Executive Summary: Key Legal and Evidentiary Issues

• Dispute over contractual interpretation of the end date of a long-term services agreement for telephones, televisions, and terminals at The Ottawa Hospital’s sites, including whether the contract expired in March 2020 or January 2031.
• Assessment of whether the hospital complied with notice requirements under the contract so that the agreement in fact ended in March 2020.
• Application of the presumption that a fully successful party is entitled to its costs, and whether any conduct justified denying or reducing that entitlement.
• Determination of whether the respondent’s litigation and negotiation conduct (flip-flopping positions and weak settlement engagement) warranted substantial indemnity, rather than partial indemnity, costs.
• Consideration of the impact of the respondent’s bankruptcy and the statutory stay under the Bankruptcy and Insolvency Act on the court’s jurisdiction to fix and award costs.
• Evaluation of the reasonableness of the hours, rates, disbursements, and scale of costs claimed, in light of the monetary stakes and the complexity of the contractual and election issues.

Background and contractual relationship

The dispute arises from a long-term commercial contract between The Ottawa Hospital (the applicant) and Hôpitel Inc. (the respondent) for the supply and management of telephones, televisions, and terminals for inpatient use across multiple hospital sites. The contract generated significant annual revenue for Hôpitel and corresponding commission payments to the hospital, with the monetary value running to six figures each year and seven figures over multiple years, depending on the duration of the relationship. At the centre of the controversy was the proper end date of the contract. The hospital consistently maintained, from at least January 2013 onward, that the agreement was to conclude in March 2020. Hôpitel, however, initially asserted that the contract extended until January 2031. The length of the term had major financial implications, both for continued service revenue for Hôpitel and for the hospital’s ongoing commission stream and control over in-room patient services.

Procedural history and earlier merits decision

The parties brought the dispute before the Ontario Superior Court of Justice by way of an application. The central question in the earlier merits decision (The Ottawa Hospital v. Hôpitel Inc., 2025 ONSC 4364) was whether the contract ended in March 2020, as the hospital argued, or whether it instead continued until January 2031, as Hôpitel argued. In that earlier decision, the court accepted the hospital’s position and held that the contract term did indeed end in March 2020. The court also concluded that The Ottawa Hospital had complied with the contractual notice provisions required to bring the agreement to an end, so the contract in fact terminated at that time. As a result, the hospital was entirely successful on the application. The court expressly recognized that, under the ordinary costs presumption, a fully successful party is presumptively entitled to its costs, and it invited the parties to attempt to resolve the issue of costs, failing which they were to submit written costs materials on a set timetable. When the parties were unable to resolve costs, The Ottawa Hospital filed detailed costs submissions and updated its costs outline to capture all work through the multi-day application hearing. Hôpitel did not file any responding costs submissions, despite having originally filed a costs outline at the outset of the hearing.

The respondent’s shifting positions and settlement conduct

An important factual and evidentiary feature for the costs analysis was Hôpitel’s pattern of inconsistent positions on the contract’s end date. While the hospital never deviated from its view that the contract ended in March 2020, Hôpitel changed course more than once. It first took the strong position that the contract expired only in January 2031. Later, in a different context where it was seeking reimbursement of what it characterized as an overpayment of commissions to the hospital, Hôpitel itself relied on a March 2020 end date to support its claim. Once the application was commenced, it returned to its original stance that the contract did not end until January 2031. The judge characterized this as “flip-flopping” and considered it a deliberate strategic approach. Although this inconsistent positioning did not prevent Hôpitel from continuing to provide services to the hospital in the interim, it left the hospital with no practical choice but to resort to litigation to secure a definitive ruling on when the contractual relationship ended. The court emphasized that such tactics—shifting positions to suit immediate financial objectives—are not strategies that should be encouraged in commercial dealings, particularly when the counterparty is a taxpayer-funded public healthcare institution. The court also reviewed Hôpitel’s approach to settlement. The hospital pointed to a failure by Hôpitel to meaningfully engage in settlement negotiations, both in correspondence and in relation to settlement meetings. Examples included a 2015 buyout proposal that the judge found unrealistic, unreasonable, and unsupported, and later efforts by Hôpitel to re-negotiate a long-term relationship when it was already clear that the parties’ relationship had broken down beyond repair. Taken together, these elements of conduct were found to have prolonged the litigation and undermined any realistic prospects of settlement.

Impact of the respondent’s bankruptcy and the statutory stay

After the 2025 merits decision was released, Hôpitel made an assignment in bankruptcy in mid-August 2025. This procedural development raised the question whether the automatic stay of proceedings under section 69(1) of the Bankruptcy and Insolvency Act prevented the court from going on to fix and award costs in favour of The Ottawa Hospital. In its costs submissions, the hospital relied on the reasoning in Nouri v. Negravi, where the court had concluded that the stay did not bar the court from determining and awarding costs that flowed from proceedings already decided on the merits. Madam Justice Corthorn agreed with that analysis and applied it to the present case. She held that the court was not precluded from addressing the outstanding issue of costs, despite the bankruptcy, and could therefore proceed to consider entitlement, scale, and quantum of costs arising from the previously adjudicated contract dispute.

Entitlement to costs and selection of the costs scale

The court began from the established principle that a party who is entirely successful in a proceeding is presumptively entitled to its costs. There was no evidence of any misconduct or other factor on the part of The Ottawa Hospital that would displace this presumption, so entitlement to some award of costs in its favour was straightforward. The more contentious question was the appropriate scale of costs: whether costs should be awarded on the usual partial indemnity basis, or on the more generous substantial indemnity scale. In assessing whether elevated (substantial indemnity) costs were justified, the court referred to appellate authority emphasizing that such awards are reserved for circumstances involving “reprehensible conduct” by the paying party, apart from situations where specific rules—such as certain offer-to-settle provisions—dictate an elevated scale. The judge then tied this standard to the record of Hôpitel’s behaviour. She noted that litigation strategies that complicate and prolong the proceeding, such as advancing inconsistent positions or taking unreasonable stances that block settlement, are precisely the kinds of conduct that should not be rewarded when costs are fixed. Here, Hôpitel’s repeated reversal of its position on the contract end date, coupled with its failure to engage constructively in settlement discussions and its unrealistic buyout proposal, were treated as serious litigation conduct concerns. These factors supported an award of costs on the substantial indemnity scale in favour of the hospital.

Fixing the amount of costs

The Ottawa Hospital sought substantial indemnity costs in the amount of $99,853.75, broken down into fees, HST, and modest disbursements. The court had before it three costs outlines: original outlines from both parties filed at the outset of the hearing, and an updated outline from the hospital covering all work through the conclusion of the multi-day application. Hôpitel chose not to update its own outline or to respond to the hospital’s detailed cost figures. The judge carefully reviewed the hospital’s updated outline and the applicable factors under Rule 57.01(1) of the Rules of Civil Procedure. She found that, taken together with the original outlines, the materials showed Hôpitel could reasonably have expected to pay costs at approximately the level now claimed. She also took into account the high monetary stakes of the contract—six-figure annual amounts and seven-figure sums over time—and the complexity of the legal issues, which involved detailed contractual interpretation and the doctrine of election within a rich factual matrix. In examining the hourly rates and time entries, the court noted that the matter was handled by experienced commercial litigators, including two senior counsel and a mid-level counsel, and that the rates were reasonable for this type of case. The recorded time covered preparation and attendances for multiple hearing dates: an initial return in October 2023, a resumed hearing in April 2024 after a six-month delay that required substantial re-preparation, and a further day in August 2024 when the application was completed. The judge found that, given these adjournments and the complexity of the case, the hours docketed were reasonable. Disbursements were minimal, consisting largely of a court filing fee and minor courier costs, and were also found to be reasonable.

Post-hearing work on costs and final outcome

The court treated work on costs submissions and the draft order as a distinct post-hearing component, separate from the costs of the “proceeding proper.” Of the total fees claimed, $3,780 represented roughly eight hours of mid-level counsel time devoted to preparing the written costs submissions and drafting the order. The judge observed that these documents were well-written, efficient, and concise, and she accepted that the time spent on them was reasonable. She therefore fixed the post-hearing portion of costs at $4,271.40, inclusive of HST. For the main proceeding, she calculated that the fees, disbursements, and HST (excluding the post-hearing component) came to $95,582.35 and rounded this to $95,580. Combining both components, the court fixed the total costs payable to the hospital at $99,855.00, all on a substantial indemnity basis. In the result, The Ottawa Hospital, as the entirely successful party on the merits of the application, obtained not only a declaration that the contract with Hôpitel ended in March 2020 with proper notice, but also a substantial costs award. The court ordered Hôpitel Inc. to pay The Ottawa Hospital total costs of $99,855.00, reflecting both the proceeding itself and the post-hearing work on costs, as the final monetary amount in favour of the successful party.