of HST) for partial indemnity costs to the date of the plaintiffs' offer to settle, $711,867.09 (inclusive of HST) for substantial indemnity costs from the date of the offer, and $140,091.34 (inclusive of HST) for disbursements. This costs award stands alongside the earlier judgment of $580,600.63 in damages plus $352,973.37 in prejudgment interest, and was fixed notwithstanding the stay arising from HBC's creditor-protection proceedings, in order to crystallize the plaintiffs' claim against the defendants.