Court File No.: CV-19-613166 Date: 2019-06-25 Superior Court of Justice - Ontario

Re: PIONEERING TECHNOLOGY CORP., Plaintiff And: LAIRD COMBER, WAYNE ZU, and STEPH COOPER, Defendants

Before: Schabas J.

Counsel: P.A. Neena Gupta and Jeramie Gallichan, Counsel, for the Plaintiffs Robert C. Taylor, Counsel, for the Defendants, Wayne Zu and Steph Cooper William Gale, Counsel, for the Defendant, Laird Comber

Heard: May 17, 2019

Costs Endorsement

[1] On May 28, 2019, I released a decision in this matter dismissing an application for an interlocutory injunction brought by the plaintiff: Pioneering Technology Corp. v. Comber et al., 2019 ONSC 3278. I invited written submissions on costs and this is my decision on that issue.

Background and Positions of the Parties

[2] This matter was heard over a full day on May 17, 2019. It was based on a large record which included extensive affidavits on both sides and transcripts of over five days of cross examinations. The factums were extensive and covered a range of legal and factual issues.

[3] The defendants had two sets of counsel. Laird Comber was represented separately and his counsel seeks costs on a substantial indemnity basis of $130,957.18, or partial indemnity costs of $92,524.07. The defendants, Wayne Zu and Steph Cooper, were defended by another set of counsel who seek costs on a substantial indemnity basis of $250,249.31, or on a partial indemnity basis of $189,879.63.

[4] In support of their claim for costs on a substantial indemnity basis, the defendants rely on the fact that they were entirely successful on the motion, which they say they were compelled to defend to preserve their reputations and livelihoods. They also rely on alleged misconduct by the plaintiff. This includes the alleged breach of solicitor-client privilege and alleged improper confiscation of Cooper’s laptop, noted by me in paragraph 30 of my decision. The defendants also point to a defamatory press release that announced the termination of the defendants “for cause as a result of their participation in a scheme aimed at competing directly with Pioneering…”, which the defendants assert rendered them “probably permanently unemployable.”

[5] The defendants Cooper and Zu also rely on an offer to settle the motion made on May 15, 2019, in which they proposed that the plaintiff pay legal costs in the amount of $190,000, all in.

[6] The defendants also ask that I direct that costs be paid forthwith, within 30 days, relying on Rule 57.03(1)(a) of the Rules of Civil Procedure, and the fact that the defendants, especially Zu and Cooper, do not have “deep pockets” and that a failure to award costs will “seriously harm their ability to fight another day.”

[7] The plaintiff submits that this is not a case for substantial indemnity costs. It notes that I found there was a serious issue to be tried and “perhaps even a strong prima facie case”. The plaintiff submits that costs should be left to the trial judge, or be in the cause, or be to the defendants in the cause. The plaintiff also seeks discounts on the amounts claimed, submitting that there should be a discount of 10% “given that a significant portion of the review work (production, answers to undertakings and review of documents) were steps that will save work during the balance of the litigation”, and that a further 33% discount should be applied “due to the unnecessary effort of the defendants to embarrass the plaintiff with irrelevant allegations relating to poor product safety, poor workplace safety and management”.

Analysis

[8] The Court has a broad discretion when determining the issue of costs. Rule 57.01(1) of the Rules of Civil Procedure sets out factors to be considered to achieve a result that is fair and reasonable for the unsuccessful party to pay: Boucher v. Public Accountants Counsel for Ontario. In my view, the defendants were successful on the motion and should be awarded costs. The issues for me to determine are whether costs should be fixed and payable now, and if so the appropriate scale and quantum.

Timing of Order

[9] The defendants rely on Rule 57.03(1)(a) of the Rules of Civil Procedure which requires the court to fix costs and order them paid within 30 days “unless a different order would be more just.” In opposing this position, arguing that costs should be reserved to the trial judge, the plaintiff relies on Rogers Cable TV Ltd. v. 373041 Ontario Ltd., [1994] O.J. No. 1087(Gen Div.), in which Borins J. (as he then was) stated at para. 4:

Where it is clear that the granting of the interlocutory injunction will put an effective end to the proceedings, it is appropriate for the court to make a costs order which reflects this fact and to fix the amount of costs. However, in a case such as this in which a trial is a virtual certainty, the Court will consider the usual alternatives; plaintiff’s costs in any event of the cause; plaintiff’s costs in the cause; costs in the cause; or costs reserved to the trial judge.

[10] As Strathy J. (as he then was) put it in Tanglewood (Sierra Homes) Inc. v. Munro Golf Limited, at para. 4: “The logic is that since the successful party on the motion may ultimately lose at trial, the award of costs should be left to the trial judge who can award costs based on the ultimate outcome.” However, he noted that “this is not an invariable rule and the court retains discretion with respect to costs.” As the Divisional Court stated in Intercontinental Forest Products S.A. v. Rugo, [2004] O.J. 4190 (Div. Ct.), at para 3:

It is our view that the Rogers Cable decision does not establish a mandatory rule but that the residual discretion of the judge with respect to costs is preserved and that, in a particular case, the motions judge may determine to award costs on a motion for an interlocutory injunction payable forthwith, rather than reserving costs to the trial judge. We have been referred to authorities where the motions judge did so, in one case after specifically considering the principles enunciated in Rogers Cable. See Rogers v. Sudbury (Administrator of Ontario Works) (2001), 57 O.R. (3d) 467.

[11] It is also noteworthy that Rogers Cable predates the coming into force of Rule 57.03(1)(a) of the Rules of Civil Procedure, which creates a presumption, albeit rebuttable, that on a contested motion the judge shall fix the costs and order them to be paid within 30 days. As Strathy J. points out in Tanglewood at para 7:

One of the premises underlying this rule is that the judge who heard the motion is best equipped to consider the factors set out in Rule 57.01 of the Rules of Civil Procedure and this in turn promotes economy and efficiency in the use of judicial resources. Another premise is that the parties should be kept aware of, and responsible for, the ongoing costs of interlocutory proceedings.

[12] More recent cases have applied Rule 57.03 of the Rules of Civil Procedure in circumstances where injunctions have been denied. In Andrejs Management Inc. v. Bourdignon, 2015 ONSC 7452, for example, Akhtar J. dismissed a motion for an interlocutory injunction and nevertheless awarded costs, stating as follows, at para. 4:

The presumption is that costs of a motion shall be paid forthwith: Rule 57.03 of the Rules of Civil Procedure. This principle is even more pertinent in the context of interlocutory injunctions: Cana International Distributing v. Standard Innovation Corp., 2011 ONSC 752, at para. 7. I see no reason to depart from that practice in this case. Cases of injunctive relief seeking to bar opposing sides from continuing what might otherwise be there normal day-to-day activity should always be subjected to a costs order following the motion. Parties should not be able to seek such influential relief without considering the spectre of a costs order in the event that they are unsuccessful. [emphasis added]

[13] This view was also adopted by Kristjanson J. in 2198572 Ontario Inc. v First Land (Overlea) Ltd., 2016 ONSC 6749.

[14] In my view, it is appropriate that costs be fixed and ordered payable forthwith, within 30 days in accordance with Rule 57.03 of the Rules of Civil Procedure. The conclusion of this injunction proceeding may or may not end this dispute. As the judge who heard the motion I am in the best position to determine costs. Doing so, and ordering them payable now, ensures that the parties are “kept aware of, and responsible for, the ongoing costs of interlocutory proceedings.” The defendants, individuals who had already lost their jobs, were subject to a very expensive and burdensome proceeding. The stakes were high - the plaintiff knew that if it lost there was the “spectre of a costs order”, and a large one. In the circumstances, I do not think deferring costs, or putting it “in the cause” would be “more just”, to use the words of Rule 57.03 of the Rules of Civil Procedure. To the contrary, in these circumstances putting off the fixing and payment of costs would be less just.

Are Costs On A Substantial Indemnity Scale Warranted Here?

[15] An award of costs on a substantial indemnity basis is exceptional, and should be made only in rare and special circumstances. Those circumstances may arise from the conduct of the unsuccessful party where it rises to a level that is considered reprehensible, egregious and worthy of sanction. As the Court of Appeal stated in Davies v. Clarington, 2009 ONCA 722 at para. 40:

[W]hile fixing costs is a discretionary exercise, attracting a high level of deference, it must be on a principled basis. The judicial discretion under Rules 49.13 and 57.01 of the Rules of Civil Procedure is not so broad as to permit a fundamental change to the law that governs the award of an elevated level of costs. Apart from the operation of Rule 49.10 of the Rules of Civil Procedure, elevated costs should only be awarded on a clear finding of reprehensible conduct on the part of the party against which the cost award is being made. [emphasis added]

[16] In my view this is not a case justifying a substantial indemnity award. As the plaintiff points out, there is a serious issue to be tried, and I recognized that the plaintiffs may even have a “strong prima facie case”. The plaintiff should not be penalized for taking steps to protect a threat to its business from three employees, two at quite a senior level, in a small company.

[17] I give little weight to the alleged misconduct. I made no findings on it in my decision. There may be some legal advice in the Ordower memo, but I am not prepared to read too much into the plaintiff’s use of it at this time. It is not clear how much was privileged as opposed to simply disclosing what the defendants were planning. While the confiscation of Cooper’s laptop may have been improper, it does not rise to a level that would justify an award of substantial indemnity costs. The press release was not the subject of submissions, and may not be improper at all if the plaintiffs did in fact have cause for dismissal of the defendants.

[18] I have not been provided with a copy of the offer to settle; it has only been described to me. However, it was made just two days before the case was argued, taking it outside Rule 49.10 of the Rules of Civil Procedure (see Rule 49.03 of the Rules of Civil Procedure) and for a sum that is similar to the partial indemnity claim. It does not favour awarding costs on a higher scale.

[19] Accordingly, I reject the request for costs on a substantial indemnity scale.

What Amounts Should be Fixed?

[20] Although no dockets were produced in support of the costs claimed, the amounts are similar to those contained in the plaintiff’s bill of costs, which would have sought $166,711.05 on a partial indemnity scale and $250,130.91 on a substantial indemnity basis. This provides some confirmation of my view that the time spent and amounts claimed are reasonable. However, I agree that there should be a 10% reduction to reflect the fact that some of the time spent was on the litigation as a whole which will likely reduce expenses later. In the absence of detailed docket entries, there is a risk of overcompensating when the litigation is still at an early stage.

[21] I do not, however, agree that there should be a further discount due to what the plaintiff calls unnecessary, irrelevant and damaging allegations about it in the defendants’ evidence which, the plaintiff says, “could not remain unanswered.” It has often been said that litigation is not a “tea party” – and that is especially true in injunction proceedings. Conduct of the plaintiff and its motivation for seeking equitable injunctive relief often gets raised, as it did here. The state of the plaintiff’s business, and its vulnerability, was a relevant factor, and I do not agree that raising these facts unnecessarily lengthened the proceedings. I see no basis for reducing costs on this ground.

Conclusion

[22] Applying an approximately 10% reduction to the partial indemnity costs claimed, I fix costs of the motion for Comber at $83,000.00 all in, and for Cooper and Zu at $171,000.00 all in, payable within 30 days.

Schabas J.

Date: June 25, 2019