In litigation cases, often only the lawyers win

Bob Aaron in Legal

In 1997, James and Barbara Dinsmore bought a new townhouse in Windsor for $177,000 from Masterpiece Homes. On taking possession, they noticed dampness on the basement floor, which raised concerns about potential drainage problems.

After investigation, the builder acknowledged that the cement slab in the basement did not meet the three-inch-depth (7.6 centimetres) requirement specified in the Ontario Building Code, but did not agree with the Dinsmores about the alleged drainage problem. The issue became how to resolve it, and the Dinsmores and the builder could not agree on the solution.

Following a series of failed negotiations, the Dinsmores in early 2002 sued the builder, the Ontario New Home Warranty Plan (Tarion), and representatives of the City of Windsor, claiming general and aggravated damages of $350,000 for breach of contract and negligence and $150,000 in punitive damages.

After 14 days of trial in May 2006, Justice John Brockenshire ordered the builders to pay the owners only $29,700 for breach of the terms of the building contract and for breach of the builder's warranty.

The judge "sadly" concluded that the Dinsmores were "the authors of their own misfortune" because they finished the basement knowing that there were moisture problems, and they took no steps to fix the problem and mitigate their damages before trial.

Based on expert testimony, the judge concluded that a reasonable course of action would have been to treat the basement floor with a specific sealant and topping, obtain an engineer's certificate of compliance with the Building Code and regrade some of the land sloping toward the house.

The Dinsmores felt that the sealant solution was unacceptable since the basement slab would not be the regulation three inches thick, but the judge rejected this position.

The judge dismissed the claim against the warranty program on the basis that the owners refused the builder's "reasonable solution," despite assurances that the new work would enjoy an extended warranty under the legislation.

Combined legal fees and court costs claimed by all of the lawyers in the wake of the trial exceeded $400,000 – out of all proportion to the true value of the underlying claim. The Dinsmores' lawyer's bill for fees, expenses and GST came to more than $205,000, while the builder's lawyers claimed a total of $98,000. Lawyers for the warranty program asked for $101,000.

In awarding costs to the homeowners, the judge ordered the builder to pay $67,045, including fees of $36,000, expenses of $26,681, and GST. Since the warranty program succeeded at trial and all claims against it were dismissed, the Dinsmores were ordered to pay Tarion $67,497.

In effect, the costs the Dinsmores recovered against the builder had to be handed over to Tarion, leaving the homeowners and the builder responsible for their own heavy legal bills.

In October, an appeal by the homeowners reached the Ontario Court of Appeal. After considering the arguments of all parties, a three-judge panel dismissed the appeal and ordered the homeowners to pay appeal costs of $15,000 to the builders and $6,500 to the warranty program.

Several lessons may be gained from this court case.

Litigation is a very expensive pastime. Frequently, nobody wins except perhaps the lawyers – if they get paid.

Court costs and fees for expert witnesses can easily exceed the value of the claim at issue by a factor of five, 10 or 20.

It's always a good idea to be reasonable and realistic at pre-trial mediations and in the face of pre-trial settlement offers (which were rejected in this case). Litigants who refuse to settle before trial do so at their own risk.

Access to justice for a growing proportion of the population is becoming increasingly out of reach due to the costs involved. Citizens need to have access to the courts without bankrupting themselves or mortgaging their future.

Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto.  Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears Saturdays in The Toronto Star and weekly on Move Smartly.  E-mail

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