Court File and Parties

COURT FILE NO.: CV-21-60532-0000 DATE: 2023 07 05 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Paul Wilson, Plaintiff AND: Stephen McNeill, Cannabis Innovation Group Ltd., and Argentia Gold Corporation, Defendants

BEFORE: The Honourable Justice R. B. Reid

COUNSEL: Fraser Dickson, Counsel, for the Plaintiff Jennifer McCarthy Counsel, for the Defendant, Argentia Gold Corporation Stephen McNeill and Cannabis Innovation Group Ltd., Self-represented

HEARD: April 13, 2023

Decision on Costs of Motion for Summary Judgment

1The plaintiff (“Wilson”) made a loan to the defendant Cannabis Innovation Group Ltd. (“CIG”) in the amount of $100,000 and received a written promissory note dated March 25, 2021, in return. When the loan was not paid, he started this action.

2By motion, Wilson sought summary judgment against each of the defendants.

3By decision dated April 24, 2023, judgment was granted in favour of Wilson against the defendants Stephen McNeill (“McNeill”) and CIG in the amount of $100,000 plus prejudgment interest. The action against Argentia Gold Corporation (“AGC”) was dismissed.

4The parties were invited to resolve the issue of costs amongst themselves, failing which a timetable was given for serving and filing costs submissions, which was extended at the request of the parties. Submissions have been received.

Positions of the Parties

5Wilson seeks costs from McNeill and CIG on a full indemnity basis in the all-inclusive amount of $28,202.70, based on the finding of fraudulent misrepresentation made against McNeill and CIG as to the income projection, inventory, and corporate value of AGC which supported the loan request.

6Despite the dismissal of the action against AGC, Wilson submits that no costs should be ordered against him in favour of AGC or in the alternative that a Sanderson order should issue requiring AGC to receive its costs from McNeill and CIG directly.

7AGC submits that it should receive an award of costs based on its success as against Wilson, since success is a presumptive factor in considering the exercise of the court’s discretion as to costs under the Rules of Civil Procedure (the “Rules”). Costs are sought on a substantial indemnity basis in the amount of $11,855.02 because the action against it was without merit, there having been no privity of contract between Wilson and AGC, and no evidence that AGC benefitted from the loan proceeds. A Sanderson order is opposed since McNeill and CIG did not attempt to shift blame to AGC thereby justifying the addition of AGC as a defendant.

8McNeill and CIG submit that there was no need for Wilson to have involved AGC in the claim, since the loan was always between CIG and Wilson, and therefore no reason for them to face a costs award involving the costs of AGC.

Discussion

9The court’s jurisdiction to award costs is found in s. 131 of the Courts of Justice Act, and the factors to be considered in exercising its discretion are listed in rule 57.01 of the Rules.

10Success is a presumptive factor. On that basis, an award should be made in favour of Wilson, payable by McNeill and CIG.

11An elevated scale of costs can be justified where the conduct of the unsuccessful party was “reprehensible, scandalous, or outrageous” Bayford v. Boese, 2021 ONCA 533, at para 4. In this case, the information provided to Wilson by McNeill (who was the CEO of AGC at the time) in support of the loan application was found to contain fraudulent misrepresentations which made the loan agreement voidable.

12McNeill and CIG submitted that Wilson was well aware of the uncertainties inherent in the fledgling cannabis industry and the attendant risks of the proposed loan (as demonstrated by the very high effective rate of interest). On that basis, and despite the misrepresentations, they submit that Wilson should bear some responsibility for costs.

13The misrepresentations were key to making the loan agreement voidable. However, in the circumstances, they were not sufficiently reprehensible, scandalous or outrageous so as to justify the award of costs on an elevated scale. Therefore, there will be an award of costs of the action, including the summary judgment motion payable by McNeill and CIG to Wilson on a partial indemnity basis fixed in the all-inclusive amount of $18,439.82.

14AGC was successful in defending the action and the motion. Presumptively, it is entitled to a cost award in its favour.

15As to whether AGC was a proper party, despite the lack of privity of contract between Wilson and AGC, it was not unreasonable for Wilson to have sued AGC given that McNeill, who made the misrepresentations, was AGC’s CEO at the time. The benefit of the funds received from Wilson which were purported to be for use in AGC’s operations may well have supported a claim of unjust enrichment by AGC. Although in dismissing the motion against AGC I found no evidence that the funds were used for AGC as working capital or equipment purchases, Wilson cannot be criticized for having maintained the action against AGC. The award of costs on an elevated scale is not justified.

16As a result, there will be an order for costs payable by Wilson to AGC on a partial indemnity scale fixed in the all-inclusive amount of $7,092.24.

Is a Sanderson or Bullock order appropriate?

17Granting a Sanderson or Bullock order is an exercise of discretion to ensure that a conventional costs order does not result in injustice, in the circumstances of the case.

18The first question is whether it was reasonable for Wilson to have named AGC as well as McNeill and CIG in the claim. As already noted, that was a justifiable choice.

19Next, the court must ask whether the defendants tried to shift responsibility onto each other, and away from the plaintiff. That did not happen. Nor was it an action of McNeill or CIG that caused AGC to be added as a party.

20The causes of action alleged against McNeill and CIG were independent from that alleged against AGC, although the fact situation was related as between the two.

21Finally, the evidence of CIG and McNeill was to the effect that neither has the financial resources available to pay a costs award.

22Applying those factors, and particularly the last one, makes the granting of a Sanderson order inappropriate. Such an order would mean that AGC would not likely receive any benefit of a costs award since the costs payment would have to be made directly by the unsuccessful defendants.

23As to a possible Bullock order, given that the two claims were legitimately made part of the same action, it is reasonable that the final obligation for costs awarded to AGC rests with McNeill and CIG. It was their actions which gave rise to the lawsuit in which AGC was implicated. Therefore, as a matter of fairness, there will be an order that McNeill and CIG are responsible to Wilson for the amount payable by him for costs of AGC.

Summary

24For the foregoing reasons, there will be an order:

a. that costs be payable by McNeill and CIG to Wilson on a partial indemnity basis fixed in the all-inclusive amount of $18,439.82;

b. that costs be payable by Wilson to AGC on a partial indemnity scale fixed in the all-inclusive amount of $7,092.24; and

c. by way of a Bullock order, that McNeill and CIG are responsible to Wilson for the amount payable by him for costs of AGC.