COURT FILES NO.: CV-08-352327

CV-08-356748

DATE: 20120529

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Joaquim Moreira, Moshe Braunstein and Remo Gigliotti / Plaintiffs

AND:

Ontario Lottery and Gaming Corporation, Falls Management Company and Falls Management Group LP, John Doe #1, John Doe #2, John Doe #3, and the Alcohol and Gaming Commission of Ontario / Defendants

AND RE: Tebaldo Barbuscio / Plaintiff

AND:

Ontario Lottery and Gaming Corporation, Falls Management Company and Falls Management Group LP, John Doe #1, John Doe #2, John Doe #3, and the Alcohol and Gaming Commission of Ontario / Defendants

AND RE: Ontario Lottery and Gaming Corporation, carrying on business as Casino Niagara and Niagara Fallsview Casino Resort / Plaintiffs by counter-claim

AND:

Moshe Braunstein / Defendant by counter-claim

AND RE: Ontario Lottery and Gaming Corporation, carrying on business as Casino Niagara and Niagara Fallsview Casino Resort / Plaintiffs by counter-claim

AND:

Tebaldo Barbuscia / Defendant by counter-claim

BEFORE: Justice E. P. Belobaba

COUNSEL:
Derek Ricci for Ontario Lottery and Gaming Corporation, Falls Management Company and Falls Management Group LP / Defendants and Moving Parties

John Kelly and Tom Schreiter for the Alcohol and Gaming Commission of Ontario / Defendant and Moving Party

Xavier Navarrete, Glen Perinot and Todd White for the Plaintiffs / Responding Parties

HEARD: April 16 and 17, 2012

costs award

[ 1 ] In a decision released on April 30, 2012 I granted the motions for summary judgment brought by the Casino defendants and the AGCO defendant. I dismissed the Moreira and Barbuscio actions in their entirety and allowed the Casino defendants’ counter-claim on the two collection actions.

[ 2 ] These actions have been hard-fought and have obviously generated large legal bills. The pleadings raised an array of issues about the legality of the Casino’s roulette games, the obligations of the Gaming Commission and the available remedies. The legal proceedings to date have been extensive: discoveries, Rule 39.03 examinations, affidavits and expert reports and related cross-examinations – not to mention long and detailed factums and a two-day hearing. In short, the costs awards will be significant.

[ 3 ] Having said this, it is also important to note that many of the issues quickly fell by the wayside. Indeed, during the course of the hearing, it became clear that only two real issues remained – whether the Casino was running an illegal roulette game because the ‘floating ball rule’ had not been formally approved as a ‘rule of play’; and if so, whether the plaintiffs had any basis in law for their claim in unjust enrichment.

[ 4 ] Because I found no basis for the unjust enrichment claim, I was able to grant the motions for summary judgment and dismiss the action. I did not have to deal in any detail with the illegality argument. I made it clear in my reasons, however, that if I needed to do so, I would most likely have found that the plaintiffs were right about the ‘floating ball rule’ – it had not been approved by the AGCO and therefore the operation of the roulette games over the three years in question, strictly speaking, contravened provincial and federal law.

[ 5 ] It is important to note that the plaintiffs claim a total of $14 million ($11 million in the Moreira action and $3 million in the Barbuscio action) against all of the defendants. The amount claimed is not apportioned between the defendants but is claimed jointly and severally. Both the Casino and AGCO defendants thus had to muster a rigorous defence.

[ 6 ] The costs requests are large amounts by any standard. Casino defendants ask for $323,286 on a substantial indemnity basis for the entire proceeding, including the motions for summary judgment. On a partial indemnity basis, the Casino defendants ask for $234,522. The AGCO defendant asks for $132,523 on a partial indemnity basis. The costs submissions of the successful defendants obviously require a discussion of both scale and quantum.

[ 7 ] First, scale. In my view, the appropriate scale is partial indemnity, not substantial indemnity. This is not a case of unsubstantiated allegations of fraud or criminal misconduct. The plaintiffs alleged various instances of illegality and it is true that some were not proven, but, as I have just noted, the primary or core allegation – that the ‘floating ball rule’ was not a duly approved rule of play – was indeed established to my satisfaction.

[ 8 ] Nor is this a case where the plaintiffs were unreasonable in defending the summary judgment motions. They ultimately lost the motions because their claim for restitution could not succeed. However, I cannot say that the legal argumentation on this point or the overall defence of these motions was inherently unreasonable.

[ 9 ] I note that both the Casino and ACGO defendants made settlement offers under Rule 49. However, in my view, neither set of offers triggers substantial indemnity across the board. The Casino defendants’ offers only relate to the two collection actions (pay the amounts owing and the collection actions will be dismissed without costs). The ACGO’s offer, although it relates to the main actions (dismiss the actions but pay costs), lacks an element of compromise that allows this court to exercise it discretion under Rule 49.10(2) and impose the partial indemnity scale. [1] I hasten to add that, in any event, the ACGO is content with partial indemnity.

[ 10 ] In sum, the appropriate scale is partial indemnity.

[ 11 ] Next, quantum. The unsuccessful plaintiffs submit that no costs should be awarded because the Casino operated an illegal roulette game over the three years in question in violation of both provincial and federal law. Be that as it may, I am not persuaded that the level of criminality was such, in the circumstances of this case, that no costs should be awarded. The Casino’s ‘floating ball’ practice, although strictly speaking, illegal because this particular rule of play had not been formally approved by the AGCO, was neither unfair nor unreasonable. Rather, it was a well-known and accepted practice in North American casinos. The nature of the illegality herein was more technical than substantive, and more likely the result of oversight than anything else. I also note that the plaintiffs provided no legal authority supporting their submission that such a significant costs penalty can or should be imposed on the facts herein..

[ 12 ] The plaintiffs make the further submission that if costs are awarded, the quantum should be in the range of $50,000 and not the “excessive” amounts suggested by the defendants. However, they do not provide any indication of what they would have asked for had they prevailed on these motions.

[ 13 ] The plaintiffs also argue that if the defendants had conceded that the ‘floating ball rule’ was a rule of play, the entire proceeding could have been shortened. The only issue would have been the unjust enrichment claim which was quite narrow and could have been argued much more expeditiously.

[ 14 ] I accept this point and I will keep this in mind as I consider the appropriate quantum. I will also pay heed to the admonition of the Court of Appeal that my primary obligation as a judge in fixing costs is to consider the factors set out in rule 57.01(1) and fix an amount that is fair and reasonable to the unsuccessful party in the particular proceeding rather than an amount fixed by the actual costs incurred by the successful litigant. [2]

[ 15 ] As a general proposition, costs awards in the range of $200,000 for a day and a half motion, absent extraordinary circumstances, are not prima facie reasonable. But the suggested costs award of $50,000 is also unreasonable given the complexity of the actions and the scope and content of the motions before me. I note that the plaintiffs did not disclose what they would have claimed on a partial indemnity basis had they prevailed. What then is an appropriate costs award in the circumstances of this case?

[ 16 ] I will deal first with the Casino defendants and then with the AGCO defendant.

[ 17 ] The Casino defendants. At least one-half of the time spent in both the action and on the motions before me was devoted to the illegality issue. Indeed, this was the main reason for the plaintiffs’ Rule 39.03 examinations and the defendants’ expert witness affidavits (which turned out to of no real assistance on the issues before the court). Had the Casino defendants conceded the “common sense” point that the ‘floating ball rule’ was a rule of play that required AGCO approval, the action and no doubt the motions before me would have been more focused (and less costly). In my view, having regard to the factors set out in Rule 57.01 and to the Court of Appeal’s admonition in Boucher , it is fair and reasonable to fix the costs payable to the Casino defendants at $110,000 all inclusive.

[ 18 ] The AGCO defendant. The AGCO argued that its oversight of gaming casinos is pursuant to a statutorily-imposed public duty and it does not owe a private duty of care to individual members of the public, including the plaintiffs. The AGCO also argued that the plaintiffs’ claims are time-barred by the two-year limitation period. [3] I noted in my reasons that there was considerable merit to both submissions. However, given my conclusion that the plaintiffs’ claim for unjust enrichment had no basis and there were thus no genuine issues requiring a trial, there was no need to consider these additional reasons provided by the AGCO.

[ 19 ] I am sympathetic to the AGCO’s submission that it should not have been added as a party defendant. The claims as against the AGCO were almost all without merit. In my view, having regard to the factors set out in Rule 57.01 and to the Court of Appeal’s admonition in Boucher it is fair and reasonable to fix the costs payable to the AGCO defendant at $60,000.

Disposition

[ 20 ] The Casino defendants are entitled to costs of $110,000 all-inclusive, payable by the plaintiffs within 30 days.

[ 21 ] The AGCO defendant is entitled to costs of $60,000 all-inclusive, payable by the plaintiffs within 30 days.

[ 22 ] Order to go accordingly.

Belobaba J.

Date: May 29, 2012

[1] Data General v. Molnar Systems Group (1991) 1991 7326 (ON CA) , 6 O.R. (3d) 409 (C.A.); Walker Estate v. York Finch General Hospital (1999) 1999 2158 (ON CA) , 43 O.R. (3d) 461 (C.A.).

[2] Boucher v. Public Accountants Council of Ontario, (2004) 2004 14579 (ON CA) , 71 O.R. (3d) 291 at para. 26 .

[3] Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.