Murano et. al. v. Bank of Montreal and Peat Marwick Thorne Inc.

Murano et. al. v. Bank of Montreal and Peat Marwick Thorne Inc. Collection Decisions of the Court of Appeal Date 1998-07-14 Docket numbers C21621 Judges Morden, John Wilson; Austin, Allan McNiece; Borins, Stephen Subject Civil Decision Content DATE: 19980714 DOCKET: C21621 COURT OF APPEAL FOR ONTARIO MORDEN A.C.J.O., AUSTIN and BORINS JJ.A. BETWEEN: ) ) JOE MURANO, HILTON VIDEO LTD., ) 828555 ONTARIO LIMITED, 828556 ONTARIO ) LIMITED, 828557 ONTARIO LIMITED and ) 873047 ONTARIO LIMITED ) I.V.B. Nordheimer ) for the appellants Plaintiffs ) (Repsondents) ) ) and ) A. Irvin Schein and ) Melissa A. Muskat BANK OF MONTREAL and PEAT MARWICK ) for the respondents THORNE INC. ) ) Defendants ) (Appellants) ) Heard: October 14 & 15, 1997 ) ) MORDEN A.C.J.O.: INTRODUCTION [1] The defendants Bank of Montreal and Peat Marwick Thorne Inc. appeal from a judgment of Adams J. for $5,038,926.03 which comprises $3,907,389 for damages and $1,131,537.03 for pre- judgment interest. They also seek leave to appeal and, if leave be granted, appeal from an order of solicitor and client costs against them and from the fixing of these costs by the trial judge in the amount of $474,760.39. The plaintiffs cross-appeal from the trial judge's refusal to award punitive damages and from the award of pre-judgment interest at the rate of 7% per annum rather than at 10%, the rate prescribed by s. 128 of the Courts of Justice Act, R.S.O. 1990 c. C43. [2] The facts relating to liability and damages are fully stated in the reasons of the trial judge, Adams J., which are reported at (1995), 20 B.L.R. (2d) 61 and 31 C.B.R. (3d) 1 and I will not repeat them. I shall confine my reference to the facts and the evidence to what is necessary to address the issues raised on this appeal. [3] The bank was a creditor of the plaintiffs with respect to four video stores which they owned and operated in the Kitchener- Waterloo and Cambridge areas. The stores comprised the "Hilton Division". More specifically, the plaintiff Joe Murano, through corporate holdings, owned and operated the four video stores. For the purpose of addressing the issues nothing turns on the particular positions and roles of each of the six plaintiffs. They have been treated as one composite entity. The judgment referred to above is simply in favour of "the plaintiffs", without any apportionment of it among the plaintiffs. [4] On March 26, 1991 the bank appointed Peat Marwick Thorne Inc. as receiver and manager of the four video stores. It went into possession of three of them on March 27, 1991. (The contents of the fourth store had been moved to Richmond Hill over the previous weekend.) Around the same time the bank disclosed information, including what the trial judge found to be false information, concerning the plaintiffs, particularly Joe Murano, to other creditors and lenders, business associates and suppliers of the plaintiffs. [5] At the time of the receivership the plaintiffs had opened five other video stores under the name "Top 30" involving a different video rental concept. The plaintiffs planned to expand the number of stores in the Top 30 division. [6] The trial judge found that Mr. Murano had also entered into an agreement to purchase companies which owned and operated another video store chain, Bandito Video and its eight corporate and 44 franchised stores ("Bandito Video Division"). The transaction was to close in April of 1991. The appellants challenge the finding of the existence of this agreement. Mr. Murano also owned several commercial properties in Kingston and various mortgages and notes receivable. [7] The trial judge held that the bank had not given the plaintiffs reasonable notice before taking possession of their properties through the receiver and had violated its obligation as a banker to the plaintiffs in disclosing information to other creditors. He held the defendants liable to pay damages for the loss of business respecting the Hilton Division, the Top 30 Division and the Bandito Video Division and also damages relating to the properties, mortgages, etc. in Kingston in the total amount of $3,907,389. (The defendant Peat Marwick may well not be liable for the same amount of damages as the bank but no distinction in this regard has been raised in the presentation of this case or in the judgment, which is against "the defendants". In these reasons I shall mention only the bank when referring to the defendants' side of the case.) ISSUES [8] The main issues on the appeal are (1) the liability of the bank to the plaintiffs; (2) if there be liability, the amount of the damages; and (3) the basis and amount of the plaintiffs' costs. LIABILITY 1. Was Reasonable Notice Given by the Bank to the Plaintiffs before the Receiver Took Possession of the Three Video Stores on March 27, 1991? [9] Two hours before the receiver took possession of the stores the bank delivered to the three video stores demand letters that their loans be immediately repaid. It is, of course, not in question that reasonable notice is required as a matter of law to give the debtor some time to repay the indebtedness before a creditor may properly enforce its security. The bank's basic position is that it did give reasonable notice in a letter of December 17, 1990 to Mr. Murano, which is quoted in full in the trial judge's reasons. The letter said that the bank was prepared "to extend continued assistance on the basis of the following terms". Certain terms were set out. The letter concluded with the following two paragraphs: Please provide a response by December 31st as to your agreement with the above arrangements and we will proceed with the increased loan. Should the above not be satisfactory to you, we will have no other alternative but to request that you seek alternative arrangements to liquidate all loans by January 31st, 1991. [10] Several events took place in the course of the relationship between the plaintiffs and the bank between December 17, 1990 and March 27, 1991. The bank has argued that what it submits to have been six weeks notice given in this letter was "suspended" by reason of representations made by the plaintiffs which culminated in an agreement under which the bank agreed to continue the banking relationship upon certain terms and conditions. One of the terms was that the plaintiffs would make a payment of $100,000 as a permanent partial payment of the indebtedness. The trial judge found that the payment was not made. The bank submits that the plaintiffs did not honour their obligations under the extension agreement and that, therefore, the bank was entitled to proceed without any further notice because adequate notice had already been given in the December 17, 1990 letter. [11] The trial judge held that the bank could not rely on the letter because it did not contain an unequivocal demand. The bank challenges the trial judge's conclusion in this respect. I am inclined to agree with the trial judge's interpretation. It appears to me, however, that a more fundamental basis for denying the bank the right to rely on the letter is that, no matter how it is interpreted, following January 31, 1991 several events had overtaken it which indicated to the plaintiffs that the letter was not being relied upon by the bank. The bank itself did not have its terms in mind when it took possession through the receiver on March 27, 1991. [12] An important meeting took place between the parties on March 20, 1991 during which several matters, not including the December 17, 1990 letter, were discussed. The plaintiffs had asked for more financing for a reorganization scheme. The bank said that it would get back to them in a few days with respect to this request. As indicated, nothing was said to convey to the plaintiffs the fact that the bank was even thinking about the earlier letter. Assuming that the bank could have taken steps to revive the terms of the letter, nothing was done by it to do this. [13] The bank advanced an alternative submission that, in the circumstances, the failure to give more time to the plaintiffs to pay would have made no difference because of their financial inability to make the required payment. This is entirely a question of fact with respect to which the trial judge examined the evidence and concluded that "regardless of the onus, I am satisfied that Murano could have repaid the funds." There was evidence reasonably supporting this conclusion. Accordingly, it is not open to us to make a different finding. 2. Improper Disclosures by the Bank [14] In Crawford and Falconbridge, Banking and Bills of Exchange, 8th ed. (1986) at p. 802 it is said that the law respecting a bank's duty of confidentiality to its customer is stated in the headnote to Tournier v. National Provincial Bank, [1924] 1 K.B. 461 (C.A.) which "is the leading case in England and throughout the Commonwealth ..." The headnote reads: It is an implied term of the contract between a banker and his customer that the banker will not divulge to third persons, without the consent of the customer, expressed or implied, either the state of the customer's account, or any of his transactions with the bank, or any information relating to the customer acquired through the keeping of his account, unless the banker is compelled to do so by order of a Court, or the circumstances give rise to a public duty of disclosure, or the protection of the banker's own interests require it. [15] The trial judge concluded that this obligation of the bank had been breached by Mr. Rowlands, an account manager with the bank in Kitchener, in conversations with several other creditors of Mr. Murano and by Mr. Skebo, a Bank of Montreal employee in Kingston and account manager of Mr. Murano's Papa and Pete's Pizza business. The most significant breaches were, likely, those relating to statements made to the Toronto-Dominion Bank (which was in the course of extending credit facilities to Mr. Murano relating to his Top 30 venture) and to Canada Trust (which had extended credit to Mr. Murano on at least one of his Kingston properties). [16] The bank submits that there was no breach of its duty of confidentiality in speaking to the other creditors because Mr. Murano had invited it to do so. There is evidence that, immediately after the imposition of the receiver, Mr. Murano told his creditors to call the bank for information. Accordingly, I think that much of the information which the bank furnished to these creditors would be covered by the exception to the rule of confidentiality based on the customer's consent. In this regard, I think, with respect, that the trial judge's statement that "there was no justification for the bank to do anything other than confirm it had called its loans and imposed a receivership" is too restrictive. The callers already knew that there was a receivership in place and Mr. Murano's suggestion to them to call the bank reasonably extended to obtaining information on why the bank had taken the steps that it had. [17] Notwithstanding the trial judge's restrictive view of the exception from the duty of confidentiality, I think that his ultimate conclusion that the bank breached the duty is clearly supported on the evidence. [18] Craig Eano, an employee of Canada Trust, which held a mortgage on a Murano property in Trenton, testified that on April 24, 1991 he received a call from Mr. Rowlands. Mr. Rowlands was calling to check on the status of Mr. Murano's equity with Canada Trust because the Bank of Montreal was taking legal action on a security. Mr. Eano made notes of the call. Among other statements made by Mr. Rowlands in the conversation was a statement that Mr. Murano had been "taking inventory in desperation". More specifically, Mr. Rowlands said that Mr. Murano was moving cassettes from video stores and that he was moving restaurant equipment from a restaurant in Kingston. I mention now that there was no substance at all to the allegation respecting the restaurant equipment. This allegation was one that must have been obtained by Mr. Rowlands from Mr. Skebo, the Bank of Montreal account manager in Kingston. [19] On April 10, 1991 Mr. David Day of the Toronto-Dominion Bank in Kingston received an unsolicited call from Mr. Skebo who advised him that the Bank of Montreal had lent money to a Murano company and "that the loan related to some pizza equipment that had been at the 611 Princess Street ... [and that] the equipment was gone and the loan was in arrears." [20] On April 5, 1991 Mr. Day had telephoned Mr. Rowlands to find out what the bank was doing. He made a note of the conversation. There was considerable argument before us on the correctness of the trial judge's findings relating to this conversation and to its effect on the Toronto-Dominion Bank's decision to cancel its credit facilities for Mr. Murano's Top 30 venture. I shall deal with it briefly. It may be fair to say that Mr. Day's oral evidence went beyond what he recorded in his notes of the conversation. The note contained the following: Rolland (sic) also advised that Murano had closed out one of the stores and removed all of the inventory and equipment which was assigned to the Bank and to the best of his knowledge no new store was opened in the area. [21] The bank submits that this is an accurate and unexceptionable statement. On behalf of Mr. Murano it is argued that it leaves out important context - that there had been nothing done to hide the moving of the inventory from the bank and that Mr. Rowlands knew that Mr. Murano had not "back doored" the inventory. More importantly, Mr. Day testified that Mr. Rowlands had said that Mr. Murano had "back doored" the inventory. Mr. Day said: Our reaction to Mr. Rowlands was quite serious. We felt that there must be a very serious problem with that particular business, both to go ahead and take the action that they took, especially when he was advising us that they put the receiver in without demanding loans first. Normally, a bank takes that kind of quick action, they suspect inventory is disappearing out the back door, and basically he indicated that in the telephone conversation, and we took his comments very seriously. [22] Later in his evidence he said that "In the conversation with Mr. Rowlands he made some direct accusations ... and based on that there was a question in my mind as to whether our dealings with Mr. Murano were going to remain satisfactory from that point on." [23] Mr. Day testified in-chief that the Toronto-Dominion Bank's decision to cancel the credit facilities for Mr. Murano was based on the fact of the receivership and the conversation he had with Mr. Rowlands. In cross-examination he said that the decision was made before the conversation with Mr. Rowlands. He was not referred to what he had said in-chief on this point. In re- examination the discrepancy was put to him. He then testified that if he had said that the decision to cancel the credit facilities was made before his conversation with Mr. Rowlands he was wrong and that the decision was made after the conversation. In my view, contrary to the bank's submission, this was proper re- examination. It is not our function to retry the factual issues in the case. Clearly, it was open to the trial judge to conclude that it was the actions of the Bank of Montreal which caused the Toronto-Dominion Bank to cancel its line of credit for Mr. Murano's Top 30 venture. [24] In conclusion, it is apparent that the bank's conduct is not covered by the exception to the rule of confidentiality based on the consent of the customer. The bank's disclosures respecting its customer, which indicated that he was dishonest, were not justified by the facts. Further, having regard to Mr. Rowlands' knowledge that the removal of the inventory did not amount to "back-dooring", it must be taken that the bank had no basis for saying that he was dishonest. Mr. Murano did not consent to disclosures of this kind. [25] It might be thought that the gravamen of Mr. Murano's complaint was not so much that confidential information was disclosed but, rather, that the "information" that was disclosed was both wrong and harmful to him. It was defamatory. This part of the case was not pleaded, nor argued, as one of defamation and so I will say nothing further on this. (It may be noted that in the leading case of Tournier two causes of action were pleaded, slander and breach of confidentiality.) At the very least, the statement of what Mr. Murano had done, which was not true, takes this case out of the exception to Tournier upon which the bank relies. DAMAGES [26] On the assumption that the bank is liable to the plaintiffs, the bank submits that the damages assessed are excessive. Before considering the bank's submissions I shall outline the trial judge's reasons on damages. 1. An Outline of the Trial Judge's Reasons [27] Having found liability on the basis of trespass and conversion following the failure to give reasonable notice and for the bank's communications to third parties in breach of the bank's duty of confidentiality, the trial judge assessed the business losses relating to each of the Hilton Division, the Top 30 Division, the Bandito Video Division and the "other losses". [28] This part of his reasons commenced as follows: It is the position of the plaintiffs that the actions of the defendants triggered a chain of events which included: * On April 22, 1991 the Canadian Imperial Bank of Commerce demanded repayment of its loans to two related companies, 855505 Ontario Ltd. (operating as a Bandito Video store) and 548996 Ontario Ltd. (operating as Paulo's Pizzeria) totalling approximately $170,000. In addition, the CIBC demanded repayment of a personal line of credit to Murano of approximately $42,000; * On or about April 25, 1991 Canada Trust demanded repayment of a $300,000 mortgage on a property located in Trenton, Ontario; * On the same date, the Toronto Dominion Bank ("TD Bank") demanded repayment of its loan of $94,000 to a related company, 548290 Ontario Ltd. (operating as Miami Subs) and refused to honour cheques over $500 relating to the Top 30 Division operating in Eastern Ontario; * In that same month Robert Hilton demanded repayment of his $1,000,000 loan and commenced an action. * On May 17, 1991 National Trust demanded repayment of $875,000 pursuant to mortgages on properties at 161 Princess Street and 180 King Street East, Kingston, Ontario; * On May 22, 1991, the TD Bank demanded repayment of a $97,000 loan to a related company, 855519 Ontario Ltd. (operating as a Top 30 Division location); and * On May 27, 1991 the TD Bank demanded repayment of a $855,000 loan in respect of 611 Princess Street and 512 Albert Street. [29] The trial judge set forth the general economic background and its bearing on the video retail industry and, following this, the competing expert opinion evidence given on behalf of the plaintiffs and the bank. [30] He then dealt with the law relating to damages for business loss. In this part of his reasons he began by stating that damages are to be compensatory for losses sustained in both contract and tort. He quoted from BC Checo International v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12 at 37. [31] Following this, he dealt with "the intertwined remedial issues of causation, foreseeability and certainty". Under the heading of certainty he noted at the outset "the requirement that a plaintiff prove its damages on a reasonable preponderance of credible evidence" and then noted that "the inherent difficulty in piecing together what might have happened had there been no breach or tort committed will not relieve a court of its duty to assess damages". [32] He concluded this part of his reasons as follows: In assessing the reliability of projected future profits, a record of past earnings will obviously increase the certainty of such a prediction. However, a lack of evidence of past earnings does not automatically preclude a new business from recovering for lost profits. Rather, a new business must be allowed to prove lost profits to a reasonable level of certainty by expert testimony, by evidence of actual profits of similar businesses, by evidence of proven managerial experience and expertise, and by evidence of subsequent earnings if such evidence is available. Nevertheless, damages should not be awarded for lost profits which are entirely speculative and uncertain. See Al Edwards v. Container Craft Carton and Paper Supply Company, 327 P. 2d 622 (Calif. Dist. Ct. App. 1958) and Cooke Associates Inc. v. Warnick et al., 664 p. 2d 1161 (Utah Sup. Ct. 1983). But once a defendant has been shown to have caused a loss, liability should not be escaped because the amount of the loss cannot be proven with precision. Consequently, the reasonable level of certainty required to establish "the amount" of the loss is generally lower than that required to establish "the fact or cause of" a loss. See Cooke Associates Inc. v. Warnick [664 p. 2d 1161 (Utah Sup. Ct. 1983) at 1116] and Bradshaw Construction Ltd. v. Bank of Nova Scotia, [[1993] 1 W.W.R. 596 (B.C.C.A.) at 612-13]. [33] After setting forth the law relating to an award of punitive damages, he turned to the application of the legal principles he had set forth to the facts as he found them. In this part of his reasons he dealt first with the valuation of the business losses. I shall deal later with his reasons respecting the expert evidence. He arrived at the following conclusions respecting the plaintiffs' losses: Hilton Division $1,550,000 Top 30 Division $1,000,000 Bandito Video Division $1,000,000 Other losses respecting Murano's real estate and real estate related assets 220,000 TOTAL: $3,770,000 In amending reasons this amount was increased by $137,389 to correct an error relating to the deduction of shareholder loans respecting the Hilton Division. [34] He then turned to the issues of causation and foreseeability "with respect to those losses". In short, he found that causation had been established: The imposition of a receivership is understood to entail immediate and devastating consequences for a business. .... The established damages flow as a direct result of the misconduct alleged, misconduct which constitutes both a breach of contract and a commission of the torts of trespass and conversion. [35] On foreseeability he said: ... I am satisfied that those business losses were reasonably foreseeable at the time of contracting. The Bank sought and obtained comprehensive information from Murano and Glenn about their business activities before deciding to contract with them. The Bank was aware that Murano was an active entrepreneur with several other ventures. At all times, the Bank would be alive to the devastating impact a receivership has on a debtor's ongoing financial credibility. At all times, the Bank would also know that the adverse impact of a receivership would be magnified if it became known that the debtor could not be trusted and was generally in a desperate financial situation. [36] He then referred to a portion of Lord Wright's reasons in Monarch Steamship Company v. A/B Karlshamns Oljefabriker, [1949] 1 All E.R. 1 (H.L.) at 14 and then said: ... [I]t was reasonably foreseeable at the time the parties contracted that these kind of breaches could destroy Murano's business and produce losses of the order established. From what the Bank knew about Murano at the time they entered into dealings with him, I am satisfied that neither the existence of loss nor the extent of loss was unforeseeable. As well, since the plaintiffs have made joint claims in tort and contract, the difference in the timing at which foreseeability is to be assessed in tort and contract claim is not material. [37] He concluded that he found "the losses established to be reasonably foreseeable in both contract and tort and caused by the defendants' wrongful actions". 2. The Bank's Submissions [38] The bank submits that the trial judge erred in his calculation of the business losses. He failed to take proper account of the evidence given by the bank's expert witness and erred in applying the discounted cash flow method of business valuation. He also erred in taking into account that every reasonable presumption should be made in favour of the plaintiffs respecting the proof of damages because the defendant had produced the circumstances of which the plaintiffs complained. [39] With respect to causation, the bank submits that there is no causal connection between the bank's actions and the alleged losses respecting the Top 30 Division and the Bandito Video Division. With particular respect to the Bandito Video Division, the bank submits that there was an insufficient factual foundation for the judge to conclude that there was an agreement for the purchase and sale of that business. [40] With respect to foreseeability, the bank submits that the trial judge erred in concluding that the date for determining what damages were reasonably foreseeable was the date of the breach, as opposed to the date upon which the contractual relationship was entered into. Further, with respect to the damages relating to the Top 30 Division and the Bandito Video Division, they were not reasonably foreseeable. [41] With respect to the "other real estate losses" the bank submits that no award should have been made. Quite apart from the legal issue of foreseeability, the award of $220,000 was unjustified by the very findings made by the trial judge. 3. Remoteness of Damages [42] According to the bank, much in this case turns on the matter of foreseeability. Before considering this matter and other principles and rules relating to damages, it is first necessary to determine the character of the wrong or wrongs that give rise to the claim. The two actions of the bank of which the plaintiffs complain are: (1) the receiver's entering into possession of the Hilton Division stores and (2) the breaches of the bank's duty of confidence. [43] The bank characterizes the first, the entering into possession of the plaintiffs' stores by the receiver, as a breach of contract. Its reasoning in this regard is that the damages in this case do not arise from torts committed by the bank but from breach of contract relating to failure to give reasonable notice. Not enough time was given to the plaintiffs to protect their other interests. If reasonable notice had been given and the receiver had gone in after the notice period there could be no claim. Accordingly, the cause of action here is breach of contract and the damages recoverable are those which were reasonably foreseeable at the time that Mr. Murano became a customer of the bank in December of 1989. [44] With respect, I disagree with this analysis. The proposition may be tested as follows. Assume that a bank calls a demand loan without giving any notice but, instead of appointing a receiver to take possession of the debtor's assets, issues a statement of claim and then proceeds to attempt to collect the debt by seeking a judgment for its payment. This would have involved a breach of contract (the failure to give reasonable notice) but, without more, nothing that happened in the present case would have happened. Accordingly, the torts of trespass and conversion by the receiver were the causes of the plaintiffs' losses, not the breach of contract. The role played by the breach of contract was, simply, that it disentitled the bank from relying upon the contract to shield it from a claim of trespass by its customer. I note that this analysis is in accord with the reasons in Ronald Elwyn Lister Limited et al. v. Dunlop Canada Limited, [1982] 1 S.C.R. 726 and Ronald Elwyn Lister Limited v. Dayton Tire Canada Ltd. (1985), 52 O.R. (2d) 88 (C.A.) [45] Because the taking of possession is a tort, it follows that in so far as foreseeability is relevant, the material time would be when the tort was committed, not when the banking relationship was entered into. I think, however, that foreseeability has little to do with the measure of damages in this case. Generally, a trespasser can be liable for unforeseeable consequences. In Ronald Elwyn Lister Ltd. v. Dayton Tire Canada Ltd., supra, at 107 this court said: Dunlop submits that the damages in this respect were not foreseeable and too remote. Since we are concerned with damages flowing from an intentional tort I regard the remoteness principle as requiring that the damages flow as a direct result of the tort: McGregor on Damages, 14th ed. (1980), para. 1087, note 33; Hart and Honoré, Causation in the Law (1959), at p. 235; and Allan et al. v. New Mount Sinai Hospital et al. (1980), 28 O.R. (2d) 356 at p. 365, 109 D.L.R. (3d) 634, 11 C.C.L.T. 299. In this regard, it is clearly a supportable finding on the evidence that, but for the tort, the only reasonable course of action open to Lister Limited was to acquire a new supplier, namely, Goodrich. [46] I refer also to Prosser and Keeton on The Law of Torts, 5th ed. (1984) at pp. 76-77 and to Second Restatement of the Law - Torts, section 435(b). The comment to the section in the Restatement includes, at p. 456, the following: The rule stated in this Section affects only the measure of damages for a tort, but is based upon the principle ... that responsibility for harmful consequences should be carried further in the case of one who does an intentionally wrongful act than in the case of one who is merely negligent or is not at fault. The rule applies not merely to physical harm to the person but also harm to the feelings, to reputation, and to business. Its principle applies not only to permit a jury to award punitive damages but also to cause an intentionally wrongful tort feasor to respond for compensatory damages in cases where, were he merely negligent, he would not be required to pay damages. [Emphasis added.] [47] I do not suggest that there can be no limit on the damages recoverable as a result of an intentional tort. It is unnecessary to explore the possible limits because, in the present case, the consequences to each of the three divisions for which damages were awarded were direct and immediate. In this regard, they do not involve any "snowball effect" . The trial judge correctly concluded that "[t]he established damages flow as a direct result of the misconduct alleged..." [48] The breaches of the duty of confidentiality were breaches of contract - specifically of an implied term in the contractual relationship. These breaches concurrently caused or contributed to the damages flowing from the trespass and may have caused additional damages. There is no finding by the trial judge on this latter question. In any event, I am satisfied that it was clearly open to the trial judge to conclude that the damages found were reasonably foreseeable by the bank at the time the bank's relationship with Mr. Murano was formed. Specifically, in this regard, it should have been within the bank's contemplation at this time that if it breached its obligation of confidentiality in the way that it did, i.e., by imparting untrue and injurious information about the plaintiffs to persons with whom they had dealings, damages of the kind that happened would ensue. [49] This view is consistent with the results in cases where a banker wrongfully dishonours a trader's cheque. See, e.g., Smith v. Commonwealth Trust Company (1970), 10 D.L.R. (3d) 181 (B.C.S.C.), Fridman, The Law of Contract in Canada, 3rd ed. (1994) at p. 729, and Swinton, "Foreseeability: Where Should the Award of Contract Damages Cease?", Reiter and Swan, Studies in Contract Law (1980) 61 at 82-83. [50] Before turning to the valuation of the four categories of business losses, I shall now deal with a separate causation issue raised by the bank with respect to the Bandito Video Division. [51] The bank challenges the trial judge's finding that Mr. Murano had an agreement with Mr. Glenn to purchase the Bandito Video Division. This transaction involved Mr. Murano purchasing from Mr. Glenn all of the issued and outstanding shares of two companies, 548531 Ontario Incorporated and Bandito Video Limited. Mr. Glenn had died before the trial. [52] The finding of the trial judge is supported by the evidence of Mr. Murano, Mr. McTurk, the lawyer for Mr. Glenn's companies, and an unsigned copy of the purchase agreement dated February, 1991. [53] During the course of the argument before us it was submitted on behalf of the bank that Mr. Murano had testified that he would produce a signed copy of the agreement but that, in fact, he never did and nothing more was said about it. [54] I do not see any reasonable basis on which we can differ from the trial judge on this issue. As I read the evidence, the bank did not appear seriously to contest the existence of the agreement. There was no cross-examination of Mr. Murano on his failure to produce the signed agreement. The bank's main concern appears to have been the amount of the loss claimed with respect to the Bandito Video Division. [55] The evidence of Mr. Murano, Mr. McTurk and Mr. Bak also reasonably supports the conclusion that the imposition of the receivership put an end to this purchase transaction. Mr. Glenn would not go through with it in light of the receivership and Mr. Bak would not advance the monies for the down payment in accordance with his commitment to Mr. Murano. 4. The Calculation of the Business Losses [56] The errors which the bank submits that the trial judge made in his determination of the business losses relating to the Hilton Division, the Top 30 Division and the Bandito Video Division relate to his acceptance of the evidence of the plaintiffs' expert witness, Richard Wise, over the evidence of the bank's expert witness, Joel Adelstein. I do not think that this court can properly interfere with the trial judge's conclusions. The issues raised by the bank are all, essentially, questions of fact. There was conflicting evidence on some of them. Substantially all of them were argued before the trial judge and his findings on them are clearly supportable on the evidence. It is not our function to retry them. I refer to Buchan v. Ortho Pharmaceutical (Canada) Ltd. (1986), 54 O.R. (2d) 92 at 98 where Robins J.A. said for the court: It is not this Court's function to weigh conflicting evidence to pass upon the credibility of witnesses or to determine the relative effect of contradictory expert opinions. Those are matters within the province of the trier of fact. [57] In deference to the bank's argument, however, I shall deal briefly with what appear to be its major submissions. [58] The bank submits that the trial judge erred in accepting Mr. Wise's evidence that the loss should be determined following the discounted cash flow method in all but the Top 30 projected stores. The bank submitted that an earnings or asset based method was more appropriate. [59] It may be of value to set forth Mr. Wise's description of the stages involved in his application of the discounted cash flow method: a) Reviewing management's projections during the Forecast Period, including the underlying assumptions for purposes of arriving at a representative level of earnings for each of the years in the Forecast Period; (b) Adding back to earnings non-cash charges and non-recurring items expensed in arriving thereat (to arrive at operating cash flow); (c) Applying a risk factor to the operating cash flow determined in (b) in respect of the future uncertainties and risks in achieving such projections; (d) Determining a representative level of discretionary cash flow, net of sustaining capital reinvestment, having regard to past performance and, in particular, future earning potential; (e) Applying a discount rate to the stream of discretionary cash flow determined in (d) above to arrive at the present value thereof (in aggregate) as of the Damage Date; (f) Determining the residual value of Hilton Division at the end of the Forecast Period (by capitalizing the risk- adjusted discretionary cash flow in the last year of the Forecast Period by a rate of return which would have regard to the internal and external factors listed in Section 9.3.2.2 above). Such capitalized cash flow was discounted back to the Damage Date; (g) Determining the tax shield as defined in Section 1.1.10; and (h) Aggregating the discretionary cash flow determined in (e), the residual value arrived at in (f) and the tax shield derived in (g) to arrive at the fair market value of Hilton Division at the Damage Date. [60] It is important to note that Mr. Wise was carefully cross- examined on the applicability of the discounted cash flow method to the circumstances of this case. It was put to him that it could not be appropriately applied to a "start-up" business and it was also put to him that his opinion appeared to be contrary to an opinion he had expressed in an earlier case. He acknowledged that there were conflicting "authorities" on the question. He referred to two which supported his opinion. [61] He also said with respect to the Top 30 business that it was "under the same umbrella" of "a company and management where Hilton had an earnings history as part of the group". He considered that the earnings projections were reasonably reliable "with the horizon that is not too far away, a reasonable horizon being four years". [62] The trial judge accepted the proposition that it was necessary for the proper application of the discounted cash flow method to establish the reliability of the cash flow projection. I cannot say that he was wrong in accepting Mr. Wise's evidence, generally, on the soundness of the projections on which he relied. [63] I say "generally" because it is important to note that the trial judge did not accept uncritically all of the evidence respecting the future cash flow. He said: Both experts adopted generally appropriate methodologies with respect to the Hilton Division. See Cypress Anvil Mining Corp., supra, at p. 667. But both experts, in my view, adopted assumptions that were either too conservative or too liberal. For example, Wise's adoption of the plaintiffs' profit projections unduly minimized Murano's own quite daunting projections made to Rowlands at the meeting of March 20; the closure of 22 Weber Street; and the fact that Murano was actually contemplating the move of a second store out of the Kitchener/Waterloo area to Pickering. In the circumstances, the projected 12% annual increases for the years 1991 to 1993 strike me as overly optimistic, particularly in light of the revenue experience in 1989 in comparison to previous years. Similarly, Wise's failure to attribute any head office costs to administer the Hilton Division stores when those stores were really the most concrete manifestation of Murano's foothold in the video rental industry was unfair. Unaccounted for, as well, were the concerns expressed by Robert Hilton in his letter to Murano of March 5, 1991. In my opinion, Murano faced challenges that were not adequately reflected in either management's projections or Wise's application of risk factors of 5-20% over the projected period. [64] The trial judge's ultimate reasons, after considering the weaknesses and strengths of the evidence bearing on the value of the Hilton Division as of March 27, 1991, are as follows: In my opinion, the plaintiffs' loss on the Hilton Division should therefore be assessed at 75% of the mid-point of the value range estimated by Wise or .75 times $2,702,500 or $2,026,875 less the amount owed the Bank (i.e. $207,000) and the indebtedness of Murano by way of shareholder loans from HVL and 828556 in the amounts of $127,990 and $146,787 respectively. See Ronald Elwyn Lister Ltd. v. Dayton Tire (1985), 52 O.R. (2d) 88 at pp. 103, 116. I would round the resulting value of the Hilton business and therefore Murano's losses in this regard to $1,550,000. [As noted earlier, he increased this amount by $137,389 to correct an error relating to the deduction of shareholder loans.] [65] With respect to the loss relating to the Top 30 Division, the trial judge, as I have noted, allowed recovery only with respect to the existing stores and, further, he assessed the loss at 50% of the mid-point value estimated by Mr. Wise. He found that the risk factors applied by Mr. Wise were insufficient to account for the risks associated with this business and that the tax rate was also inappropriate. The resulting amount was $1,000,000. [66] With respect to the Bandito Video Division, the trial judge was of the view that the plaintiffs' revenue projections were overly optimistic and that the risk factors of 5% to 20% applied by Mr. Wise were inadequate. Accordingly, he assessed the plaintiffs' losses with respect to this part of the claim at 75% of the mid-point of the fair market value range estimated by Mr. Wise, which he rounded to $1,000,000. [67] In very general terms, what the trial judge did with respect to these claims for business loss was to prefer the evidence of the plaintiffs' expert to that of the bank's expert, but he did find some shortcomings in the plaintiffs' expert's evidence. To give effect to his findings, he reduced two of the claims by 25% and one of them by 50%. His starting point for the reduction was the mid-point in the range of values in Mr. Wise's opinion. [68] At many turns in the expert evidence it might be that this court could take a view different from that of the trial judge, but I cannot say that any step taken by the trial judge reflects a clear error or that this court could arrive at conclusions that are demonstrably better than those of the trial judge. 5. The Other Losses [69] The basis of the claim for "other losses" was a loss of: (a) market value, that is, the excess of the market value of the properties over the proceeds of their liquidation suffered by Mr. Murano; and (b) the loss of mortgages and notes receivable, as well as additional financing costs on securing a mortgage on his home, as a result of the bank's actions. [70] The trial judge dealt with this claim as follows: ... [T]he losses associated with Murano's real estate and real estate related assets need consideration. I am not satisfied with the reliability of the fair market value estimates as of the loss date for the real estate in question. The market was a difficult one for commercial properties and particularly properties experiencing vacancies. Not all of the back-up documentation constituted formal appraisals and even where opinions were expressed as appraisals, extensive local market comparisons and revenue projections were not given. Murano had heavily mortgaged these properties and, thus, his asset base was highly leverage[d] at the very time his operations in the video industry were being challenged. Murano's claim is for losses arising from the forced sale of these properties. I think it more likely than not he would have been required to sell several of these properties to meet those challenges. Having regard to all of the circumstances, however, I am prepared to assess his loss on real estate as the difference between the total mortgage balance outstanding of $1,872,541 and the gross disposal price of $1,753,000 or $119,541 rounded to $120,000. To this I would add a further $100,000 to assess the total extent of loss due to untimely disposition of real estate assets at $220,000. [71] With respect, the trial judge's conclusions are not supportable on the findings of fact which he made. He said that he was not satisfied with the fair market value estimates, that the back-up documentation for the assessments was not given, and that the properties would likely have had to have been sold by Mr. Murano in any event to meet the challenges facing his business at the time unrelated to the actions of the bank. By reason of these findings, no award should have been made in favour of the plaintiffs with respect to these losses. [72] The principle that every reasonable assumption should be made in favour of the plaintiffs is of no assistance to shore up this award. It was open to the plaintiffs to obtain evidence to establish these losses and their failure to do so does not reasonably give rise to the presumption. I would set aside the award of $220,000 for this part of the claim. THE AWARD OF COSTS ON A SOLICITOR AND CLIENT BASIS AND THE AMOUNT OF COSTS FIXED BY THE TRIAL JUDGE 1. Introduction [73] The bank appeals from the awarding of costs on solicitor and client basis and, also, from the amount fixed by Adams J. of $474,760.39. [74] The bank sought leave to appeal but submitted that it did not need leave because its costs appeal is part of a larger appeal and, accordingly, was not an "appeal .. only as to costs" within the meaning of this expression of s. 133(b) of the Courts of Justice Act, R.S.O. 1990, c.C43. The bank referred to the decision of this court in Cameron v. Julian, [1957] O.W.N. 430 which is contrary to its submission but sought to distinguish it. [75] In Cameron the appeal to the Court of Appeal on the substantive issues failed and leave had not been obtained to appeal costs. The court held that it had no power to deal with the appeal from the costs part of the judgment. At p. 435 Schroeder J.A. said for the court: It was held in Murphy v. Lamphier (1914), 32 O.L.R. 19, 20 D.L.R. 906 that where an appeal fails on the merits the Court has no power to interfere with the exercise of the trial Judge's discretion as to costs where no leave has been given by him to appeal with respect to costs. The point also fell to be considered in Buckley v. Vair (1917), 40 O.L.R. 465, 39 D.L.R. 796 and in Le Lage v. Laidlaw Lumber Company (1918), 43 O.L.R. 400. It was decided in those cases that an appellant could not, by joining with an appeal as to costs, an appeal as to other parts of the judgment on which he failed, escape from the provisions of s. 23 (now s. 24). [76] Because the bank has been successful with respect to part of its appeal the interpretation applied in Cameron is not applicable. Nevertheless, it may be of value to deal with the bank's submission. [77] The bank submitted that at the time of Cameron the relevant provision (s. 24 of the Judicature Act, R.S.O. 1950, c. 190) was different from the present provision. It then read: ... [N]o order of the High Court or of a judge thereof as to costs only ... shall be subject to appeal ... except by leave of the court or the judge making the order. [78] The present provision, s. 133(b) of the Courts of Justice Act, reads: No appeal lies without leave of the court to which the appeal is to be taken, .... (b) where the appeal is only as to costs that are in the discretion of the court that made the order for costs. [79] The bank submitted that the change in the wording dictates a different conclusion from that reached in Cameron. I do not think that, in substance, the two provisions have a different meaning. If the Legislature had intended a change in this regard I think that it would have expressed itself more clearly on the question. When an appeal on the merits is dismissed what remains is, equally, an "order ... as to costs only [that is] subject to appeal" and an "appeal [that] is only as to costs". [80] I mention that, by reason of rule 61.03(7), where a party seeks to join an appeal under s. 133(b) of the Courts of Justice Act with an appeal as of right, leave to appeal is to be determined by the court which hears the appeal as of right so that, in effect, the leave requirement should occasion no delay in the progress of the proceeding. It may be noted, in passing, that rule 61.03(7) would be unnecessary if Cameron were not the law. 2. The Award of Costs on a Solicitor and Client Basis [81] The bank submits that this is not one of those rare and exceptional cases in which solicitor and client costs should be awarded. In my view, having regard to the findings that the trial judge made respecting the bank's conduct before the proceeding was commenced and the manner of its defence of this conduct during the proceeding, it cannot be said that he exercised his discretion wrongly. He said: The Bank, at trial, pursued the allegation of absconding in a manner that went to Murano's honesty and personal integrity. It was pleaded he had acted surreptitiously and in a manner inconsistent with honesty. To buttress these positions, the Bank argued it was necessary for the court to analyse in detail the entirety of its relationships with the plaintiffs prior to the time at which its actions giving rise to this action occurred. The result was a minute examination of many events over the course of the preceding year with a general emphasis on Murano's alleged lack of honesty and, in my view, with the subtext being that Murano was "the kind of debtor" who would have attempted to abscond with assets otherwise subject to the Bank's security. It was found, however, that no matter how all these earlier events were construed, the Bank could not have reasonably concluded or been certain that Murano was absconding with the Weber Street assets in March, 1991 and, in fact, that the Bank had used the circumstances surrounding the closure of the Weber Street store as a convenient pretext for implementing a plan it had been considering well before learning that the store was empty. It was also found that officers of the Bank, in an attempt to justify the Bank's wrongful conduct, inaccurately relayed to other lenders as well as to existing and prospective business associates that Murano was financially desperate and that he had acted dishonestly not only in respect of the movement of the Weber Street store but also in relation to inventory associated with a restaurant located in Kingston. This wilful misconduct of the Bank essentially destroyed Murano's businesses and likely impaired his reputation in the business community on an ongoing basis. These unfounded allegations were then repeated in the Bank's pleadings and pursued with vigour at trial. As previously mentioned, while the Bank was entitled to proceed in this manner, it had to be prepared for the cost consequences if this court concluded its serious allegations in this respect were totally unfounded. [82] The following statement of Blair J. in 131843 Canada Inc. v. Double "R" (Toronto) Ltd. (1992), 7 C.P.C. (3d) 15 (Ont. Ct. (Gen. Div.)) at p. 17, which the trial judge quoted, is an accurate statement of law which clearly supports the trial judge's conclusion on this issue: The real question at issue is whether the defendants, or some of them, should be awarded costs on a solicitor-and-client scale, as opposed to the normal party-and- party scale. The power to make such an award is clearly within the discretion of the court. It is equally clear, however, that such a power is only exercised in special and rare cases. See, for example, Foulis v. Robinson (1978), 8 C.P.C. 198, 21 O.R. (2d) 769, 92 D.L.R. (3d) 134 (C.A.) and S&A Strasser Ltd. v. Richmond Hill (Town), supra. Cases where allegations of fraud are made and found to be totally unfounded fall into this latter category. So, too, do cases involving "other allegations of improper conduct seriously prejudicial to the character or reputation of a party", which are found in the result to be totally unfounded: Re Bisyk (No. 2) (1980), 32 O.R. (2d) 281 (H.C.), per Robins J. at p. 287 [O.R.]. [83] The bank has made the further submission that the solicitor and client costs award was, in effect, used by the trial judge as an award of damages related to the bank's disclosure of information relating to the plaintiffs "and/or" to his refusal to otherwise award punitive damages. I do not agree with these submissions. It is clear from Adams J.'s reasons that his costs award is soundly based on costs principles alone and that there is no reasonable basis for concluding otherwise. 3. The Order Fixing the Costs at $474,760.39 [84] Although the bank's right to appeal this particular order was not questioned before us I should say something about it. (It is clear that the result of the fixing process is embodied in an order and not a certificate. See Rex v. Royal De Versailles Jewellers Inc., [1995] O.J. No. 2941 (Gen. Div.)) The order in question is a final one (Andrews v. Andrews (1980), 32 O.R. (2d) 29 (C.A.) at 33-34) and, accordingly, the right to appeal from it is conferred by s. 6(1)(b) of the Courts of Justice Act. If the appeal is only as to costs (as discussed in the preceding part of these reasons) leave to appeal is required under s. 133(b) of the Act. [85] In Jamieson v. Hagar (1919), 17 O.W.N. 104, which is noted in Holmested and Gale, Ontario Judicature Act and Rules of Practice, Vol. 3, at p. 2803, it is said at p. 104 that "Where costs are fixed by a judge exercising his discretion, his ruling is not subject to review ...". Having regard to the authorities to which the court referred and the state of the legislation at the time, I would interpret this to mean not subject to appeal except on leave. [86] As far as the fixing of costs is concerned, the power is conferred by s. 131(1) of the Courts of Justice Act and rule 57.01(3) of the Rules of Civil Procedure which, respectively, read: (1) Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid. .... (3) In awarding costs, the court may fix all or part of the costs with or without reference to the Tariffs, instead of referring them for assessment, and where the costs are not fixed, they may be assessed under Rule 58. [87] The bank's submission on this part of the appeal bears on the manner in which Adams J. performed his function and not, specifically, that he erred in exercising his discretion to fix costs rather than directing that they be assessed by an assessment officer. Accordingly, while this is not the occasion for considering in detail the scope of the discretion, the following might usefully be said. [88] Having regard to the unqualified wording of s. 131(1) and rule 57.01(3) it would not be sensible to impose, in advance of considering any particular case, hard and fast limits on when or how the power to fix costs should be exercised. The following considerations, however, should be helpful: (1) A judge should not fix costs on his or her own motion. If a judge is minded to fix costs, or if one party asks the court to do so, the parties should be given the opportunity to make submissions on whether costs should be fixed. (2) With due respect to the contrary view expressed by Henry J. in Apotex Inc. v. Egis Pharmaceuticals (1991), 4 O.R. (3d) 321 (Gen. Div.) at 322, I do not think that a judge has an unfettered discretion to fix costs. The power should only be resorted to when the judge, having received the parties' submissions, is satisfied that he or she is in a position to do procedural and substantive justice in fixing the costs instead of directing that they be assessed by an assessment officer. (3) Having decided to fix costs, the judge should, of course, conduct an appropriate hearing on the question of the amount to be fixed. Depending on the circumstances, this could properly take the form of the receipt of written submissions from the parties. [89] Each case turns on its own circumstances. In Couglin v. Mutual of Omaha Insurance Co. (1992), 10 O.R. (3d) 787 (Gen. Div.) Madam Justice E. Macdonald embarked on a fixing of costs on the basis that she accepted a submission of the plaintiff that she was "fully apprised of all details and background of the matter". By way of contrast, in Skinner v. Royal Victoria Hospital (1995), 35 C.P.C. (3d) 290 (Ont. Ct. (Gen. Div.)) Somers J. took the opposite view. He said, at pp. 297-98: I do not feel that in this case I have the same familiarity [as E. Macdonald J. in Coughlin] with the background. It should be remembered that the trial of the action was bifurcated with the first part being heard in the spring of 1993 and the second in the summer of 1994. There were numerous expert witnesses called at both trials. I have no doubt that before the first trial there were extensive pretrial examinations and production and inspection of documents including hospital records. I have no knowledge of any pretrial interlocutory proceedings but there may well have been many. In order for a proper evaluation of the costs to be made I am of the view that a complete review and breakdown of all of the time spent will have to be prepared and submitted. I would expect this to be a lengthy document and I would also expect it to be subject to considerable investigation and comment by counsel for the defendants. Accordingly the costs that I have ordered to be paid should be made payable forthwith by the defendants after their assessment by a designated assessment officer. [90] It is reasonable to think that a judge or court after hearing a motion, an application, or an appeal would generally, because of familiarity with all of the relevant facts, documents, and issues, be in a reasonable position to fix the costs of the motion, application, or appeal. With trials, the matter becomes more difficult because the trial judge is not likely to know, simply by virtue of having been the trial judge, much about all of the pre-trial stages. In these circumstances, his or her knowledge of the case would necessarily require substantial supplementation. The whole question is helpfully canvassed by Robert D. Malen in "To Assess or to Fix Costs: That is the Question" (1998), 20 Adv. Q. 85. [91] I turn now to Adams J.'s decision, which may be found at [1996] O.J. 2415, in the present case. He set forth the amounts of the fees and disbursements sought by the plaintiffs and then set forth the parties' submissions. Following this, he accepted the following statement of Feldman J. in Tri-S Investments v. Vong, [1991] O.J. No. 2292 (Gen. Div.) as a proper description of the judge's function in fixing costs: A judge's function in fixing costs (as contrasted with the role of an assessment officer on a full assessment) is to perform a summary analysis of the cost of the services of counsel for the successful party, then to apply the party/party scale of indemnification to that figure. The purpose of the summary analysis is for the trial or motions judge, familiar with the nature of the proceeding as well as with its substantive and procedural complexity, to ensure that the magnitude of the claimed costs is in keeping with what is warranted in the circumstances. I do not view it to be the court's function when fixing costs to second- guess successful counsel on the amount of time that should or could have been spent to achieve the same result, unless the time spent is so grossly excessive as to be obvious overkill. (Emphasis added by Adams J.) [92] Adams J. then referred to a passage in Apotex Inc. v. Egis Pharmaceuticals and Novopharm Ltd., supra, at p. 325 on the meaning of solicitor and clients costs. His reasons conclude as follows: This was a fifteen day trial. The matter was quite complex and hard fought. I intended the award of costs to completely indemnify the plaintiffs because of the circumstances I have reviewed in earlier reasons. The fees and disbursements are not, in all the circumstances, grossly excessive. The services billed and the costs incurred fall within the ambit of being "reasonably necessary" to fully and fairly prepare and present the plaintiffs' case. The bill of costs presented by the plaintiffs is therefore allowed without adjustment. [93] I agree with the judge's acceptance of Henry J.'s statement of the purpose of solicitor and client costs set forth in Apotex at p. 325: The general principle that guides the court in fixing costs as between parties on the solicitor and client scale, as is provided in my order, is that the solicitor and client scale is intended to be complete indemnification for all costs (fees and disbursements) reasonably incurred in the course of prosecuting or defending the action or proceeding, but is not, in the absence of a special order, to include the costs of extra services judged not to be reasonably necessary. [94] The difficulty with this statement, in many cases, lies in its application to the facts before the court - more specifically, in the approaches and tests to be applied in fixing costs on a solicitor and client basis. [95] Henry J., in Apotex at 326, set forth the following approach: This brings me to a second guiding principle - the judge in fixing costs of a proceeding is not assessing costs as if he were performing the functions of a master or officer to whom the court has referred costs to be assessed. Rule 57.01(3) expressly provides that: In awarding costs, the court may fix all or part of the costs with or without reference to the Tariffs, instead of referring them for assessment ... This I understand is what the judges are doing frequently in interlocutory proceedings currently, including myself; it is not an assessment item by item according to the Tariffs as would be done by an assessment officer; it is rather the judge's determination of what the services devoted to the motion or other proceeding are worth according to the submissions of counsel, his own experience and with some regard to what could be taxed on the party and party scale. This is done in Weekly Court, Motions Court and Divisional Court and normally involves the party and party scale. It is essentially pragmatic, made on an overall appreciation of the factors in rule 57.01 without reviewing a catalogue of itemized charges. [96] I accept this approach subject to some qualification. It is one thing to say that the fixing of costs is not an assessment item by item according to the tariffs as would be done by an assessment officer, which I accept. It is quite another to countenance not reviewing a "catalogue of itemized charges". Claims for solicitor and client costs in any matter of complexity are invariably broken down into items describing the services performed and the amounts charged for them. These must be reviewed by the judge, as must their total. In this regard, I think that the approach of Haines J. in Worsley v. Lichong, [1994] O.J. No. 614 (Gen. Div.) is the correct one. In paragraph 5 he said: ... I believe the fixing of costs still requires a critical examination of the work undertaken in order to determine that the costs claimed have been reasonably incurred and reflect what the court considers to be proper and appropriate in the circumstances given the complexity and significance of the proceedings held up against the backdrop of full indemnification. [97] In Coughlin, supra, E. Macdonald J. said, to the same effect, at p. 792: I do not believe the decision in Apotex, however, should be interpreted as authority for the proposition that costs are to be fixed pursuant to the statement of account without careful consideration by the judge as whether or not the costs were reasonably incurred. [98] Also, in line with the foregoing are the observations of D. Lane J. in McKinlay Transport Ltd. v. Motor Transport Industrial Relations Bureau of Ontario, [1997] O.J. No. 1098 at paragraphs 18 to 20, which reflect the same attitude as that indicated in the reasons of Somers J. in Skinner, quoted above: Should the costs be fixed or assessed? [para 19] The defendants urged me to fix the costs. My experience with the case would save much time; the process would be less time- consuming than the assessment process; trench warfare over every motion over 17 years of litigation would be avoided. The plaintiff sought an assessment submitting that although I knew about the trial, I would have no advantage as to the pre-trial period; the process would inevitably resemble an assessment given the nature of the proceedings; the effective allocation of court resources called for the assignment of the task to the Assessment Officers; I should not force them to a summary fixing over their objections. [para 20] This was a 30 day trial after over a decade of active litigation. The costs will be very large amounts, backed by extensive records. Fixing the costs is meant to be a summary sort of procedure and I do not think such a procedure is likely to reach a just result unless it evolves into something akin to an assessment, with the Judge reviewing the factors an Assessment Officer would review. The costs will be assessed, but I am prepared to consider submissions as to any special directions that ought to be given. [99] In my view, this contains the correct observation that, in the circumstances of that case, to reach a just result the process would have to be "something akin to an assessment, with the Judge reviewing the factors an Assessment Officer would review". The value of the trial judge's knowledge of the case would become part of the assessment process through directions to the assessment officer, as provided for in rule 57.02. [100] The short point is that the total amount to be awarded in a protracted proceeding of some complexity cannot be reasonably determined without some critical examination of the parts which comprise the proceeding. This does not mean, of course, that the award must necessarily equal the sum of the parts. An overall sense of what is reasonable may be factored in to determine the ultimate award. This overall sense, however, cannot be a properly informed one before the parts are critically examined. [101] Another, possibly related, qualification I have to the statement in Apotex relates to the statement that the judge is to have "some regard to what could be taxed [assessed] on the party and party scale". He was speaking principally of an award of costs on a party and party basis at that place in his reasons. If this was intended to mean that the law recognizes that the fixing procedure properly yields a different substantive result, i.e., a different amount, from the assessment procedure, then I respectfully disagree. The procedure for determining costs is, of course, different but this does not mean that the substantive results of the two processes are intended to be different. [102] The general principle is that like cases should conclude with like substantive results. Because no two cases are exactly alike and, also, because matters of discretion and judgment are involved, it is not to be expected that results will be identical even in cases that are exactly alike. This does not mean, however, that the substantive goal should not be equal results. I think that my view is reflected in the following passage from the reasons of Jessel M.R. in Willmott v. Barber (1881), 17 Ch. D. 772 (C.A.) at 774: The judge has a large discretion as to costs... [H]e may follow the course which I sometimes adopt, and I generally find that the parties are grateful to me for doing so, namely, fix a definite sum for one party to pay to the other, so as to avoid the expense of taxation, taking care in doing so to fix a smaller sum than the party would have to pay if the costs were taxed. [103] I read this as indicating that Jessel M.R. intended that his fixing of costs would be in line with the results of a taxation, after giving some effect to the saving of the expense of a taxation. To the same effect is the following statement of Austin J. in Ligate v. Abick (1991), 5 O.R. (3d) 332 (Gen. Div.) at 335: It was also argued [in support of a submission that he, as trial judge, fix the costs] that, since I tried the case, I would have an advantage in that I would already know how long it took, how difficult it was, etc. I acknowledge that I would have had a headstart in that regard. On the other hand, I have a serious disadvantage. Specifically, I do not know the rates presently being awarded by assessment officers. Few judges do and, in my view, in the interests of consistency, the job of assessing costs should be left to those skilled in the task, except in circumstances which compel another approach. This indicates the relevance to the fixing process of decisions made in the course of the assessment process and the importance of general consistency. [104] The main advantage of the fixing procedure is its expedition - the avoidance of delay in the determination of the costs part of the proceeding. This should not be bought at the price of a less than reasonable procedure. Robert D. Malen, at p. 94 of the article to which I have referred, has rightly observed that the amounts of costs involved in some cases are of a very substantial amount and that "something more than a 'summary analysis' is required." He elaborates on this as follows: The dollars at stake in most trials are less than that amount [he was referring to $600,000] and, if that quantum was in issue at a trial, most judges would not question spending a week or two trying the case. Why then, when the issue is costs, should the approach be any different? From the client's point of view, a dollar is a dollar whether it forms part of the judgment or part of the costs. [105] If it be objected that a careful review by a judge is too time consuming then the proper course is to refer the costs to assessment. I refer to the statement of D. Lane J. in McKinlay Transport which I have quoted. [106] Related to this subject are the observations of Callaghan C.J.O.C. in In-Med Laboratories Ltd. et al. v. Director of Laboratory Services (Ont.) et al. (1991), 45 O.A.C. 241 (Div. Ct) at 248. We are embarking on a new direction in this case in that most appeals before us to date, upon which we have fixed costs, have been matters of a lesser nature where there has not been such a large number of hours claimed by counsel as being expended in preparation for the hearing before this court. We feel that when a claim for costs reaches numbers similar to that before us today then it should be supported by an affidavit of counsel. Either counsel, who have appeared on this matter can provide us with an affidavit substantiating the hours spent and the disbursements. We note for the record that the hours claimed, in the circumstances of this case, having regard to the nature of the appeal and the transcripts involved, of approximately 1,700 pages, do not appear out of line and we certainly are not taking issue with them. We rule, however, that when a bill of costs reaches this size it should be supported by an affidavit that confirms the hours and disbursements. No affidavit appears to have been filed in this proceeding. [107] I now consider Adams J.'s decision in light of the foregoing. First, did he apply the correct substantive principle respecting the determination of costs on a solicitor and client basis? I think that he did. He referred to the statement of Henry J. at p. 325 of Apotex. It is true that he said that "[t]he fees and disbursements [were] not, in all the circumstances, grossly excessive". With respect, I think that "grossly excessive" is an expression that should be avoided. It is clearly susceptible of being read as allowing an amount that is more than reasonable. Adams J. did not give it this meaning because in the next sentence he said that the costs were "reasonably necessary to fully and fairly prepare and present the plaintiffs' case". [108] Second, with regard to the procedure followed, I have some concern stemming from the lack of detail in his reasons whether the judge subjected the proposed costs to the degree of scrutiny required. In the circumstances, however, this concern does not incline me to setting aside the award. [109] In the bank's supplementary notice of appeal it sought to have this court reduce the amount fixed. On the argument before us this remedy was not pursued - that is, the bank did not make submissions on what a more correct amount would be and why. Instead, the bank requested that the costs be referred for assessment. I have noted that the trial judge in his reasons did set forth the submissions of both parties. I assume that he gave them proper consideration. Of importance to me, in reviewing the award and taking into account the factors listed in rules 57.01(1) and 58.06 (the amount involved in the proceeding, the complexity of the proceeding, the importance of the issues, the length of the trial, etc.) is that I am not persuaded that any part of the costs, or the total allowed, are out of line measured against the principle of full indemnification for costs reasonably incurred. In this regard, I accept what Henry J. said at p. 331 of Apotex: ... Whether a service is performed or engaged in contemplation of adversarial proceedings in court is essentially a matter of judgment. I have looked for the exercise of judgment, together with prudence, foresight and imagination, in assigning services to the motion in this case as the test of fairness, reasonableness and necessity in applying the guiding principles. It is not appropriate to apply the test of hindsight (20/20 vision) to determine whether a service charged for was an extra service or frill not reasonably necessary to defend the client's position. The time to view the decision to commit services to the project is before the hearing or trial - not on the basis of hindsight which might indicate that as it turned out, the service was unnecessary. For the sake of completeness, I should note that I do not regard the reduction of the damages by $220,000 respecting "other losses" to have any significant bearing on the reasonableness of the costs award. [110] For these reasons, whatever misgivings I may have with respect to the process followed by Adams J., I do not think that the materials before the court justify a re-hearing of the costs fixed. THE CROSS-APPEAL 1. The Failure to Award Punitive Damages [111] The plaintiffs also submit that the trial judge erred in not awarding to them punitive damages. The trial judge, in the part of his reasons concerned with the punitive damages, characterized the bank's actions as "high handed and callous conduct" which would normally call for punitive damages but, following this, he deprived them of an award of punitive damages on the basis of the plaintiffs' conduct. The trial judge cited Moase v. Royal Bank of Canada (1987), 64 C.B.R. (N.S.) 191 (P.E.I.S.C.) at p. 199. [112] The plaintiffs submit that the facts of this case are different from those in Moase and that the trial judge, having found that "none of the [plaintiffs'] conduct justified the bank's actions", should not have concluded that this conduct deprived the plaintiffs of an award of punitive damages in their favour. [113] Earlier in his reasons the trial judge referred to Waddams, The Law of Damages, 2nd ed., at paragraph 11.450 for the proposition that "the conduct of the plaintiff in provoking otherwise harsh or oppressive actions by a defendant is relevant and may reduce or extinguish an award of exemplary damages". On this point I refer, also, to Burrows, Remedies for Torts and Breaches of Contract, 2nd ed. (1994) at p. 280: ... [E]xemplary damages may be refused (or reduced) if the plaintiff has brought the defendant's conduct upon himself. Indeed this is analogous to the principles of causation and contributory negligence applied in relation to compensatory damages. [114] While it may be that the facts of Moase v. Royal Bank of Canada afford a stronger example of a plaintiff provoking the conduct of the defendant which could be the basis of an award of punitive damages, I cannot say that it was not open to conclude that the plaintiffs' conduct in this case (which included failure to communicate information to the bank and other conduct described by the trial judge) was a cause of the bank's conduct in the sense that if the plaintiffs' conduct had been more reasonable the bank would not have acted as it did. This does not mean, of course, that the plaintiffs' conduct justified the bank's action. Rather, it simply means that if the plaintiffs' conduct had been more reasonable it is not likely that the bank would have acted as it did. In these circumstances, I am not disposed to interfere with the trial judge's discretion not to award punitive damages. 2. Failure to Award Prejudgment Interest at the Statutory Rate [115] The plaintiffs submit that the trial judge erred in awarding prejudgment interest at the average rate of 7 percent per annum rather than at the rate of 10 percent prescribed by s. 127(1) of the Courts of Justice Act, R.S.O. 1990, c.C.43. [116] The components of an award of prejudgment interest are, to some extent, a matter for the discretion of the trial judge. Accordingly, while we probably would not interfere with an award at the statutory rate (see Graham v. Rourke (1990), 75 O.R. (2d) 622 (C.A.)) I cannot say that this is a proper case to interfere with the exercise of his discretion. In this regard, I refer to s. 130(2)(a) of the Courts of Justice Act, which requires the court, in exercising its discretion under s. 130(1) of the Act, to take changes in interest rates into account and to the decisions of this court in Spencer v. Rosati (1985), 50 O.R. (2d) 661 and Data General (Canada) Ltd. v. Molnar Systems Group Inc. (1991), 3 C.P.C. (3d) 180, which the trial judge relied upon. DISPOSITION OF THE APPEAL AND CROSS-APPEAL [117] Subject to the reduction of the award by $220,000, respecting the "other losses", I would dismiss the main appeal including the appeal from the costs award. I would dismiss the cross-appeal. [118] The respondents have been substantially successful. I would award them the costs of the appeal and make no order respecting the costs of the cross-appeal, which took very little time. Released: July 14, 1998