SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-10-413040
MOTION HEARD: February 17, 2012

RE: Merike Berehowsky, Danielle Berehowsky, Darren Berehowsky and Drake Berehowsky v. 2170836 Ontario Ltd. c.o.b. Butler Capital Management Group, Avalon Funds Ltd., Phillip Butler, Kyle Butler and Sandra Butler

BEFORE: MASTER R.A. MUIR

COUNSEL:
Lucas E. Lung for the plaintiffs

Andrea Gorys for the proposed defendants ALT Capital LLC and ALT Capital Markets Inc.

Phillip Butler in person

ENDORSEMENT - COSTS

[ 1 ] This costs endorsement is in respect of a motion brought by the plaintiffs pursuant to Rule 5.04 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 (the “Rules”) for an order granting them leave to amend their statement of claim to add new parties. The motion was opposed by the proposed new defendants ALT Capital LLC and ALT Capital Markets Inc. (collectively “ALT”). In my reasons for decision dated February 21, 2012, I granted the plaintiffs leave to amend their statement of claim, as requested. In those reasons for decision I also requested that the parties provide the court with written costs submissions. I have now received and reviewed those submissions.

[ 2 ] The plaintiffs seek their costs from ALT. They argue that they achieved complete success on the motion and that it should not have been opposed. They also take the position that a portion of their costs should be awarded on a substantial indemnity basis in view of an offer to settle the motion served January 6, 2012. That offer to settle provided that the plaintiffs would not seek costs from ALT if ALT consented to the proposed amendments.

[ 3 ] The plaintiffs’ costs outline sets out partial indemnity costs of $5,251.55, inclusive of HST and disbursements. If the offer to settle is taken into account, the plaintiffs claim costs of $6,313.75.

[ 4 ] ALT argues that the proposed amendments as drafted were very broad and far reaching. They submit that it was not until the actual hearing of the motion that the plaintiffs conceded that they were only advancing a claim against ALT in negligence and not negligent misrepresentation. ALT also argues that the offer to settle should not be taken into account as it contained no element of compromise. Given those factors, and what ALT argues is the tenuous nature of the claim, ALT submits that costs should be awarded to the plaintiffs on a partial indemnity basis, but payable in the cause. ALT concedes that the amount of $5,251.55 sought by the plaintiffs as partial indemnity costs is fair and reasonable in the circumstances.

[ 5 ] The court’s general authority to award costs as between parties to litigation is found in section 131(1) of the Courts of Justice Act , R.S.O. 1990, c. C.43, which provides that costs are in the discretion of the court. Rule 57.01(1) sets out a non-exhaustive list of factors the court is to consider when awarding costs. Rule 57.03(1) deals with the costs of interlocutory motions and provides that as a general rule the court should fix the costs of a motion and order that they be paid within 30 days. Rule 1.04(1.1) is also applicable. It requires the court, when applying the Rules , to make orders that are proportionate to the importance and complexity of the issues and to the amount involved in the proceeding. In general terms, the overall objective for the court is to fix an amount that is fair and reasonable for the unsuccessful party who generally must pay the costs of the successful party. See Zesta Engineering Ltd. v. Cloutier , 2002 25577 (ON CA) , [2002] O.J. No. 4495 (C.A.) at paragraph 4 . In Clarington (Municipality) v. Blue Circle Canada Inc. , 2009 ONCA 722 the Court of Appeal stated as follows at paragraph 52:

Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant.

[ 6 ] These are the factors and principles I have considered in determining the appropriate costs order in the circumstances of this motion.

[ 7 ] In my view, the plaintiffs are entitled to their costs on a partial indemnity basis payable within 30 days. The proposed amendments to the statement of claim do not make a claim in negligent or fraudulent misrepresentation against ALT. The portion of the proposed claim dealing with those causes of action is found in paragraphs 75 to 77. Those allegations are clearly limited to the Butler defendants (2170836 Ontario Ltd. c.o.b. Butler Capital Management Group, Avalon Funds Ltd., Phillip Butler, Kyle Butler and Sandra Butler). They are not directed at ALT.

[ 8 ] The plaintiffs’ proposed claims against ALT may or may not succeed. Certainly there does not appear to be a great deal of evidence in support of those claims, at least at this stage. However, a motion to amend a pleading is not a summary judgment motion. The merit of the plaintiffs’ proposed claims against ALT is a matter for another day.

[ 9 ] I do agree, however, with ALT’s assertion that the plaintiffs’ offer to settle does not contain an element of compromise. The offer to settle was served on January 6, 2012, before ALT had served any responding materials. All of the time and effort expended by the plaintiffs before that date was necessary regardless of whether ALT opposed this motion or not. The plaintiffs were simply not entitled to any costs from ALT at that point in time. For this reason, it is not appropriate that the offer to settle be taken into account.

[ 10 ] I therefore order that ALT Capital LLC and ALT Capital Markets Inc. pay the plaintiffs’ costs of this motion on a partial indemnity basis fixed in the amount of $5,251.55, inclusive of HST and disbursements, payable within 30 days.

Master R.A. Muir

DATE: March 12, 2012