COURT FILE NO.: 257/06

DATE: 20060929

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

RE: JAZZ AIR LP v. TORONTO PORT AUTHORITY, CITY CENTRE AVIATION LTD., REGCO HOLDINGS INC., PORTER AIRLINES INC. and ROBERT J. DELUCE.

BEFORE: Swinton J.

COUNSEL: Donald H. Jack and Brian N. Radnoff for the Plaintiff/Moving Party

Orestes Pasparakis and Susan Rothfels for the Defendants, City Centre Aviation Ltd., REGCO Holdings Inc., Porter Airlines Inc, and Robert J. Deluce

HEARD: September 26, 2006

E N D O R S E M E N T

[1] The plaintiff, Jazz Air LP, seeks leave to appeal an order of costs made by Spence J. on May 24, 2006, in which he ordered costs on a substantial indemnity scale in the amount of $160,000, plus disbursements and GST. The costs arose out of an injunction motion brought on short notice by Jazz and heard on February 27, 2006. The motion was dismissed.

[2] The moving party submits that the motions judge erred in awarding costs on a substantial indemnity scale, in the quantum awarded, and in fixing costs based on the .25 hour increment used in the dockets.

[3] The costs award of a judge is entitled to a high degree of deference. It should be set aside only if the judge made an error in principle or the award is plainly wrong (Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.) at paras. 19-20).

[4] In granting leave to appeal under rule 62.02(4)(b), “the threshold question is whether the correctness of the order is open to serious debate” (Bank of Montreal v. Canada (Attorney General), [1999] O.J. No. 90 (Div. Ct.) at para. 4).

Costs on a substantial indemnity scale

[5] The reasons of the motions judge are brief on this issue:

The request of the Porter defendants for costs on the substantial indemnity scale and on the order of the large amount they request is supported by their submissions.

[6] The submissions of the Porter defendants justify an award on a substantial indemnity scale for two reasons: first, Jazz made unfounded allegations that the Porter defendants were conspiring unlawfully and acting in bad faith and with the primary intent to injure Jazz; and second, the clear purpose of Jazz’s motion was tactical, putting the business of the Porter defendants into jeopardy.

[7] Costs on a substantial indemnity basis are to be awarded only in rare and exceptional cases, where there has been reprehensible, scandalous or outrageous conduct in the course of the litigation (Toronto-Dominion Bank v. Grande Caledon Developments Inc. (1998), 39 O.R. (3d) 93 (C.A.) at pp. 95-96; Hunt v. TD Securities Inc. (2003), 66 O.R. (3d) 481 (C.A.) at 509).

[8] In this case, the motions judge does not make any clear findings of fact that the motion was undertaken to harass the defendants, or that the plaintiff’s conduct was reprehensible and outrageous. In contrast, in Apotex Inc. v. Egis Pharmacueticals (1990), 2 O.R. (3d) 126 (Gen. Div.) at 130, Henry J. found that serious allegations had been made without any acceptable evidentiary foundation in an attempt to harass the defendant.

[9] Therefore, there is good reason to doubt the correctness of the decision, given the lack of findings of fact that would justify a punitive award of costs.

The Quantum of Costs

[10] Jazz also submits that there are errors of principle in the quantum awarded. First, in considering the reasonable expectations of Jazz, the motions judge commented that Jazz’s complaint about quantum was “an attack in the air” because Jazz’s counsel refused to provide their dockets. Jazz submits that it was not required to disclose its counsel’s dockets. Second, Jazz submits that the motions judge failed to address the overall reasonableness of the award, and it is inconsistent with comparable awards.

[11] In my view, the motions judge did not err in taking into account the lack of dockets from Jazz’s counsel when determining reasonable expectations (see Andersen v. St. Jude Medical, Inc. (2006), 264 D.L.R. (4th) 557 (Div. Ct.) at para. 25 -27 and 407 ETR Concession Co. v. Ontario (Registrar of Motor Vehicles, [2006] O.J. No. 868 (Div. Ct.) at para. 5). However, the failure to provide dockets is one factor that may be considered in determining the reasonableness of the costs award, but it is not determinative (Andersen, at para. 27).

[12] The Court of Appeal made it clear in Boucher, supra that the judge determining costs should consider the overall reasonableness of the award, and not just look at hours and rates. In this case, the motions judge, in his brief reasons, stated that “[t]he only reasonable expectation the plaintiff could have had is that Porter would do everything it could to prepare for and present a case with the best possible prospect of succeeding.” He referred to the lack of a bill of costs from the plaintiff’s counsel made their attack on the hours “an attack in the air”. Finally, he reduced the quantum on the basis that the top hourly rates were not appropriate for all the lawyers for all their work. Therefore, he reduced the hourly rates. However, he did not address the reasonableness of the 500 hours billed over the course of four days in preparation for and argument at a one day hearing, nor did he address the overall reasonableness of the award. Therefore, there is good reason to doubt the correctness of the decision on quantum.

[13] In my view, there are issues of general importance here which should considered by the Divisional Court. In particular, it is important to address the findings that must be made before an award of costs is made on the substantial indemnity scale, particularly in the context of interlocutory injunction motions, as well as the overall fairness and reasonableness of the costs awarded. Therefore, leave to appeal is granted, with costs of the motion for leave left to the panel hearing the appeal.

Swinton J.

Released: September , 2006