Court File and Parties

Citation: DeGroote v. Pajak et al., 2014 ONSC 1548 Divisional Court File No.: 78/14 Date: 2014-03-10 Superior Court of Justice – Ontario Divisional Court

Re: Michael G. DeGroote, Plaintiff/Respondent And: DC Entertainment Corporation et al., Defendants/Moving Parties

Before: Harvison Young J.

Counsel: W. Niels F. Ortved, Eric S. Block and Byron Shaw, for the Respondent Robert Trifts, for the Defendants/Moving Parties

Heard: February 25, 2014

Endorsement

[1] Don Carbone Entertainment Inc. ("Don Carbone"), Dream Kiosk Solutions Inc. ("Dream Kiosk") and Andrew Pajak (together, the "Pajak Defendants") seek leave to appeal from the costs order against the defendants on a joint and several basis. Newbould J. made the costs order in the total amount of $247,566.14 following the plaintiff's successful motion for an order appointing a receiver and the books and records of the corporation defendants. The remaining defendants, DC Entertainment Corporation, King Software Solutions Corp., Dream Corporation Inc. ("Dream"), Dream Casino Corporation S.R.L., Dream Software Solutions Inc. ("Dream Software") and the individual defendants Antonio Carbone and Francesco Carbone, do not seek leave to appeal.

[2] Rule 62.02(4) provides that leave to appeal shall not be granted unless:

(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or

(b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

[3] The test for leave to appeal is particularly onerous in the case of an appeal from a costs award, which is a discretionary order, and "the judge of first instance is in the best position to determine the entitlement, scale and quantum of any such award". As Molloy J. stated in Bell Expressvu Limited Partnership v. Pieckenhagen:

An award of costs involves the motion judge's exercise of discretion, which is entitled to a high degree of deference. Leave to appeal costs must be granted sparingly and only in obvious cases where the Court is satisfied that there are "strong grounds" upon which an appellate court could find that the motions judge exercised his discretion on a wrong principle or is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303; Adrian v. Napa Valley Plaza Inc., 2011 ONSC 2168. [Emphasis added.]

[4] The applicants assert a number of grounds which they claim give reason to doubt the correctness of the decision.

[5] The applicants acknowledge that the test for leave is particularly stringent in the case of a costs order. They argue that the size of the order, while not enough in itself, renders this award as "outlier" that warrants a "hard look", particularly in light of the fact that the award was ordered on a joint and several basis against all the defendants including Mr. Pajak personally.

[6] I see no error on the part of the motions judge in awarding costs against the defendants on a joint and several basis. The motions judge was alive to the role played in the motion by the Pajak defendants. He found the Carbone brothers and Mr. Pajak shared responsibility for the failure to provide Mr. DeGroote with the final information to which he was entitled. He also considered the issue of offer, regarding which the motions judge received and considered extensive submissions, and concluded it was not accepted and should not affect the award of costs on the Pajak defendants. His finding in this regard was amply supported by the record and there is no reason to doubt its correctness. I do not agree with the applicants that the motions judge erred in imposing costs against Mr. Pajak personally. While it is true that the motion was not brought against him personally, the action does name him personally and the motions judge was alive to and addressed the interconnections of the players, as well as the fact that the Pajak defendants had contested the receivership motion on its merits.

[7] With respect to the quantum, the Pajak defendants submit that Mr. DeGroote did not provide sufficient particulars of the fees and disbursements sought to enable the motions judge to exercise his discretion in determining an appropriate costs award. This argument was made to the motions judge and he specifically addressed it and concluded that he did have adequate particulars and that dockets were not required. He found that the particularized cost outline "was sufficient to determine whether the costs claimed were reasonable and in accordance with the requirements of Rule 57.01(1)". I am satisfied that he was alive to the concern articulated by Mr. Trifts that Mr. Pajak was effectively being required to pay the abandoned "unfounded allegations" motions in which he had played a part, and he was in the best position to consider that position.

[8] With respect to the quantum of costs ordered, it is undoubtedly high, but the reasons for that were squarely considered and addressed by the motions judge. Given the amount of money in issue and the circumstances as discussed by the trial judge, I am not satisfied that the quantum awarded violates the proportionality principle.

[9] The Pajak defendants also argue that the motions judge determined that the Pajak defendants would be required to pay costs prior to the exchange of the parties cost submissions, thus violating the principles of natural practice. This ground fails. All the motions judge determined at that point was that Mr. DeGroote was entitled to his costs of the motion and directed the parties to make written submissions on costs. It is clear from the record that the motions judge's preliminary statement was, in essence, simply a statement that costs would follow the event, and it is also clear from his reasons that he carefully considered the costs submissions that were received.

[10] Finally, the doctrine of functus officio does not arise in these circumstances. The motions judge was not reconsidering a prior judgment but was exercising his discretion under s. 131 of the Courts of Justice Act. It is clear that all the parties treated the costs issues as continuing.

[11] This is not a case which could justify as set out on the basis of a conflicting decision as set out in Rule 62.02(4)(b). I am not satisfied that there is "good reason to doubt the correctness" of the motions judge's costs order for the reasons I have set out. In any event, I am not of the opinion that such an appeal would involve matters as such importance that leave should be granted. The application is therefore dismissed. This is not one of those rare cases which justify leave to appeal a costs order. The motions judge's decisions regarding costs were detailed and complete.

COSTS

[12] Costs of this application are payable by the applicants to the respondents in the amount of $3,500.

Harvison Young J.

Date: March 10, 2014