Court File and Parties
CITATION: AE Hospitality Ltd. v. George, 2015 ONSC 7370 DIVISIONAL COURT FILE NO.: 342/15 DATE: 2015-12-11 SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT
RE: AE Hospitality Ltd., Applause Catering Inc. and Encore Food With Elegance, Plaintiffs AND: Irene George, Anne Bolotin, Eugene George, The Canadian Imperial Bank of Commerce, Bank of Nova Scotia, Bank of Montreal, HSBC Bank of Canada and TD Canada Trust, Defendants
BEFORE: Mr. Justice H.J. Wilton-Siegel
COUNSEL: Lara Di Genova, for the Applicants/Defendants, Irene George, Anne Bolotin and Eugene George Shawn Tock, for the Respondents/Plaintiffs
HEARD: December 1, 2015
Endorsement
[1] The defendants in this action sought leave to appeal the costs order of Whitaker J., dated April 27, 2015 (the “Order”), awarding costs in favour of the plaintiffs in the amount of $30,000. At the conclusion of the hearing, I advised the parties that the motion was denied for written reasons to follow. This Endorsement sets out the reasons of the Court for this determination.
Background
[2] The motion judge rendered an amended endorsement dated March 20, 2015 (the “Endorsement”) in which he denied the defendants’ motion for a variation of the terms of an outstanding Mareva injunction to provide funds to pay their prospective legal costs in defending this action.
[3] The Endorsement provided that the parties were to make written submissions as to costs within ten days. The plaintiffs provided costs submissions within ten days. The defendants did not. The motion judge issued a costs award on March 31, 2015 by a letter dated March 30, 2015.
The costs award read: “I have before me the materials filed by the parties. The plaintiffs are to get their costs, all in, fixed at $30,000.”
[4] Upon receiving this costs award, counsel for the defendants inquired whether the motion judge would still accept their submissions and, upon being advised that he would, provided them by email. Pursuant to a letter dated April 27, 2015, the motion judge confirmed his earlier costs award. The letter read: “I have read and considered the further material filed. I am not changing my Order of costs in my letter of March 30, 2015. Costs remain to the plaintiffs fixed at $30,000.”
The Test for Leave to Appeal
[5] The test for granting leave to appeal under Rule 62.02(4) of the Rules of Civil Procedure, R.R.O. 1990, O. Reg. 194 is well-settled. It is recognized that leave should not be easily granted and the test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test and, in each case, both aspects of the two-part test must be met before leave may be granted.
[6] Under Rule 62.02(4)(a), the moving party must establish that there is a conflicting decision of another judge or court in Ontario or elsewhere (but not a lower level court) and that it is, in the opinion of the judge hearing the motion, “desirable that leave to appeal be granted.” A “conflicting decision” must be with respect to a matter of principle, not merely a situation in which a different result was reached in respect of particular facts: see Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 7 O.R. (3d) 542 (Div. Ct.).
[7] Under Rule 62.02(4)(b), the moving party must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong – that aspect of the test is satisfied if the judge granting leave finds that the correctness of the order is open to “very serious debate”: see Nazari v. OTIP/RAEO Insurance Company Inc., [2003] O.J. No. 3442 (S.C., per Then J.); Ash v. Lloyd’s Corp. (1992), 8 O.R. (3d) 282 (Gen. Div., per Farley J.). In addition, the moving party must demonstrate matters of importance that go beyond the interests of the immediate parties and involve questions of general or public importance relevant to the development of the law and administration of justice: see Rankin v. McLeod, Young, Weir Ltd. et al. (1986), 57 O.R. (2d) 569 (H.C.J., per Catzman J.); Greslik v. Ontario Legal Aid Plan (1988), 65 O.R. (2d) 110 (Div. Ct.).
Position of the Applicants
[8] In their costs submissions, the applicants say that a substantial portion of the costs claimed by the plaintiffs related to new allegations that were irrelevant to the motion, but would be relevant for the trial, and should therefore have been adjusted for by the motion judge and reserved for the trial judge. The applicants say that, because the motion judge confirmed his earlier costs award without providing any reasons, they cannot tell if any such adjustment was factored into the motion judge’s costs award, as set out in the Order.
[9] The applicants argue that, in these circumstances, they are entitled to written reasons providing them with an indication as to whether an adjustment was made. In the absence of such reasons, they say that it is impossible to determine the reasonableness of the Order. On this basis, they say that the Order conflicts with the principles in Toronto Standard Condominium Corp. No. 1633 v. Baghai Development Ltd., 2012 ONCA 417, 293 O.A.C. 123, and that there is also reason to doubt the correctness of the decision.
Analysis and Conclusions
[10] I will address the operation of both branches of the test for leave to appeal under Rule 62.02(4) in turn.
The Test Under Rule 62.02(4)(a)
[11] The applicants suggest that the absence of reasons in the circumstances of this case conflicts with the decisions of the Court of Appeal in Toronto Standard and of Epstein J. (as she then was) in United States v. Yemec, [2006] O.J. No. 510, 207 O.A.C. 249 (S.C.). I do not agree. These decisions can only constitute conflicting decisions to the extent that they evidence a principle that written reasons are required in all circumstances. There is no statutory or case law authority for such a principle.
[12] While courts are required to fix fair and reasonable costs, neither s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, nor Rule 57 of the Rules of Civil Procedure require a court to provide written reasons for costs award. The general rule is instead that a court will not disturb a costs award, notwithstanding the absence of reasons, if the record discloses a proper basis for the judge’s exercise of discretion: see Toronto Standard at para. 76 citing with approval McPhee v. Canadian Union of Public Employees and Canadian Union of Public Employees, Local 2094, 2008 NSCA 104, 270 N.S.R. (2d) 265, leave to appeal refused, [2008] S.C.C.A. No. 546.
[13] The cases upon which the applicants rely concluded that written reasons were required for reasons that were particular to the facts in those cases rather than on any more general principle.
[14] In Toronto Standard, the application judge was dealing, in effect, with two costs awards: an award of costs under s. 131 of the Courts of Justice Act and a request for “actual additional costs” under s. 134(5) of the Condominium Act, 1998, S.O. 1998, c. 19, which attracted its own standard of reasonableness. In these circumstances, the court held that written reasons were necessary to understand the manner in which the trial judge addressed the two sets of costs in the single costs award. In the present circumstances, the court was dealing only with costs under s. 131 of the Courts of Justice Act.
[15] The circumstances in Yemec were also substantially different from the present case. It is clear from paragraph 26 of that decision that the trial judge considered that an analysis of the motion judge’s reasoning was required in that case because of exceptional circumstances – the magnitude of the award, being $616,900, as well as certain process issues.
[16] Accordingly, there is no conflicting decision for the purposes of the test in Rule 62.02(4)(a).
[17] In addition, in the absence of any conflicting decision, I am not persuaded that there is any basis for concluding that it is desirable that leave to appeal be granted for the purposes of Rule 62.02(4)(a). This issue is of significance only to the parties themselves. Moreover, the actual monetary difference between the parties is $9,000 or roughly 25% of the partial indemnity costs proposed by the respondents as discussed below.
The Test Under Rule 62.02(4)(b)
[18] In the alternative, the defendants submit there is good reason to doubt the correctness of the Order on its merits.
[19] The plaintiffs sought costs in the amount of $49,510.12 on a substantial indemnity basis and $37,118.88 on a partial indemnity basis. It is noteworthy that the defendants suggested in their cost submissions that, if costs were awarded in favour of the plaintiffs, such costs should be awarded on a partial indemnity basis in the amount of $21,000. The motion judge rejected an award on the substantial indemnity scale and awarded costs of $30,000, representing approximately $7,000 less than the amount the plaintiffs sought and $9,000 more than the amount the defendants proposed on a partial indemnity basis.
[20] The defendants rely heavily on the order of events as the basis for their argument of entitlement to written reasons. This is perverse for the following reason. If the motion judge had received costs submissions of counsel from both parties prior to his initial letter, there would have been no entitlement to written reasons for the reasons discussed above. It is the fact that the motion judge confirmed his original decision without any change after receiving the defendants’ cost submissions that the defendants say gives rise to their right to written reasons. However, this situation only arose because of the defendants’ failure to adhere to the schedule established by the motion judge in the Endorsement and the subsequent indulgence granted by the motion judge. I do not see why such an indulgence should be turned around to give rise to a right to receive written reasons when there was no such right in respect of the original determination.
[21] To address this problem, the defendants argue that there are exceptional circumstances in the present case. They argue that a motion judge has an obligation to give written reasons if the judge makes a costs award in an amount that is less than the amount sought by the successful party. There is, however, no authority for such a proposition. Moreover, the defendants’ position is also contrary to the role of the court in making a costs award.
[22] Under the Courts of Justice Act and the Rules of Civil Procedure, the role of the Court is to fix fair and reasonable costs, not to assess costs. While the defendants argue apparently that they are entitled to written reasons to know if the motion judge made an adjustment that they think is appropriate rather than an adjustment on some other basis, there no right to such an adjustment in the first place. The motion judge was entitled to make his own determination regarding the appropriate considerations to be taken into account, provided in his opinion the final result was fair and reasonable in the circumstances of this motion.
[23] Given the discretion granted to the court for such purposes, a costs award can be set aside only if a party can demonstrate an error in principle or a palpable and overriding error of fact upon which the award was based. The onus is on the defendants to demonstrate such an error in principle or overriding error. In effect, the defendants seek to reverse this onus by asserting a right to written reasons that address their specific issues. For this reason, I think the premise upon which the defendants proceed is incorrect.
[24] Accordingly, the defendants can only succeed on this leave motion if they can demonstrate that there is serious reason to doubt that there was a proper basis for the costs award of the motion judge. The defendants have not satisfied this requirement.
[25] The new allegations pertained to an allegedly false account by which additional monies were alleged to have been diverted by the defendants, Irene George and Eugene George. The evidence before the Court indicates that the new allegations were relevant to the motion before the motion judge. In addition to having relevance for the merits of the action, the evidence also suggested the existence of additional monies that would be available to the defendants to fund their legal costs.
[26] The defendants’ principal issue relates to the legal costs associated with certain Rule 39.03 examinations conducted with respect to evidence of the plaintiffs that responded to certain emails produced in reply by the defendants. The plaintiffs’ asserted that the emails were fictitious and produced evidence directed to this issue. It is certainly arguable that this issue is relevant to the credibility of the defendants which was significant for the motion judge. In addition, regardless of the relevance of these examinations, I would note that the total costs pertaining to these examinations roughly approximate the adjustment to the plaintiffs’ partial indemnity costs that the motion judge applied, based on the time estimated by the defendants’ counsel and a reasonable blended rate for the plaintiffs’ counsel. The evidence therefore suggests that an adjustment was made for at least some of these costs.
[27] In short, the motion judge was in the best position to determine the extent, if any, to which any adjustment should be made to reflect costs attributable to the allegations raised by the plaintiffs that the defendants say were not relevant to the motion and any other relevant factors including the offer to settle made by the plaintiffs. While the motion judge did not provide reasons, there was a reasonable basis in the record for the award that he made.
[28] Based on the foregoing, I am not persuaded that there is any reason to doubt the correctness of the Order.
[29] Furthermore, given the absence of any requirement that the motion judge provide written reasons in the circumstances of this motion, the defendants have not demonstrated the existence of any matter of importance that goes beyond the interests of the immediate parties and involves a question of general or public importance relevant to the development of the law and the administration of justice. As mentioned above, the matter is of significance only to the parties themselves and the actual monetary difference between the parties is $9,000 or roughly 25% of the partial indemnity costs sought by the respondents.
[30] Accordingly, the defendants cannot satisfy the requirements for leave to appeal under Rule 62.02(4)(b).
Conclusion
[31] Based on the foregoing, the defendants’ motion for leave to appeal is dismissed. Costs of this leave motion are awarded in favour of the respondents in the amount of $6,300.
Wilton-Siegel J.
Date: December 11, 2015