COURT FILE NO.: CV-07-276

DATE: 2012-10-15

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

JONATHAN ESSA and REGINALD ESSA

Christopher D. J. Hacio, counsel for the Plaintiffs

Plaintiffs

• and -

LARRY PANONTIN, ROBERT PANONTIN and MILLS MANUFACTURING ACRYLIC PRODUTS LIMITED

Alex Demeo, counsel for the Defendant Larry Panontin

John Illingworth, counsel for the Defendant Robert Panontin

Defendants

HEARD: March 27, 2012

Platana J.

Reasons On Motion For Costs

Introduction

[1] The Plaintiffs brought a motion returnable September 15, 2011, seeking:

(1) an order for the production of certain financial records of the Defendant, the particulars of which are set out in the Affidavit and Exhibits annexed hereto;

(2) an order seeking answers to refusals given by the Defendants at their respective cross-examinations;

(3) costs of this motion; and

(4) such further and other relief as counsel may request and this Honourable Court may deem just.

Grounds

[2] The grounds for the motion are:

(a) The Plaintiffs have commenced an action against the Defendants alleging that the Defendants fraudulently conveyed assets and money between themselves in an effort to divert funds away from the Plaintiffs, which the Plaintiffs allege are owed to them;

(b) The Defendants have been cross-examined. It became apparent during their respective cross-examinations that numerous documents existed which would shed light on the Plaintiffs’ allegations of fraudulent conveyance. The Defendants refused to answer certain relevant questions relating to the documentation the Plaintiffs are seeking at their respective cross-examinations. To the date of the Notice of Motion, the Defendants have refused to change their mind and produce the requested documentation;

(c) The Defendants have refused to produce the documentation the Plaintiffs need to challenge the Defendants’ position that they did not fraudulently convey assets and/or money between themselves to hinder or defeat the Plaintiff’s claim;

(d) The Plaintiffs have asked the Defendants and their counsel on numerous occasions to produce the documents in question. To the date of this Motion Record, the Defendants have refused and/or neglected to produce the requested documentation that the Plaintiffs need to effectively pursue their actions as against the Defendants;

(e) Rules 1, 2, 3, 4, 29, 30, 31, 34, 37 and 39 of the Rules of Civil Procedure; and

(f) Further and other grounds as counsel may request and this Honourable Court may permit.

[3] Some aspects of this matter been settled, however, there remains outstanding the issue of costs on motions brought which were not heard but were settled or resolved in some fashion.

[4] In addition, the Plaintiffs seek their costs of bringing this motion.

Background

[5] The Plaintiffs’ claim arises out of an alleged contract between the Plaintiffs and Larry Panontin. At issue is the transfer of the Plaintiffs’ fifty percent ownership and beneficial interest in an insurance policy on the life of Demetre Chronopoulos, now deceased.

[6] Notice of Action was issued July 29, 2007 and the Statement of Claim was filed thereafter. On September 18, 2009, the Plaintiffs brought an ex parte motion to extend the time for service of the Statement of Claim. Justice Smith granted an Order extending the time for service to October 31, 2009.

[7] On October 8, 2009, the Defendants brought a motion to set aside the ex parte order for service. On the same date the Plaintiffs brought a cross-motion restraining the payment of the insurance proceeds. Both motions were adjourned to October 15.

[8] On October 15, the Plaintiffs brought an ex parte motion for an injunction and obtained an interim interim order, restraining the Defendants’ insurance company from paying out fifty percent of the proceeds. This was done by way of endorsement only and no formal order was issued. Both of those motions were then adjourned to November 12.

[9] Further adjournments were then granted until December 11, 2009, when Justice Shaw determined that the interim injunction motion should be heard before the motion to set aside service. The motion was set to be heard February 4, 2010, if Larry Panontin was not cross- examined, and if he was cross-examined, the motion was to be heard after that cross-examination took place. The cross-examinations were to be conducted on affidavits filed with respect to the motions setting aside the extension of time for service. The motion with respect to the interim injunction was not argued February 4, and has not been heard to date. Cross-examinations on the affidavits filed in support of the motion to set aside service were not completed until the Fall of 2010.

[10] In October 2009, the Plaintiffs learned that Larry Panontin had transferred one half of his beneficial interest in the insurance policy. The Plaintiffs brought a motion January 21, 2010, to amend the Statement of Claim, which resulted in an order adding Robert Panontin as a Defendant. The amendments included allegations of conspiracy and fraudulent conveyance against the Defendants.

[11] An Amended Statement of Claim was then served on March 11, 2010. Robert Panontin served a Statement of Defence on May 28, 2010 and Larry Panontin and Mills Manufacturing served a Statement of Defence on June 24.

[12] On July 27, 2010, cross-examinations were conducted on the affidavits filed by Larry Panontin in the previously unheard motions. Cross-examinations were continued on October 4, 2010, when Larry Panontin was re-examined and gave certain undertakings and refusals. On October 14, Robert Panontin was cross-examined. Some answers were provided to undertakings.

[13] Correspondence was exchanged between counsel. Mr. Hacio was requesting financial disclosure and additional examinations in order to use those documents and examinations as evidence in the motion for an interim injunction.

[14] On May 2, 2011, Mr. Hacio wrote to counsel for the Defendants stating that an agreement had been reached between counsel that the cross-examinations on the affidavits on the motion before Justice Shaw could be used at trial as if such evidence was given at an examination for discovery. Neither of the Defendants’ counsel wrote back disputing that such an agreement had been reached. At that time, neither defence counsel raised any preliminary objection to the request for further and better documentary production, or the outstanding motion for an interim injunction.

[15] On September 15, 2011, the Plaintiffs served a motion for a production of financial records and also a motion to satisfy undertaking and refusals.

[16] From May through September when the above correspondence was being exchanged neither defence counsel raised any issue that a motion for production of documents and financial information was premature. The first reference by Mr. Demeo, counsel for the Defendant Larry Panontin, was in October, after the motion had been served. Mr. Demeo raised the issue of the discovery plan, and no affidavit of documents having been exchanged.

[17] On November 8, 2011, Robert Panontin assigned his interests to the Defendant Larry Panontin and requested the Plaintiffs to discontinue the action as against him. The Plaintiffs refused.

[18] Counsel for Robert Panontin first raised an issue with respect to no discovery plan in February 2012. To this point, no Defendant had submitted an affidavit of documents or submitted a discovery plan.

[19] In a December letter Mr. Demeo further stated that the refusals to questions had been given on cross-examinations on affidavits which had been presented in the earlier motions which had settled.

[20] The Plaintiffs’ position is that all of the documents they sought were necessary to argue the interim injunction motion. The Defendant Robert Panontin acknowledges that he should have some liability for costs in that respect.

Plaintiffs’ Position

[21] Mr. Hacio argues that these subsequent motions were precipitated when the Plaintiffs learned of an assignment of the beneficial interest from Larry Panontin to Robert Panontin. That precipitated the action for an injunction. Mr. Hacio originally attempted to get an agreement with respect to paying the insurance proceeds into court or freezing them in some way and, when that was not agreed to, he brought a motion for injunction before Justice Smith which resulted in an interim endorsement to essentially freeze the proceeds. No order was ever entered.

[22] Mr Hacio submits that it became necessary for him to bring a motion to amend the style of cause to add Robert Panontin as a Defendant and to include claims of conspiracy and fraudulent conveyance. He references that during the course of the outstanding motions, cross-examinations were conducted on affidavits which were filed in the injunction motion. Cross-examinations were also conducted on affidavits with respect to obtaining the amendment of pleadings to include fraudulent conveyance and conspiracy. Undertakings were given in the course of the cross-examinations. These undertakings were given with respect to what Mr. Hacio argues was a need to establish the grounds for a fraudulent conveyance in the Amended Statement of Claim. It is in the course of adding Robert Panontin in the Amended Statement of Claim that the request for document production was made.

[23] An essential disagreement between the parties is Mr. Hacio’s position that, when cross- examinations on the affidavits filed in support of motions were conducted, those cross-examinations were also to be used for the purposes of examinations for discovery. It was on that basis that Mr. Hacio now claims that the motion for undertakings and requests for productions of documents can be brought as they arise out of examinations for discovery.

[24] In considering the issue of the cross-examinations being considered as examinations for discovery, I have reviewed the fact that the notices served on the Defendants specifically state that the examinations are to be cross-examinations on the affidavits. Furthermore, in the transcripts of the cross-examination on October 6, 2010, Larry Panontin’s counsel specifically stated that “Cross-examination was going to be confined to issues which relate to your client’s motion to set aside the order extending the time for service”. The affidavit of Chantal Brochu states that no agreement was in fact ever reached to that effect.

[25] It is the joint position of Mr. Demeo and Mr. Illingworth that there was no agreement between parties to consider the cross-examinations on the affidavits as discoveries, and furthermore, the rules with respect to examinations for discoveries cannot be ignored by agreement of the parties. It is Mr. Demeo’s position, supported by Mr. Illingworth, that shortly after bringing the motion for production of documents and compliance with undertakings, Mr. Hacio was advised of the Defendant’s position that this motion was premature in as much no examinations for discovery had been held. Furthermore, they point to the rules that require a discovery plan and an affidavit of documents.

[26] While the material supports the fact that there may have been some discussion between counsel about that, I cannot conclude on the basis of the material before me that such an agreement was ever formalized. I am therefore, left with the position that the only documentation which could be relied upon by the Plaintiffs to substantiate a position that undertakings should be complied with and productions should be made are in fact based on cross-examinations of affidavits on motions which are no longer relevant to the issues in this case.

[27] Mr. Hacio’s position on the issue surrounding the motion for productions is somewhat more complicated. After the Statement of Claim was amended, during the course of cross-examination on affidavits filed, Mr. Hacio requested production of a lengthy list of documents. He subsequently determined that it was necessary to engage a forensic investigator to examine records of the Defendants to determine whether the transactions in question were in fact legally valid transactions. Numerous documents were requested. These documents are the subject of this motion. With the settlement of the issues with respect to the fraudulent conveyance now resolved, Mr. Hacio seeks cost for bringing that motion.

[28] In arguing his position on costs, Mr. Hacio looks at the history and says that in September 2009, he proposed that $500,000.00 of the potential insurance proceeds be frozen by the insurance company or paid into court. He argues that if in fact that had been done that would have stopped the necessity for the injunction motion, the fraudulent conveyance issue and all other aspects. He further argues that it would not have been necessary to bring any motion with respect to undertakings which relate almost entirely to the fraudulent conveyance issue. Relying on Section of 131 of the Courts of Justice Act, rule 49 of the Rules of Civil Procedure and the decisions in Prinzo v. Bay Crest Centre for Geriatric Care (2002), 60 O.R. (3d) 474 (ON CA) and Niagara Structural Steel v. W.D., 1987 58 O.R. (2d) 773 (ON CA), he submits this should be considered as an offer to settle.

[29] He then relies upon rule 57.01 and suggests that the Defendants should have expected the results of motions having been brought, if in fact Mr. Hacio’s offer was not accepted. He argues that the consequences to the Plaintiffs would have been particularly significant if the motion had not been brought in as much as Robert Panontin would have received all of the proceeds. He also argues that, since the material establishes that Larry Panontin is unable to pay, or seems to be in the position to be unable to pay any judgment, any judgment would have been meaningless against Larry.

[30] He argues that I should consider that the amount at stake here was $500,000.00. He then suggests that the action became much more complex when the issue of fraudulent conveyance came into play. The fraudulent conveyance was only necessary as a result of the actions of Larry and Robert Panontin, which Mr. Hacio’s argues were in essence intended to defeat any claim that the Plaintiff may have against Larry.

[31] He submits that with respect to rule 57.01, the Defendants’ conduct has significantly lengthened the proceeding of this action. He submits that the Defendants have deliberately dragged this action out for two and a half years, and then did exactly what the Plaintiffs originally asked for in terms of having the Plaintiffs put into this situation where the $500,000.00, which is the subject of the claim, would be available to the Plaintiffs if successful. In that regard he relies on the decision in Monks and I.N.G. Insurance Company, (2005) 80 O.R. (3d) 604 (ON SC).

[32] He asks me then to consider the Defendants’ conduct and suggests that there was never any valid position for the Defendants to raise with respect to a fraudulent conveyance. He argues that it was necessary for him to obtain a forensic auditor, and once the Defendants knew that a forensic auditor was involved, they realized the position they were in. This, in essence, forced the Defendants into a position where they knew they were required to agree to Mr. Hacio’s initial suggestion. In that regard, he points out that the transfer from Larry to Robert Panontin took place after initial negotiations, but before a motion was brought before Smith J. extending the time for service. He further notes that the affidavit material of Larry Panontin says that he owed monies to Robert Panontin’s companies, but that the beneficial interest was transferred to Robert Panontin personally, and for no consideration. He completes his argument by saying that there was no down side to the Defendants’ to paying the $500,000.00 into court or having it protected.

[33] He relies on the decision in Gerula v. Flores, (1995) 126 D.L.R. (4th) (ON CA) to argue that where a party commits a deceptive act courts can award a higher level of costs. Further, he cites the decision in Standard Life v. Elliott (2007) 86 O.R. (3d) (ON SC) where the courts determined that it is a costs consideration if a party has done something that has deliberately driven up the costs.

[34] For the injunction motion, Mr. Hacio asks for $5,808.08 on a substantial indemnity basis, and $4,000.00 on a partial indemnity basis. He seeks $11,000.00 on a substantial indemnity basis and $7,500.00 on the basis of partial indemnity for the injunction and fraudulent conveyance motion. On the injunction, fraudulent conveyance and production motion he seeks cost of $ 18,000.00 on substantial indemnity and $13,000.00 on a partial indemnity basis. On the production motion aspect, he seeks $20,706.69 and $14,000.00 respectively. For the cost submissions before me, he seeks cost of $21,825.95 on a substantial indemnity basis or $15,000.00 on a partial indemnity basis. He also submits disbursements of $7,086.46 on the costs submissions.

Position of Defendant Larry Panontin

[35] The focal point of Mr. Demeo’s costs submissions is that there have been no examinations for discovery, no discovery plan, and therefore the motion for productions is premature. He further takes the position that the request for financial records is disproportionate and that the financial records requested are no longer relevant given that the alleged fraudulent conveyance has been reversed. He also notes that the motion for productions includes requests from a corporation which is not a party Defendant. He argues that the motion should not have been brought now, and cannot be brought now, since the issues arose out of cross-examinations on affidavits in support of the order to set aside service of the Statement of Claim. That has been dealt with and resulted in the order of Shaw J. on March 11, 2011.

[36] Mr. Demeo has also argued the issue of proportionality. He submits that it has never been clear with respect to what financial records were being requested and that the materials sought based on the affidavit of Mary Hamilton are overreaching.

[37] With respect to the costs on the injunction motion, Mr. Demeo argues that the interim interim order of Smith J., in October of 2009, effectively froze any insurance proceeds. He further argues that Robert Panontin, subsequently transferred his interest back to Larry Panontin and there is no necessity for any follow up with respect to the injunction motion.

[38] With respect to the costs submitted by Mr. Hacio, he argues initially that the costs outlines provided are too vague and duplicitous. He further submits that there is much duplication in the bills of costs as submitted by the Plaintiffs.

[39] Mr. Demeo asked for costs for the Defendant Larry and has submitted two costs outlines, one based on an amount of $24,000.00 on a substantial indemnity basis and $19,000.00 on a partial indemnity basis.

Position of Defendant Robert Panontin

[40] Mr. Illingworth, on behalf of Robert Panontin, notes that the motion I am specifically dealing with is that returnable September 15, 2011 which asks for compliance with undertakings and for disclosure of documents. He notes that Mr. Hacio argues that he needed the documents to prove the fraudulent conveyance, although Mr. Essa, in his initial affidavit dealing with the amendment of the Statement of Claim, argued that his fraudulent conveyance claim had merit and that the “evidence is overwhelming”. That affidavit was sworn prior to any request for document disclosure. Mr. Illingworth argues that once he had been retained by Robert Panontin, an assignment of Robert Panontin’s interest in the life insurance proceeds was dealt with and that any insurance proceeds were paid into court to the credit of the action. Robert Panontin is now out of the action and it is back to where it started.

[41] Mr. Illingworth notes that the document disclosure which the Plaintiffs seek does not arise from the cross-examination of Robert Panontin on his affidavits. He further argues that the deemed refusals arose from the cross-examination of him in the motion to set aside the ex parte order of Smith J. to extend the time for service of the Statement of Claim. That motion was dismissed, and that therefore, any refusals which were not completed are now moot.

[42] His position is that since Robert Panontin has assigned his remaining interest in the life insurance police to Larry Panontin by way of a written assignment dated November 8, 2011, the allegations of fraudulent conveyance and conspiracy against him are now moot and there is no longer any relevance to the extensive documentary disclosure the Plaintiffs seek from him.

[43] Mr. Illingworth notes that, on a proportionality basis, the Plaintiffs have already received costs of the previous motions before Justice Shaw and Justice Fregeau, and, if costs are awarded on a substantial indemnity basis, the Plaintiffs will have received costs of $115,000.00 in an action where discoveries have not yet even been held. He argues that costs must be fair and reasonable and must bear a relationship to the issues that are involved. He acknowledges that Robert Panontin may be subject to an award of some costs for the cross-examinations and for the fraudulent conveyance motion, provided such costs are not in the bill previously submitted to Justice Fregeau in the motion to amend the Statement of Claim.

[44] In commenting on the bills of costs as submitted by the Plaintiffs, Mr. Illingworth submits that much of the cost is for secretarial work, dictation, faxing and emailing, including emails from the secretarial staff to Mr. Hacio. He suggests that all secretarial costs are appropriately considered in counsel’s hourly rate and not to be considered in addition to.

[45] He argues that this case was not complex and was only made complex by the series of motions then brought by the Plaintiffs on affidavits which were filed on motions and not in any examinations for discovery.

[46] As I noted earlier, Mr. Illingworth agrees with the position taken by Mr. Demeo that the motions with respect to production of documents is premature as no discoveries have been held. He further agrees that Mr. Hacio cannot get costs for a motion for production of documents when there has been no discovery plan and no formal affidavit of documents.

[47] Mr. Illingworth seeks costs for the Defendant Robert Panontin in the amount of $12,023.20 on a full recovery basis, and $8,947.34 on a partial basis, both including HST.

Plaintiffs’ Reply

[48] In reply, Mr. Hacio submits that if he has not complied with the rules, neither have the Defendants. They have not filed affidavit of documents, nor a discovery plan. He further submits that at no time between September 2009 and November 2011 did the Defendants ever raise the issue that the discovery rules had not been met. No issue of these motions being premature was raised until such time as this motion was argued. In that regard, I do note specifically that the material on file notes that Mr. Demeo began indicating in October of 2011 that the motion for production was premature.

[49] Mr. Hacio in essence argues that the Defendants are now attempting to rely on an argument which they could have raised earlier and that at no time during any of the motion proceedings before Justice Smith, Justice Fregeau, or Justice Shaw was that issue ever raised.

[50] The basis of Mr. Hacio’s requests that costs on these motions is that, as he has stated, nothing would have been required except for the issue of the fraudulent conveyance which came to his attention. He takes the position that anything that has been brought in this action dealing arising out of the issue of the fraudulent conveyance would have been unnecessary if the Defendants had dealt with it appropriately when the issue originally became clear.

The Law

[51] In Serra v. Serra, 2009 ONCA 395, 66 R.F.L. (6th) 40, at p. 42, the Court of Appeal reiterated the fundamental purposes which modern costs rules are designed to foster, as set out in Fong v. Chan (1999), 46 O.R. (3d) 330 (ONCA) at para. 22:

(1) to partially indemnify successful litigants for the costs of litigation;

(2) to encourage settlement; and

(3) to discourage and sanction inappropriate behaviour.

[52] In Anderson v. St. Jude Medical Inc., [2006] O. J. No. 508 (Ont. Div. Ct.), at para. 22, the Divisional Court set out the principles to be applied by the court in exercising its discretion (citations omitted):

1. The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in Rule 57.01(1).

2. A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant.

3. The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: Rule 57.01(1)(O.b).

4. The court should seek to avoid inconsistency with comparable awards in other cases. “Like cases [if they can be found], should conclude with like substantive results.”

5. The court should seek to balance the indemnity principle with the fundamental objective of access to justice.

[53] The Court of Appeal has made it clear that in assessing costs, the overriding principle is one of reasonableness, and that the failure to follow that principle can produce a result that is contrary to the fundamental objective of access to justice: (Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (ONCA), at p. 302.

[54] In Zesta Engineering Ltd. v. Cloutier, [2001] O.J. No. 4495 (ONCA), at para. 4, the Court of Appeal did not make a specific finding with respect to the amount of time spent or the rates charged by counsel, and stated:

In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant.

[55] Rule 57.01(1) of the Rules of Civil Procedure provides:

“57.01 (1) Factors in discretion - In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct on any party that tended to shorten or lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding; or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different solicitor; and

(i) any other matter relevant to the question of costs.”

[56] With respect to the scale of costs, I refer to the comments of Henry J. in Apotex v. Egis Pharmaceuticals and Novopharm Ltd. (1991), 4 O.R. (3d) 321 (Ont. Gen. Div.) at p. 325:

“Furthermore, while the award of costs between parties on the solicitor and client scale has traditionally been reserved for cases where the court wishes to show its disapproval of conduct that is aggressive or contumelious, there is also a factor that frequently underlies the award, that is not necessarily expressed, that the successful party ought not to be put to any expense for costs in the circumstances.”

Discussion/Analysis

[57] I find this one of the most confusing requests for costs I have ever had to consider in that I have found it very difficult to deal with the issue of costs on motions which I was not involved in, and which have been settled by counsel without my awareness of what the resolution was. In the course of my consideration of this motion, there was an initial objection by defence counsel to the filing of some documents by the Plaintiffs. However, after considering the position, and recognizing that at some point in time a judicial decision would be necessary on the unargued motions, I decided to proceed rather than adjourn all of the costs requests to the trial judge. If anything, this demonstrates to me the difficult position counsel place judges in when motions in the course of an action are resolved, but counsel do not settle the costs issue, and then place that before a judge who has had no prior involvement in the matter. In addition, counsel for the Plaintiffs has presented different bills of costs for each of the motions and it is particularly difficult to determine any overlap between the work done on the various motions.

[58] Mr. Illingworth has perhaps best described this file as one which began as a relatively straight forward action for breach of contract and which now, as a result of what normally are relatively simple intermediary motions, has become a complicated file.

[59] I have looked at this matter on an overall basis with particular reference to rule 57.01. In relation to the conduct of the parties, I note that these proceedings were originally brought about when the Plaintiffs’ found out that there had been a transfer of the insurance policy interest from Larry Panontin to his brother Robert Panontin. The interim interim order of Smith J. has remained in effect, however, the Plaintiffs take the position that a motion was necessary and relevant in order to obtain or prevent the insurance proceeds from being paid out prior to this action being dealt with. Before the necessity of any motion with respect to an injunction, the Plaintiffs offered informally to have the proceeds paid into court, or frozen by the Insurance Company. The Plaintiffs note that this indeed was the ultimate result which was agreed to by the parties. The Plaintiffs therefore take the position that if the Defendants had agreed to pay the proceeds into court, or to freeze the proceeds in some way, then the motion for an injunction would not have been necessary. I agree with the Plaintiffs’ submissions in this regard. The issue regarding the protection of the proceeds from being paid out is one which, in my view, ought to have been resolved much earlier without the necessity of the Plaintiffs having to bring this motion. Mr. Illingworth, for the Defendant Robert Panontin, in essence has acknowledged that there should be some costs payable by the Defendants in relation to the necessity of having to bring that motion.

[60] Following the preparation of the motion for injunction, the Plaintiffs then brought a motion with respect to the amendment of pleadings to include a fraudulent conveyance. While costs of the motion to amend the pleadings have been dealt with, the Plaintiffs now claim costs with respect to the work done in order to gather the evidence required to establish the fraudulent conveyance. There were cross-examinations on affidavits filed, attendances when adjournments were granted, and drafting of responding affidavits. Significantly in the bill of costs for the fraudulent conveyance the costs claimed include time spent by Plaintiffs’ counsel legal assistant in receiving or forwarding information such as emails or straightforward confirmations, and in inter-office communication.

[61] As previously noted, one of the major issues between counsel is the motion for the production of certain documents, specifically an order for the production of certain financial records of the Defendants. There is a significant difference of opinion between counsel as to whether this motion was necessary and should have been brought. I have already commented earlier that the material filed does not satisfy me that there was ever any agreement to have the cross-examinations on affidavits considered as part of examinations for discovery. Having made that finding, I consider the issue of whether the motion for production was premature as argued by the Defendants.

[62] I am satisfied that the Rules of Civil Procedure with respect to discovery have not been complied with. Prior to bringing the motion, there was no discovery plan, no affidavit of documents filed and, as I have stated, no discoveries having yet been conducted. The Plaintiffs rely upon information given in affidavits and sought as a result of those cross-examinations, and the necessity to engage an expert in order to determine specifically what documents should sought to be produced.

[63] I am mindful of the fact that the Plaintiffs have argued that prior to the bringing of the motion in September of 2011, the Defendants had not specifically raised the issue of non-compliance with the rules or any issue with respect to the cross-examinations being considered as examinations for discovery. Mr. Hacio argues that the Defendants should not be entitled to rely upon the Rules of Civil Procedure for him not having complied with the discovery rules while at the same time not having raised the issue themselves in a timely fashion. Mr. Hacio relies upon rule 2.02 of the Rules of Civil Procedure that the Defendants should now be barred from raising objections to his non-compliance with the discovery rules.

[64] In approaching the overall determination of costs in this issue I find that, in and of themselves, none of these motions were particularly complex, and indeed should have been relatively straightforward. Confusion, and the resulting costs, appear result primarily from the Plaintiffs taking the position that the cross-examinations on the affidavits were to be considered as examinations for discovery. As I have noted previously, I cannot find, on the basis of the information provided, particularly the affidavit of Chantal Brochu, the Defendants’ counsel, comments during a cross-examination, and the notices of the examination, that these were to be considered as discoveries. Therefore, I cannot find that it was reasonable for the Plaintiffs to bring the motion with respect to the productions. Notwithstanding that the motion was premature I do agree that the Plaintiffs were put to time and expense in considering the productions which they considered necessary following the cross-examinations on the affidavits, during which time no objection was raised by the Defendants, other than requesting specificity. I consider it fair and reasonable to allow the Plaintiffs some costs for preparation.

[65] I have spent considerably more time considering this issue of costs than would normally be expected. As I noted at the beginning of this discussion regarding costs, it has been particularly difficult for me to isolate the determination of costs considering the way the matter was presented. I therefore direct my mind to the overall rule of costs in terms of what is fair and just in the circumstances and in consideration of the overriding principles of reasonableness and proportionality. Directing my mind to the factors set out in rule 57.01, I consider the fact that, with respect to the injunctions motion, the Plaintiffs early in the proceedings made an offer, although not a formal offer, and that ultimately the projected effect of that proposal was brought into effect by consent of the parties in freezing the insurance proceeds.

[66] With respect to the actual amount of costs claimed, I have also recognized the amount of costs that the Defendants could reasonably have expected to pay in relation to such motion. In relation to the amount claimed and the amount recovered in the proceeding, I recognize that this claim is for $500,000.00. While that is a significant amount, I cannot overlook the fact that, if costs are awarded in the amounts claimed by the Plaintiffs on a substantial indemnity basis, together with costs already recovered, the Plaintiffs will have received costs close to 25% of the amount of the claim, and the matter has not yet even reached the stage of discoveries.

[67] I have considered that the Defendants have requested costs between $9 - $19,000.00 on a partial indemnity basis, and between $12 - $24,00.00 on a substantial indemnity basis.

[68] I have already noted that I do not consider any of the individual motions to have been particularly complex.

[69] Further, while the issues are important to these parties, they cannot be considered as issues of general importance to the public in general.

[70] In relation to the conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding, I cannot accept the argument of the Plaintiffs that the Defendants have deliberately attempted to delay these matters in an attempt to, in essence, put the Plaintiffs in a position where they can no longer proceed to trial financially. The history of the adjournments of motions in this matter, and the difference of opinion as to the nature of the cross-examination on the affidavits, do not demonstrate to me that there was any deliberate attempt to lengthen unnecessarily the duration of the proceeding.

[71] In relation to rule 57.01(1)(f), I have already commented that in my view the motion for productions, while not improper or vexatious, was, brought prior to the discovery rules in the Rules of Civil Procedure having been complied with.

[72] With respect to the specific bill of costs, I have reviewed the Bill of Costs in detail and, in my view, some of the work items claimed by the Plaintiffs are not appropriate. While work done by legal assistants and associate lawyers may be appropriate to be claimed, such matters as emails between counsel and the legal assistant, or other members of the staff, are appropriate to be considered as an expense item to be covered by counsel fees.

[73] In looking at this matter as a complete package, the overriding principle for costs should be one of reasonableness. I must look at what the Defendants could reasonably be expected to pay, and what the unsuccessful parties claim for costs. Substantial indemnity costs awards should be considered in the rare and exceptional case where the conduct of the opposing parties is reprehensible or outrageous, or deserving of rebuke. I do not find that in this case.

[74] I have a wide discretion as to costs, and in the somewhat confusing and overlapping of the argument for costs, although I have found that the motion for production was premature, the fundamental basis in my consideration is that the Plaintiffs have been put to significant time and cost as a result of the Defendants not agreeing to initially freeze the insurance proceeds on a voluntary basis. All other issues essentially arose from that. Having said that, I consider the quantum of costs sought by the Plaintiffs to be overreaching and disproportionate, particularly in view of my determination that the productions sought prior to examinations for discovery was inappropriate.

[75] The ultimate determination of costs has been noted as achieving the goal of being fair and reasonable. Considering all factors set out in the Rules, and in consideration of what an unsuccessful party could expect to pay if unsuccessful, the Defendants should pay costs to the Plaintiffs for all outstanding costs issues in the amount of $33,000.00, inclusive of HST, on a joint and several basis.

[76] With respect to disbursements, I do not consider the Plaintiffs decision to engage a forensic auditor, and to request financial information from persons/corporations not parties to the action to be within the scope of what is proportional to the overall issue. I do not allow that cost, but do allow the balance of the disbursements in the amount of $502.43, non-taxable, plus $3,584.03, inclusive of HST.

The Hon. Mr. Justice T. A. Platana

Released: October 15, 2012

COURT FILE NO.: CV-07-276

DATE: 2012-10-15

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

JONATHAN ESSA and REGINALD ESSA

Plaintiffs

• and –

LARRY PANONTIN, ROBERT PANONTIN and MILLS MANUFACTURING ACRYLIC PRODUCT LIMITED

Defendants

REASONS ON MOTION

Platana J.

Released: October 15, 2012

/mls/nf