Berry v. Scotia Capital Inc., 2010 ONSC 1948

CITATION: Berry v. Scotia Capital Inc., 2010 ONSC 1948

COURT FILE NO.: 391/09

DATE: 2010/04/01

SUPERIOR COURT OF JUSTICE - ONTARIO

DIVISIONAL COURT

RE: Berry v. Scotia Capital Inc.

BEFORE: H. Sachs J.

COUNSEL: Sheila Block and Arlen K. Sternberg, for the Defendant/Moving Party Robert L. Colson and Kimberly Boara Alexander, for the Plaintiff/ Responding Party

DATE HEARD: March 22, 2010 at Toronto

ENDORSEMENT

Introduction

[1] The Defendant seeks leave to appeal a $345,733 costs award made on a partial summary judgment motion that took almost two days to argue. The Plaintiff also seeks leave to appeal the award, but only if leave to appeal is granted to the Defendant.

Background

[2] The Plaintiff is a trader who was employed in a senior capacity by the Defendant as head of preferred share trading. His employment was terminated in June of 2005. The Defendant maintains that the termination was for cause as a result of serious misconduct and breaches of employment obligations. In the action the Plaintiff alleges that he was wrongfully dismissed or, in the alternative, constructively dismissed. He asserts various claims for damages, including a claim for $50 million for “loss of competitive advantage”. The Defendant has counterclaimed for damages that it alleges it suffered as a result of the Plaintiff’s alleged misconduct, including fines that it paid to the regulator. The Plaintiff’s conduct is also the subject of ongoing disciplinary proceedings before the independent market regulator.

[3] After the close of pleadings and before any documentary or oral discovery had taken place the Defendant brought a motion for summary judgment against the Plaintiff asking the court to dismiss the Plaintiff’s claim on the ground that it disclosed no genuine issue for trial. After motion records were exchanged and eight days of cross-examination had taken place, the Defendant concluded that there was a genuine issue for trial on the issue of just cause, but that there was no genuine issue requiring a trial with respect to the claims that the Plaintiff had been constructively dismissed or the claim for loss of competitive advantage. The Defendant advised the Plaintiff that it would now be seeking to proceed with a motion for partial summary judgment on just those two claims. Therefore, the motion proceeded on that basis.

[4] Pollack J. heard that motion over a two day period. At the end of the hearing she indicated to the parties that she would be reserving her decision. Both parties then handed her up costs outlines that they had prepared respecting the costs that they would be claiming if they were successful on the motion. The Defendant’s costs outline claimed a total of $36,739.98. The Plaintiff’s submitted various costs outlines, setting out partial and substantial indemnity claims, claiming amounts that were about 10 times what the Defendant was claiming.

The Motion Judge’s Decision

[5] Pollack J. dismissed the motion and gave the parties an opportunity to make written submissions as to costs. The parties did so, but in different forms. The Plaintiff filed affidavit evidence to support his costs claim, including copies of all the relevant time dockets showing how much time was devoted to the motion and an affidavit describing how the costs outline had been prepared. The Defendant made submissions respecting the Plaintiff’s claims, but did not cross-examine the Plaintiff or produce their own dockets for inspection or review by the Plaintiff. In its submissions the Defendant claimed that the Plaintiff should receive costs on a partial indemnity basis, in the range of $50,000-$60,000.

[6] The motion judge considered the question of costs under three headings, namely costs for:

(a) the abandoned part of the Defendant’s motion;

(b) the portions of the motion argued by the Defendant; and

(c) the costs of the cross-examinations, which the parties had agreed would form part of the discoveries.

[7] The motion judge awarded the Plaintiff his substantial indemnity costs for the portion of the motion that was abandoned in the amount of $142,285. For the portions of the motion that were argued she awarded the Plaintiff his partial indemnity costs fixed in the amount of $100,964.36. With respect to the cross-examinations, the motion judge determined that 80% of those cross-examinations related to the abandoned portion of the motion and 20% related to the portion of the motion that did proceed. Therefore, she awarded the Plaintiff 80% if the costs he claimed for these cross-examinations on a substantial indemnity scale and 20% on a partial indemnity scale. In the result the amount awarded for the cross-examinations was $102,484.

The Defendant’s Motion for Leave to Appeal

[8] The Defendant seeks leave to appeal the motion judge’s decision. They do not seek leave to appeal the scale of costs awarded. Rather, they say that in arriving at the quantum for costs, the motion judge “simply accepted – without any reduction or apparent scrutiny or analysis - the amount claimed on the plaintiff’s various costs outlines.” (Defendant’s Factum, para. 24.). In doing so she arrived at an amount that was so excessive that it warrants appellate intervention. They also submit that in exercising her discretion, the motion judge failed to apply the principles of reasonableness, proportionality and consistency. In particular, she failed to take into account the expectation of the Defendant as to what they could reasonably be expected to pay if they lost the motion in question. In making their submission the Defendant points to those aspects of the Plaintiff’s cost outline that they say are excessive, including submissions about excessive lawyer involvement and excessive time spent. They also take issue with the motion judge’s conclusion that the award of costs for the cross-examinations should reflect no discount even though the parties had agreed that those cross-examinations would count as discoveries.

[9] In opposing the Defendant’s motion for leave the Plaintiff emphasizes the discretionary nature of a costs decision, the fact that the case law is clear that leave to appeal a costs order is rarely granted and the fact that the motion judge in her reasons stated that she considered all of the relevant costs principles, including the ones outlined by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O. R.(3d) 291. With respect to the reasonable expectation of the parties, the Plaintiff submits that the Defendant provided the motion judge with no evidence on this question. In contrast to the Plaintiff, they did not make their own dockets available for inspection or review. With respect to the claims about excessive lawyering and excessive time, the Plaintiff argues that the Defendant again provided no evidence for the motion judge to consider that would cause her to believe that these claims were justified. They did not cross-examine the Plaintiff on the affidavit he filed that fully explained his costs outline. As put by the motion judge at paragraph 8 of her reasons:

Scotia argues that the hours and the rates claimed are excessive. It has not however indicated what the reasonable costs should be, other than to indicate that in total reasonable and fair costs for this motion for Berry would be in the range between $50,000.00 and $60,000.00 in total.

[10] With respect to the cross-examinations, the Plaintiff points out that the same argument was made before the motion judge and that she found that the cross-examinations would not advance the trial, a decision that other judges have made in other cases.

[11] In making his submissions the Plaintiff underlined the fact that this was a motion where the stakes were very high for the Plaintiff. The Defendant began by trying to strike his 75 page Statement of Claim on the basis that it raised no genuine issue for trial and then brought a motion to strike, among other things, a claim where he was claiming $50 million. The issues were complex and time consuming to canvass. In the face of such a “full frontal” attack, the Plaintiff had no choice but to spend the time he did in fighting the motion. In effect, as Plaintiff’s counsel put it, the Plaintiff “was fighting for his life”. The motion judge recognized this when she said at para 9 of her decision:

Berry argues that the amount of time spent and the amount of lawyer hours on the file were justified in order to present the most effective economic defence. Berry emphasizes that his entire action was in jeopardy and that he had to use every defence possible. Upon reviewing the affidavit evidence presented by Berry regarding costs, and the Bill of Costs as well as the dockets provided, I find that the amount being claimed by Berry is reasonable and justified in the circumstances.

Test on a Motion for Leave to Appeal

[12] Pursuant to Rule 62.02(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, leave to appeal from an interlocutory order of a judge of the Superior Court of Justice shall only be granted if:

(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.

[13] To satisfy the “conflicting decision” requirement of Rule 62.02(4)(a), there must be a difference in principle that has guided the motion judge’s exercise of discretion. Where there are conflicting decisions in Ontario or elsewhere on a matter of law of general importance, it is desirable that it be referred to a higher court to deal with the apparent conflict. (Brownhall v. Canada (Ministry of National Defence)(2006), 2006 7505 (ON SC), 80 O.R.(3d) 91 (S.C.J.))

[14] With respect to the route for leave to appeal set out in Rule 62.02(4)(b), for there to be “good reason to doubt the correctness of the order in question,” it is not necessary to show that the decision is wrong or probably wrong, only that it is open to “very serious debate.” Leave should then be granted if the matters involved are of general importance that relate to matters of public importance and matters relevant to the development of the law and the administration of justice. (Brownhall, supra, at paras. 29-30; Greslik v. Ontario Legal Aid Plan (1988), 1988 4842 (ON SCDC), 65 O.R. (2d) 110 (Div. Ct.)).

[15] This is a motion for leave to appeal a decision on costs, a decision that is one within the discretion of the motion judge. Leave to appeal costs decisions must be granted sparingly and only in very obvious cases (Axelrod v. Jacob, [1943] CarswellOnt 113 (High Court)).

Analysis re the Defendant’s Motion for Leave

[16] The award of costs in this case is very large. By way of contrast it is almost twice what Polowin J. awarded for an entire action in Young Estate v. RBC Dominion Securities, [2009] O.J. No. 734 (S.C.J.). In Young Estate the court awarded $180,000 costs for an entire action after a 10 day trial, with trial preparation time (for experienced downtown Toronto counsel and a junior) and the trial itself being on a substantial indemnity basis.

[17] The question becomes whether a large award by itself is enough to warrant appellate review. This question was addressed to some extent by Lax J. in Anderson v. St. Jude Medical, Inc. 2006 85158 (ON SCDC), [2006] O.J. No. 508 (Div. Ct.). In that case the Divisional Court was hearing an appeal from a very large award of costs in a class action certification motion. At paragraph 22 Lax J., writing for the Court, states:

The award in issue here is very large. It is probably the largest award for a class certification in Ontario, but in our view the magnitude of a costs award by itself, does not constitute a principled basis upon which to interfere. Appellate intervention based solely on quantum is problematic because there is no meaningful way to determine when a number is too high. However, an award of this magnitude warrants careful scrutiny because in exercising the discretion to award a significant amount for costs, we must be satisfied that the judge exercised the discretion on proper principles and that the award is not “plainly wrong.”

[18] Applying this reasoning to the case at bar, it is my view that leave to appeal should not be granted in this case simply because of the amount of the award. However, the amount of the award does justify careful scrutiny to ensure that it does not offend any of the proper principles regarding costs. Awards that on their face stand out as “outliers” raise a concern about whether the fundamental principle of reasonableness was followed. A failure to follow that overriding principle “can produce a result that is contrary to the fundamental objective of access to justice…the chilling effect of a costs award of the magnitude of the award in this case generally exceeds any fair and reasonable expectation of the parties.” (Boucher, supra, at para. 37.)

[19] In this case the motion judge accepted the hours as presented to her by the Plaintiff. In this respect she exercised her discretion in the same manner as the judge whose order was the subject of the appeal in Boucher, supra. However, as Boucher makes clear at para. 24:

While it is appropriate to do the costs grid calculation, it is also necessary to step back and consider the result produced and question whether, in all the circumstances, the result is fair and reasonable.

[20] In this case the motion judge at paragraphs 16 and 17 of her reasons states that she performed this exercise, but her reasons give no real details as to how. Given the size of the award in relation to other costs awards for comparable matters and this lack of particulars, the question of whether the motion judge exercised her discretion in accordance with the overriding principle of fairness and reasonableness is open to very serious debate. Further, as in Boucher, supra, the issue is one that goes beyond the interest of the parties and that could affect the fundamental principle of access to justice.

[21] For these reasons I am granting the Defendants’s motion for leave to appeal. The question of the costs payable on this motion are reserved to the panel hearing the appeal.

The Plaintiff’s Cross- Motion for Leave to Appeal

[22] Having granted leave on the Defendant’s motion it is necessary to consider the Plaintiff’s motion for leave to appeal. On this motion the Plaintiff argues that the motion erred in principle when she failed to award the Plaintiff substantial indemnity costs for the portion of the motion that was argued. Thus, he seeks an increase to the costs award.

[23] In my view, the Plaintiff’s motion does not meet the test for leave to appeal. First, there is no good reason to doubt the correctness of the motion judge’s decision that the motion that was argued was reasonably brought. In coming to this conclusion, the motion judge exercised her discretion in accordance with the rule in effect at the time and the jurisprudence. Second, since the time of the motion, the rule regarding the scale of costs for summary judgment motions has changed. Accordingly, unlike the Defendant’s proposed appeal, the Plaintiff’s proposed cross-appeal does not raise any matter of continued importance to the development of the law or the administration of justice. The issue in the proposed cross-appeal does not go beyond the interest of the parties.

[24] For these reasons, the Plaintiff’s motion for leave to appeal is dismissed. The Defendant is entitled to their partial indemnity costs of this cross-motion, which I fix in the amount of $4000.00. This amount reflects the fact that the majority of the time in argument was spent on the Defendant’s motion for leave to appeal.

Conclusion

[25] The Defendant’s motion for leave to appeal is granted, with costs reserved to the panel hearing the appeal. The Plaintiff’s motion for leave to appeal is dismissed, with costs payable to the Defendant, fixed in the amount of $4000.00.

H. Sachs J.

DATE: April 1, 2010