CITATION: Awad v. Dover Investments Limited, 2016 ONSC 279
DIVISIONAL COURT FILE NO.: 262/15 DATE: 20160115
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
BETWEEN:
GHAREEN AWAD and TRANSPACIFIC PETROLEUM CORP.
Applicants (Respondents)
– and –
DOVER INVESTMENTS LIMITED, DOVER PETROLEUM CORP. and ROBERT SALNA
Respondents (Moving Parties)
Ghareeb Awad, in Person, for the Applicants
Harold Maltz, for the Moving Parties
HEARD at Toronto: November 17, 2015
M.A. Sanderson J.
REASONS FOR DECISION
Introduction
[1] The Respondents Dover Investments Limited, Dover Petroleum Corp. and Robert Salna “hereafter Dover” seek leave to appeal the costs order of McEwen J. dated April 30, 2015 made after an 18 day trial of three issues.
Background
[2] I shall briefly refer to the background, subject matter, and course of the litigation between the parties to date as they provide the context in which the issues judge heard the trial of the three issues and made the costs award relating to that trial of the issues that he did.
[3] In 2000, Awad and Dover entered into a Joint Venture Agreement in respect of an oil field “the REU oil field” in Egypt and a development lease.
[4] In November 2003, Awad commenced an oppression application 09-CL-5217 under the OBCA against Dover.
[5] On September 21 2004, after a 7 day trial, Spence J. declared that the affairs of Dover Investments had been conducted in an oppressive manner with respect to witholdings Dover had made relating to Concession expenses in respect of the REU joint venture. He held that Dover had wrongly withheld payments from Awad and he ordered Dover to pay Awad US$725,095.48.
[6] He ordered that Awad’s interest be valued on a reference on the basis of an overall value of the joint venture of $3.5 million and a base value of $630,000 for Awad’s 18% interest as at March 31 2004.
[7] In December 2004, Dover brought a motion to set aside the judgment. On February 3, 2005, Spence J. released supplemental Reasons for Decision. Submissions were made on May 9, June 21-23, August 23 and November 21-25, 2005, and in accordance with Directions on March 31, 2006, Second Supplemental Reasons for Decision were released on August 30, 2006.
[8] On November 24 2006, in Supplemental Reasons for Decision, Spence J. held that Dover’s oil revenue from REU guaranteed performance of the obligations under the EWA. Awad had agreed that certain expenses could be paid. Therefore, Spence J. reduced the judgment from $725,095.48 by subtracting $231,234 to $493,861. Spence J. ordered a reference and an accounting in respect of the revenues received, the expenses incurred and payments made under the REU joint venture for the purpose of determining the amounts, if any, owing between Awad and Dover.
[9] Spence J. also ordered Awad to sell and Dover to buy Awad’s interest under the REU Joint Venture Agreement. The value of Awad’s interest in the joint venture was to be determined by means of a reference. He ordered that Awad’s interest in the REU joint venture was to be valued by means of a reference as of December 31, 2005. Effect was to be given to a Ryder Scott draft valuation as of March 1, 2004 and to Awad’s acceptance of that valuation. Adjustments were to be made subsequent to the valuation date.
[10] The valuation and accounting was to be conducted by a Master.
[11] On November 24 2006, Spence J. also granted Awad’s request for an order in advance of the references. He ordered subject to further direction of the Court, that the costs of the references be borne by Dover because Awad had been successful in obtaining remedies in the form of an accounting and a valuation. He noted that further references would be for the purpose of giving effect to the judicial determination that he had already made.
[12] The portion of the order respecting costs of the references before the Master read as follows: Subject to any further direction of the Court, the costs of the references shall be payable by the Respondents [Dover] and shall be within the discretion of the Master in all other respects.
[13] On February 4, 2008, the Divisional Court heard Dover’s appeal and Awad’s cross appeal and dismissed them both.
[14] The Divisional Court held that Spence J.’s direction as to costs, while unusual, was warranted because Awad had succeeded in obtaining an order for the purchase of his interest in the REU joint venture and the reference as to the valuation was to carry out that order. Further, the decision re the costs of the reference was not final.
[15] On March 25, 2009, after a long trial in British Columbia, Loo J. held that Awad had failed to prove that Dover or its principal Salna had breached its contract with respect to REU wells 1 and 11. She also declared that Awad was not entitled to any revenues from REU well 12 and that no expenses in connection with that well were to be deducted. She reduced Awad’s interest in the REU joint venture to 17.647%.
[16] Awad’s application to appeal the decision of Loo J. was dismissed.
[17] Awad and Dover then brought motions for directions pursuant to the Judgment of Spence J. dated November 24, 2006.
[18] On May 6, 2011, Spence J. held, inter alia, that since expert evidence was proposed and would likely be disputed and controversial, a trial of an issue would be appropriate to determine the value of the REU joint venture.
[19] Spence J. ordered trials of two issues: (1) to determine the value of the REU joint venture as of December 31, 2005 and (2) to quantify the volume of oil produced by the REU well 12, and the revenue earned by the sale of the oil produced by REU well 12, to and including December 31, 2005.
[20] Because Awad had consistently availed himself of the court process in BC, Alberta and Ontario, had been unsuccessful, and had failed to pay costs orders made against him, monetary judgments, costs awards, and orders made in British Columbia action SO72294,BC file no CA36089, costs certificates made in BC SO 68338,72294, and 33664, in Alberta action 0601,03308,1001-0198 AC be registered in Ontario, Spence J. also ordered that the references he had ordered on November 24, 2006 would be conducted in accordance with the order of Loo J., and would also determine the amounts owing on the judgments in BC and Alberta. At the time of the costs submissions, counsel for Dover submitted that the amount owed by Awad was $1,673,916, of which only $864,333 had been paid.
[21] In September 2011, Spence J. dismissed a further motion brought by Awad to vary his May 2011 order.
[22] After Awad was denied leave to appeal from that order, he then served a Notice of Abandonment of this Application and attempted to commence a new Application in the name of a related company, Transpacific Petroleum Corp. On June 27, 2012, Perell J. set aside Awad’s Notice of Abandonment and dismissed his new Application.
[23] In February 2014, McEwen J. ordered a trial of a third issue: i.e. whether Awad was required to pay 17.64% of the monies paid to the investors who purchased a 5.71% interest in the REU Joint Venture.
[24] The trial of the three issues was heard by McEwen J. (the “issues judge”) in May, June, July and August of 2014. Reasons for Decision were released in January 2015. McEwen J.’s costs endorsement was released on April 30, 2015.
The Reasons of McEwen J. Re Costs
[25] Given Dover’s request for an order granting leave to appeal from a discretionary order, I have first included the issues judge’s reasons explaining why he exercised his discretion in the manner that he did:
[2] In conducting my review of the cost submissions I have taken into account the principles set out in Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA). As noted in that case, the overall objective of fixing costs to arrive at an amount that is fair and reasonable for an unsuccessful party to pay in the particular circumstances, rather than a fixed amount by the actual costs incurred by the successful litigation. I do not propose to go through each and every item which would amount to an assessment of the bills of costs provided. Instead, I have fixed costs, keeping in mind the principle of proportionality and the factors set out in Rule 49 and Rule 57.01.
Should Costs be Awarded?
[3] The applicants submit that costs should not be awarded based on Spence J.’s November 24, 2006 judgment, paragraph 10, which noted that costs of the reference should be paid by the respondents and shall be in the discretion of the Master. In my view, Spence J.’s judgment did not refer to the trial of the issues that I was to conduct; therefore, the discretion to award costs remains with me with respect to the trial of the issues.
To Whom Should Costs be Paid?
[4] For the reasons below, I have awarded the respondents partial indemnity costs on a reduced scale.
The Scale at Which Costs Ought to be Awarded
[5] The respondents submit that the applicants ought to pay the respondents “costs on a full indemnity basis” primarily on what they described to be Awad’s “egregious conduct” as well as the Offers to Settle delivered by the respondents.
[6] I will first deal with the issue of behaviour”. In this regard, the respondents primarily rely upon the fact that Awad alleged throughout the trial that the respondents and their experts misled the Court (which I did not accept) and that Awad authored significant portions of the report and also further instructed Chapman how to author the report.
[7] All this being said, the fact of the matter is that Awad’s case went in quickly (only he and Chapman testified on behalf of the applicants). In total, it took approximately four days. His cross-examinations of the respondent’s witnesses, notwithstanding the fact he made allegations of bias and dishonesty, were not excessive nor did they prolong the litigation. If anything, Awad’s conduct at trial was superior to that of the respondent Salna, and I noted this in my Reasons for Judgment.
[8] On this basis, there is no reason to award full indemnity costs or substantial indemnity costs.
Offers to Settle
[9] With respect to the Offers to Settle, there were two offers open for the applicants to accept, being the offers of February 13, 2013 and May 4, 2014. In my view, the February 13, 2013 Offer to Settle really does not impact the three issues that I determined at the trial of the issues in any meaningful fashion.
[10] On the other hand, the May 4, 2014 Offer to Settle is of relevance. Having reviewed that Offer to Settle, I agree with the respondents that they obtained a better result than that set out in the offer with respect to the issues surrounding the value of the REU oil field, the REU 12 oil production figure amount earned by the sale of that oil from the REU 12. Similarly, they obtained a better result with respect to the issue of the 5.71 percent investors. The difficulty with the May 4, 2014 Offer to Settle, however, is the fact that it was delivered to the applicants on the basis that all terms contained therein had to be accepted by the applicants. Some of those terms did not involve the issues involved in the trial of the three issues before me (see paragraph 1 and particularly 7 and 8 of the Offer to Settle) and dealt with other disputes between the parties.
[11] The applicants did not deliver any Offers to Settle but prior to trial delivered an offer to settle all litigation in the amount of $20 million dollars. This offer was nowhere close to the result at trial, and similarly sought to settle all the litigation between the parties.
Analysis
[12] Surprisingly, neither the applicants nor the respondents delivered Offers to Settle dealing only with the three discrete issues that had to be determined at the trial. As noted, the applicants’ Offer to Settle need not be considered. With respect to the respondents’ Offer to Settle, as I have noted, it was delivered on the basis that all of the terms had to be accepted by the applicants and some of those terms involved issues outside the scope of the trial before me. In these circumstances, it is settled law that it does not constitute a valid Offer to Settle since it cannot be determined whether, overall, the respondents enjoyed success.
[13] Offers to Settle, however, are designed to encourage settlement. Although the respondents did not technically beat their offer, the applicants could have responded to the offer with respect to the three issues that were in dispute in this trial. They did not and the matter went on to a lengthy trial.
[14] In my view, I should therefore exercise my discretion and award some costs to the respondents. They clearly obtained a result with respect to the three issues that was superior to that contained in the Offer to Settle. In these circumstances the respondents created a potential for settlement with respect to the three issues that the applicants did not respond to. If they had, there is reason to believe a settlement could have been achieved.
[15] In all of these circumstances, the respondents are entitled to some portion of their costs. I have reviewed the respondents’ bill of costs in order to determine what would be a fair award in the circumstances.
[16] On a full indemnity basis the respondents incurred legal fees in the amount of $462,697.00, exclusive of taxes, plus general disbursements in the amount of $15,021.51 inclusive of taxes.
[17] They also seek disbursement amounts for experts of $358,442.60, plus consulting fees for Amrine and Wood totaling $25,255.00, and other associated expenses involving travel and accommodation. Reimbursement for the experts is sought in US dollars (“USD”).
[18] Insofar as fees are concerned it is my view that the amount sought is too high. While the hourly rates of Messer’s Maltz and Gold are reasonable it is my view that two senior counsel were not required throughout the trial preparation and trial stage, particularly when Mr. Gold did all of the counsel work at trial.
[19] In this case, I would have thought that the respondents own legal costs for fees would be assessed in the approximately $400,000.00 range plus applicable taxes. Partial indemnity costs would therefore amount to approximately $240,000.00 plus applicable taxes. I would award the respondents the amount of $120,000.00 plus applicable taxes, which amounts to approximately 50 percent of the respondents’ partial indemnity costs, including pretrial motions.
[20] Insofar as disbursements and experts reports are concerned, I do not have any difficulty with respect to the $15,021.51 in general disbursements. I do have difficulty, however, with the amounts paid to experts. First, I would not allow any amounts to the experts McKee or Weiner since I did not accept their opinions. I would further not award anything for the report of Earth Resources Exploration Petroleum Consultants since no expert was called at trial.
[21] With respect to the remaining experts; namely, Connor, Roesle and Carsted, I have difficulty accepting the amounts that were paid for attendances at trial ($90,102.97 US for Connor and Roesle and $24,417.18 US for Carsted). I acknowledge that Connor and Roesle had to re-attend but the applicants should not bear the cost of this, since the re-attendance had nothing to do with them.
[22] Further, I would not allow for any of the consulting fees sought for Amrine or Wood. They were fact witnesses. Amrine was also an ex-employee. There is no basis, in my view, to compel the applicants to pay these witnesses who were appearing at trial pursuant to a Summons to Witness. In any event, the amount sought is excessive.
[24] I would also not allow for any of the travel or accommodation expenses for McKee or Weiner for the reasons above, nor would I allow any for the respondent Salna who lives in Richmond Hill. I would also not allow any expenses for Salna’s travel to the courthouse in Toronto or to Vancouver to attend Awad’s examination for discovery, nor would I allow secretarial expense.
[25] In all of the circumstances, some amount should be paid to the experts but not on a partial indemnity basis given my comments with respect to the Offer to Settle and the amounts of the accounts rendered.
[26] I would allow disbursements in the amount of $110,000.00 USD inclusive for the experts fees of Carsted, Connor and Roesle. I would allow a further $15,000.00 inclusive for the remaining disbursements. (emphasis added)
The Test To Be Applied In Granting Or Refusing Leave to Appeal a Costs Order
[26] Leave to appeal costs orders should be sparingly granted, given that costs awards are discretionary.
[27] In McNaughton Automotive Limited v. Co Operators General Insurance Company, see also McNaughton Automotive Ltd. v Co Operators General Insurance Co. 2008 ONCA 597, 95 OR (3d) 365 at paras 24-26, Armstrong J. for the Ontario Court of Appeal wrote:
[24] In Brad-Jay Investments Ltd. v. Szijjarto, 2006 42636 (ON CA), [2006] O.J. No. 5078, 218 O.A.C. 315 (C.A.), at para. 21, this court said:
Leave to appeal a costs order will not be granted save in obvious cases where the party seeking leave convinces the court that there are "strong grounds upon which the appellate court could find that the judge erred in exercising his discretion".
[25] This court has also said that "[l]eave to appeal a costs order, standing alone, is granted only sparingly": see [page373] Inter-Trust Mortgage Investment Corp. v. Robinson, 1999 CarswellOnt 1733 (C.A.), at para. 12.
[26] As to the grounds upon which an appellate court should set aside a costs order, Arbour J. said in Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, [2003] S.C.J. No. 72, at para. 27:
A court should set aside a costs award on appeal only if the trial judge has made an error in principle or if the costs award is plainly wrong (Duong v. NN Life Insurance Co. of Canada (2001), 2001 24151 (ON CA), 141 O.A.C. 307, at para. 14).
[27] I am also mindful that a costs award is a discretionary order and that the judge of first instance is in the best position to determine the entitlement, scale and quantum of any such award. In this case, the motions judge, a trial judge of great experience, has lived with these cases for more than six years. He knows and understands all the subtleties of the cases. I must grant him considerable deference unless I conclude that there are obviously strong grounds of appeal.
Analysis
Principles To Be Applied in Assessing Costs
Rule 1.04-Proportionality
[28] Counsel for Dover submitted that leave should be given because the issues judge erred in law and principle in the application of the principle of proportionality under Rule 1.04(1.1)
[29] Rule 1.04(1.1) requires the Court to: “make orders” that are proportionate to the importance and complexity of the issues, and to the amount involved in the proceeding."
[30] Counsel for Dover submitted that the amount involved in the proceeding was substantial. Awad claimed that he should receive $24.6 million to $44 million. In considering the costs of defending that claim, the issues judge should have mentioned and considered the significance of that claim.
[31] The issues judge expressly acknowledged that the issues were complex. He should have reflected that complexity in his costs award.
Rule 57.01
[32] Counsel for Dover submitted that with respect to fees, the issues judge erred in the application of Rule 57.01 factors, when he ordered that Awad must pay only 50% of Dover’s estimated partial indemnity fees.
Success – The Amount Claimed and the Amount Recovered in the Proceeding
[33] He submitted that despite his statement that he had kept in mind the factors set out in Rule 57.01, the issues judge failed to reflect in his costs award that Dover was the winner on all three issues.
[34] On the first issue, the volume of oil produced by the REU well 12, up to December 31, 2005, Awad claimed that the well was incapable of production at a commercial rate and that its production was nil. Dover claimed that its production was 84,835 barrels. McEwen J. held its production was 78,700 barrels, a conclusion favourable to Dover.
[35] On the second issue, Awad claimed the joint venture was worth $249 million in total, and that his percentage had a value of $44 million. Dover’s position was that the value of the REU field and Joint Venture, as of December 31, 2004 was $4.9 million. The issues judge held at paras 119, 139 and 143 that it was $6,323,218 (US $5,423,000), a conclusion again favourable to Dover.
[36] On issue three, Awad claimed that he had no obligation to pay anything. Dover submitted that Awad was required to pay 17.647% of the monies paid by the investors who purchased a 5.71% interest. The trial judge held that Awad was required to pay the 17.647% share.
Any Offer to Settle
[37] Although the trial judge held that the Offer to Settle dated May 4, 2014 was not a valid Offer to Settle under Rule 49, he held it was relevant to the costs issues. He noted that Dover obtained a better result on all 3 issues than was contained in Dover’s offer to settle.
[38] Had it been a valid offer, since Awad obtained a result less favourable than the terms set out in Dover’s offer to settle, he would normally have been entitled to partial indemnity costs to the date of the offer to settle and Dover would have been entitled to receive partial indemnity costs from the date of the offer to settle, unless the court ordered otherwise.
[39] According to the Respondents, after May 2, 2014, Mr. Maltz, one of the counsel for Dover, spent 266.50 hours and Mr. Gold, another Dover counsel, spent 467.8 hours. The issues judge commented in his Costs Reasons that while the hourly rates of Mr. Maltz and Mr. Gold were reasonable, he was of the view that two senior counsel were not required throughout the trial preparation and trial, particularly when Mr. Gold did all of the counsel work at trial.
Complexity
[40] On the complexity of the issues, I have already noted that the issues judge mentioned in his Reasons for Decision that determining the value of the REU joint venture was complex.
The Amount of Costs that an Unsuccessful Party Could Reasonable Expect to Pay in Relation to the Step in the Proceeding for Which Costs are Being Fixed
[41] Counsel for Dover submitted that given Awad’s significant claims, Dover was justified in incurring significant expenses to defend against them. Awad would, or should have anticipated that Dover’s expenses in that regard would be substantial.
Other Factors Affecting The Amount and/or Scale of Costs-Allegations of Fraud and Manipulation of the Evidence
[42] Counsel for Dover submitted that the issues judge erred in law in failing to award costs on a complete or substantial indemnity basis throughout, by reason of Awad’s improper conduct, manipulation of the evidence and unsubstantiated allegations that Dover had acted fraudulently. The issues judge erred in not sanctioning Awad’s conduct by awarding substantial indemnity costs, because he was of the view that Awad's evidence and cross-examination of the Dover witnesses had not delayed the trial of the issues.
[43] Counsel for Dover submitted that meritless claims of fraud, deceit and dishonesty represent a form of egregious conduct that should ground a higher costs award. Davis v. Clarington 2009 ONCA 722, 100 O.R. (3d) 66 Court of Appeal for Ontario. He also cited Hamilton v. Open Window Bakery [2004] 1. S.C.R. 303 Supreme Court of Canada, where Arbour J. referred to the principle at paragraph 26 as follows:
In Young v. Young, 1993 34 (SCC), [1993]4 S.C.R. 3, at p. 134, McLachlin J. (as she then was) for a majority of this Court held that solicitor-and-client costs "are generally awarded only where there has been [page313] reprehensible, scandalous or outrageous conduct on the part of one of the parties”. An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and-client costs, since not all such attempts will be correctly considered to amount to "reprehensible, scandalous or outrageous conduct". However, allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception. When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent (as Wilkins J. found), costs on a solicitor and-client scale are appropriate: see, generally, M. M. Orkin, The Law of Costs (2nd ed. (loose-leaf)), at para. 219. (emphasis in original) McNaughton Automotive Limited v. Co- Operators 2008 ONCA 597, 95 O.R. (3d) 365 Court of Appeal for Ontario
[44] He also cited TO v. Hunt Securities 2003 3649 (ON CA), 66 O.R. (3d) 481 where the Court of Appeal for Ontario referred to Gerula v. Flores as follows:
[133] In Gerula, at pp. 528-29 D.L.R., the court relied on the judgment of Dubin J.A. in Foulis v. Robinson, Gore Mutual Insurance Co. (third party) (1978), 1978 1307 (ON CA), 21 O.R. (2d) 769, 92 D.L.R. (3d) 134 (C.A.) which set out the following principles:(1)Solicitor-and-client costs as opposed to party-and-party costs will only be awarded in rare and exceptional cases.(2)A defendant is entitled to defend an action and to put a plaintiff to the proof of his case.(3)Where a defendant's acts are a deliberate attempt to frustrate the proceedings by fraud or deception, where the conduct of the defendant is calculated to harm the plaintiff, or where the unreasonable conduct of the defendant compounds the complexity of the proceedings, there are proper grounds to order solicitor-and-client costs.
[45] In 1465778 Ontario v. 1122077 Ontario, the Court of Appeal for Ontario referred to the decision of the Supreme Court of Canada in British Columbia and Okanagan Indian Band as follows:
…As the Fellowes and Skidmore [infra] cases illustrate, modern costs rules accomplish various purposes in addition to the traditional objective of indemnification…In short, it has become a routine matter for courts to employ the power to order costs as a tool in the furtherance of the efficient and orderly administration of justice.
[46] Counsel for Dover submitted that while Awad held his expert Chapman out as an independent expert, in fact he was far from independent because Awad had manipulated his evidence.
[47] The issues judge recognized the nature of Awad’s conduct when he wrote at paragraph 27 of his Reasons for Decision: “…Chapman failed to execute his duty to provide proper expert evidence…On some occasions, Chapman simply practically verbatim incorporated portions of Awad’s emails into his report so it appears that the thoughts expressed were Chapman’s, when they were in fact Awad’s…” He noted that during cross examination at trial, Chapman had conceded that Awad had provided numbers that he had used in his report. Chapman had assumed that the information had been developed in court proceedings. Otherwise, he would have prepared his report differently.
[48] The issues judge commented at paragraph 26 of his Reasons for Decision: "In addition to not providing Chapman with the aforementioned voluminous, relevant documentation, Awad provided Chapman with little or any of the relevant information relied upon by the respondents, since Awad felt that the data relied upon was meaningless. This simply was not the case, as the data relied upon by the respondents was, generally speaking, reliable and relevant to the issues in this action." He noted that "Awad refused to give Chapman a copy of Spence J.'s order that set out the issues to be tried in this action so that Chapman could better understand the case and his role as expert" and that "Awad provided Chapman with inaccurate information as to the length of the Concession Agreement lease.”
[49] Counsel for Dover referred to Awad’s evidence at the trial, that after he had sent material to Chapman by email dated January 24, 2013, he had had no communication with Chapman until after he had received his report (dated March 6, 2013).
[50] During cross-examination, Chapman produced email correspondence illustrating that he and Awad had communicated between January 25, 2013 and March 6, 2013 about how Chapman should write his expert report. In some cases, Awad had provided the text that he wanted Chapman to use in his report. Chapman admitted that Awad had written the opinion with respect to REU #12 and that he had merely filled in the cash flow projection according to Awad’s instructions.
[51] The trial judge wrote at paragraph 25 of his Reasons for Decision:
Awad generally testified that he provided certain information and documentation to Chapman and thereafter allowed Chapman to prepare his own report. Email transmissions between Awad and Chapman produced at trial, however, demonstrated that this was not the case. The email transmissions showed that Awad provided Chapman with instructions, information and documentation that essentially resulted in a report prepared to Awad's liking, without any, or at best very little, of the necessary expertise being provided by Chapman.
Counsel Fees
[52] Counsel for Dover takes no issue with the issues judge’s conclusion that Dover’s legal fees would probably be assessed at $400,000 plus applicable taxes. He does not challenge that 60% of $400,000 would result in partial indemnity fees of $240,000. He does, however, challenge the reduction of that amount to $120,000.
[53] Counsel for Dover submitted that, the absence of such an explanation, given Dover’s substantial success on the three issues tried, the amounts in issue and Dover’s May 4 2014 offer to settle, in awarding Dover counsel fee of about half of partial indemnity fees, the issues judge erred in principle.
Expert Evidence of Carsted, Roesle and Connor
[54] Counsel for Dover also challenged the amount of the reduction of the fees of Dover’s experts, Carsted, Connor and Roesle. He submitted that the issues judge erred in principle in failing to order Awad to pay at least full partial indemnity costs in relation to their evidence.
[55] He submitted that the issues judge generally accepted and relied upon their evidence. He commented in his Reasons for Decision that Carsted was an “excellent witness”. He described in detail the complexity of the issues, the completeness of their evaluations and the extensive amount of historical material they were required to examine and evaluate in reaching their opinions. He commented that he was particularly impressed by the scope of Carsted’s investigation and the reams of documents he had reviewed. The issues judge at paragraph 26 commented that Chapman, Awad’s expert witness, should have reviewed the voluminous relevant documentation as Dover’s experts had done.
[56] Counsel for Dover reasoned that the amounts Dover paid for their attendances at trial were too high. He did not think Awad should also be required to pay for their re-attendances.
[57] Counsel for Dover submitted that there was no evidence before the issues judge upon which he could have properly concluded that the amount charged by these three experts was too high. Included in amounts they charged was the time that they took to educate counsel as to that complex and specialized analysis, and as to the evidence that they would be required to give at trial.
Connor and Roestle
[58] Connor gave evidence at the trial on June 9 and 10, 2014. Roesle gave evidence on June 10, 2014. Both Connor and Roesle re attended to give further evidence on July 11, 2014.
[59] Excluding the amount paid for re-attendances, Dover paid approximately US $170,000 for the reports and attendances of Connor and Roesle. The amounts it paid in June related to their attendances in June and in July. The amount it paid for their July attendances was approximately US $30,000.
Carsted
[60] Dover paid US $119,727 for the reports and attendance at the trial of Carsted consisting of US $96,000 for reports and US $24.417 related to his attendance at the trial.
Amrine and Wood
[61] On this application for leave, Dover does not challenge the issues judge’s refusal to award the consulting fees of Amrine and Wood totaling $225,255.
Costs of Motion Heard by Perell J.
[62] At paragraph 19, the issues judge mentioned “pretrial motions” in the amounts that he awarded for legal fees. He had personally heard two pretrial motions, a scheduling motion on January 9, 2014 and a motion by Dover to call more than three expert witnesses on February 26, 2014.
[63] Counsel for Dover submitted that he erred in law and principle in failing to separately award Dover’s costs arising from the order of Perell J. dated June 27, 2012.
[64] Counsel for Dover submitted that for the motion before Perell J, Dover had incurred fees in the amount of $25,733 on a partial indemnity scale. Dover had also incurred disbursements for the motion of $1,684. He asked for costs on a complete indemnity scale in the amount of $42,889 excluding HST, or on a substantial indemnity scale in the amount of $38,600 excluding HST, because Perell J. had held that Awad had abused the process of the Court.
[65] On April 2, 2012, Awad served a Notice of Abandonment this Application. On April 4, 2014, he prepared a new Notice of Application on behalf of Transpacific Petroleum, a related company, seeking an accounting and payment of amounts allegedly owing under the Joint Venture Agreement. Transpacific alleged that Awad's interest in the Joint Venture had been assigned to it. Dover promptly moved to set aside the Notice of Abandonment and for a dismissal of the new Application as an abuse of the process of the Court.
[66] Perell J. heard the motion. He reviewed the history of the proceedings, set aside the notice of abandonment and dismissed Transpacific’s Application as an abuse of process. He ordered costs of the motion to be in the cause.
[67] Counsel for Dover submitted that the Master who will be hearing the Reference will not have jurisdiction to order costs in the cause. Therefore, he requested the issues judge to award costs of the motion before Perell J.
Analysis
Application of the Test - Did the Trial Judge Err in Principle in Making the Costs Award that he Did?
Did he Fail to Give Proper Consideration to or Fail to Properly Apply Rules 1.04(1.1) and Rule 57.01(1)?
[68] Counsel for Dover submitted and I agree that the issues judge did not expressly explain why the settlement offer or any other factor in Rule 1.04 or Rule 57.01 led him to conclude that an order for costs on a scale lower than partial indemnity costs was appropriate. If the May 14, 2014 settlement offer had been a formal Rule 49 offer, the usual order would have been costs to Awad on a partial indemnity basis to May 4, 2014 and to Dover on a partial indemnity basis after May 4, 2014.
[69] The issues judge did not mention the significant amounts that Awad had claimed as they related to the amounts he arrived at. He did mention that the matters in issue were complex.
[70] However, I am satisfied from the content of his Reasons disposing of the issues and his costs Reasons, that the issues judge duly considered the amounts that Awad had been claiming from Dover, and the relative success achieved by Awad and Dover on the trial of the three issues.
[71] The issues judge did mention in his costs reasons that he had considered the proportionality principle, the factors enumerated in Rule 57 and the amounts that Awad would reasonably expect to pay if he were unsuccessful.
[72] He expressly considered the offer to settle dated May 4, 2014 and while he concluded that it did not qualify as a formal Rule 49 offer, he commented that it was more favourable than the results Awad received on the trial of all three issues, and that he had considered that offer.
[73] These costs Reasons did not cover the costs of the entire Application but were limited to costs of the trial of the three issues. The determination of the three issues did not finally determine the overall result or completely resolve the issues raised in Awad’s oppression application against Dover, first commenced in November 2003. Further proceedings will be required, including a reference or references before the Master.
[74] At this juncture, although it has been possible to measure success on the trials of the issues, given the complexity and history of this litigation and of the related and interrelated litigation in other provinces, it is still too early to measure with absolute certainty, the degree of overall success of the respective parties. A final costs award must await the final result.
[75] Dover’s degree of success in this trial of three issues must be considered in the overall context of all that has occurred in this litigation to date and the proceedings yet to occur, including the fact that Awad was originally successful against Dover on his oppression Application.
[76] The issues judge was clearly aware of that reality. He was in a better position to put the result of the trial of the three issues into its overall context, and to determine the entitlement scale and quantum than is this Court.
[77] Awad relied heavily on Spence J.’s order dated November 24, 2006 that Dover pay the costs of the references he had ordered before the Master, submitting that Dover was required to pay all of the costs of the trial of the three issues.
[78] Counsel for Dover submitted that Spence J.’s November 24, 2006 costs order made in respect of the references before a Master had no application to the trial of the three issues before a Judge. The issues judge would also have been aware that the Divisional Court had made it clear that the November 24, 2006 costs order was subject to any further direction of the Court.
[79] The issues judge referred to the November 24, 2006 costs order as follows: “In my view, Spence J.’s judgment did not refer to the trial of the issues that I was to conduct, therefore the discretion to award costs remains with me with respect to the trial of the issues.”
[80] In my view, it was open to the issues judge to reach that conclusion.
[81] The offer to settle dated May 2014 and the caselaw on Rules 1,49 and 57 provided him with a basis to award the legal fees that he did, to conclude that despite Dover’s success on the three issues it should not receive full partial indemnity costs throughout. At the same time, it was open for him to award some costs to Dover, including the legal fees and disbursements in the amounts that he did.
[82] On the issue of experts fees, the issues judge had a basis on which he could award the experts fees that he did. In the overall context of the litigation and given the settlement offer of May 2014, it was open to him to award less than full partial indemnity fees to Carsted, Connor and Roestle.
[83] On the issue of full or substantial indemnity costs, while other judges may have awarded the same to Dover, the caselaw does not mandate such an award. Again, the issues Judge must be granted considerable deference. There are no strong grounds for concluding that the issues judge erred in exercising his discretion. He made no error in principle. His order was not plainly wrong.
[84] Since the costs order made by the issues judge relates only to the trial of the three issues, he did not err in failing to order costs of a motion before Perell J. that was unrelated to the trial of the three issues.
Disposition
[85] Therefore, the motion for leave to appeal is dismissed with costs.
___________________________ M.A. SANDERSON J.
Released: January 15, 2016
CITATION: Awad v. Dover Investments Limited, 2016 ONSC 279
DIVISIONAL COURT FILE NO.: 262/15 DATE: 20160115
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
GHAREEN AWAD and TRANSPACIFIC PETROLEUM CORP.
Applicants (Respondents)
– and –
DOVER INVESTMENTS LIMITED, DOVER PETROLEUM CORP. and ROBERT SALNA
Respondents (Moving Parties)
REASONS FOR JUDGMENT
M.A. Sanderson J.
Released: January 15, 2016