SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Sistem Mühendislik İnşaat Sanayi Ve Ticaret Anonim Sirketi, Applicant

AND:

Kyrgyz Republic and Kyrgyzaltyn JSC, Respondents

BEFORE: D. M. Brown J.

COUNSEL:
G. Pollack, for the Applicant
J. Casey and C. Doria, for the Respondent, Kyrgyzaltyn JSC
J. Judge and V. Voakes, for Centerra Gold Inc.
No one appearing for the Respondent, Kyrgyz Republic

HEARD: April 17, 2012; with written cost submissions.

REASONS FOR DECISION - costs

I. Positions of the parties on costs

[ 1 ] By Reasons dated July 25, 2012 ( 2012 ONSC 4351 ) I dismissed stay and forum non conveniens motions brought by Kyrgyzaltyn JSC (“Kyrgyzaltyn”) against the applicant, Sistem Mühendislik İnşaat Sanayi Ve Ticaret Anonim Sirketi (“Sistem”), which had been supported by a non-party, Centerra Gold Inc. (“Centerra”). The parties now have filed written cost submissions for the motion.

[ 2 ] Sistem seeks partial indemnity costs of $65,000.00 apportioned 75% against Kyrgyzaltyn and 25% against Centerra. Kyrgyzaltyn submitted that costs of $29,845.52 should be awarded to Sistem, allocated 60% against itself and 40% against Centerra. Centerra, notwithstanding its active involvement in the motion and its filing of extensive materials, contended that as a non-party it bore no responsibility for costs or, alternatively, if it did, costs against it should not exceed $2,500.83.

II. Analysis

[ 3 ] As the successful party on the motion Sistem is entitled to its costs. Elevated costs against Kyrgyzaltyn or Centerra are not justified as neither engaged in any reprehensible litigation conduct, as that term is used in the context of cost awards.

[ 4 ] In fixing the costs of a motion the court must take into account the factors enumerated under Rule 57, including the time spent, the result achieved, and the complexity of the matter, as well as the application of the principles of proportionality and those set forth by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA) , 71 O.R. (3 rd ) 291 (C.A.) and Davies v. Clarington (Municipality) (2009), 2009 ONCA 722 () , 100 O.R. (3d) 66 (C.A.), specifically that the overall objective of fixing costs is to fix an amount that is fair and reasonable for an unsuccessful party to pay in the particular circumstances, rather than an amount fixed by actual costs incurred by the successful litigant.

[ 5 ] I have considered the cost submissions of the parties, including Sistem’s Costs Outline.

[ 6 ] The motion took 1.5 days to argue. The written materials were substantial, including affidavits from two experts on Republic law. A significant volume of legal authorities were filed by the parties.

[ 7 ] Neither Kyrgyzaltyn nor Centerra took issue with the partial indemnity hourly rates for which Sistem sought recovery. Centerra made no submissions regarding the overall quantum of costs claimed by Sistem. Kyrgyzaltyn sought to reduce Sistem’s costs on the basis that an issue it had raised on the motion was novel – i.e. whether a court requires a real and substantial connection to exercise jurisdiction to recognize and enforce an arbitral award. I see no merit in this argument. The Republic, which is the debtor under the arbitral award, did not participate in these proceedings. I found that it was not open to Kyrgyzaltyn, as a stranger to the arbitration, to assert arguments only open to the Republic to make. [1] No novel issue was involved.

[ 8 ] Kyrgyzaltyn argued that Sistem’s failure to serve the Republic properly with the notice of application “invited the motion to set aside on the basis of improper service. Thus, Sistem’s conduct unnecessarily lengthened the motion.” This argument simply repeats the failed attempt by Kyrgyzaltyn to act as the Republic’s proxy in advancing arguments only open to the Republic, as judgment debtor, to make. I give no credence to the argument.

[ 9 ] Finally, Kyrgyzaltyn took issue with the disbursement amount claimed by Sistem for the report of its expert - $16,520.80. Kyrgyzaltyn argued that the amount should be reduced because it only paid its expert $4,900.00. Neither Sistem nor Kyrgyzaltyn filed copies of their expert’s invoices, so it is not easy to compare the relative costs of the experts. Sistem’s expert’s report was an extensive one, covering the recent history of the Republic, especially the history dealing with the status of the judiciary within the Republic. The amount claimed by Sistem does not strike me as unreasonable given the extent of the expert’s report, but I will reduce the disbursement claimed to $15,000.00 on the basis that Sistem should have included the expert’s invoice.

[ 10 ] Kyrgyzaltyn initiated this motion. The issues it put in play were extensive – “throwing in the kitchen sink” would be an apt description. As a result Sistem was put to the expense of responding to a multitude of issues. Given its approach to setting the scope for its motion, Kyrgyzaltyn could only have reasonably expected that Sistem would incur significant costs in responding to it. The hourly rates claimed for Sistem’s counsel are reasonable on a partial indemnity basis. Based upon my review of the materials filed and Sistem’s bill of costs, I am satisfied that the hours claimed by Sistem represented a reasonable, proportionate response to Kyrgyzaltyn’s motion. It also must be recalled that at stake in this application is the enforcement of a U.S. $8.5 million award against the Republic. Notwithstanding that the award was made three years ago, the Republic still has not paid it.

[ 11 ] Accordingly, I conclude that the $54,182.37 in fees incurred by Sistem on a partial indemnity basis are reasonable. I would reduce the disbursements by $1,500 to $17,432.62. The resulting costs slightly exceed $70,000, but Sistem is only seeking $65,000.00 in costs. That is more than fair in these circumstances. I therefore conclude that an award of costs in the amount of $65,000.00 would be a reasonable one in the circumstances.

[ 12 ] The question then becomes who pays what? Sistem proposes a 75%/25% split as between Kyrgyzaltyn and Centerra. Kyrgyzaltyn argues that its share should be reduced to 60%; Centerra attempts to escape any substantial costs responsibility.

[ 13 ] Let me deal first with Centerra’s argument that it should bear no costs. I find that submission extraordinary in the circumstances of this case. True, Centerra is not a named party. But Centerra invited itself to the party on this motion, so to speak. It did so to protect its own interests. I took from the affidavit filed by its executive that Centerra feared retribution against its foreign assets from the Republic if it did not join in the attempt by the Republic’s wholly-owned corporation, Kyrgyzaltyn, to set aside the award. To that end Centerra filed extensive written submissions, to which Sistem had to respond. Having put Sistem to that expense in order to protect its own corporate interests, Centerra cannot now run away from any responsibility for costs. In those circumstances, Centerra is a person against whom a costs award can be made under section 131(1) of the Courts of Justice Act .

[ 14 ] As to the proper apportionment of costs as between Kyrgyzaltyn and Centerra, based upon my review of the materials filed, the issues raised by those two entities and the work Sistem was required to perform to respond to those issues, I conclude that that 75/25 allocation proposed by Sistem is most reasonable in the circumstances.

[ 15 ] For these reasons, I order Kyrgyzaltyn to pay Sistem costs of $48,750 within 30 days of the date of this order, and I order Centerra to pay Sistem costs of $16,250 within 30 days of the date of this order.

D. M. Brown J.

Date : September 24, 2012

[1] 2012 ONSC 4351 , para. 36 .