SUPERIOR COURT OF JUSTICE - ONTARIO

COMMERCIAL LIST

COURT FILE NO.: CV-11-9262-00CL
DATE: 20120927

B E T W E E N:

Saputo Inc. and 4223934 Canada Inc . Applicants

• and -
  dare holdings limited and SERAD HOLDINGS LIMITED Respondents

Eliot N. Kolers and Ellen M. Snow, for the Applicants
M. Philip Tunley, for the Respondents

BEFORE: Justice Newbould

E N D O R S E M E N T

[ 1 ] On September 4, 2012 I released my decision in this matter and awarded partial relief to the applicants. I ordered that as success was divided, there should be no order as to costs. Subsequently, the respondents requested permission to make submissions on costs on the basis that they had served an offer to settle that would entitle them to costs. I gave leave to the parties to file costs submissions, which I have now considered.

[ 2 ] The respondents contend that they are entitled to costs on a substantial indemnity basis on the grounds that allegations were made by the applicants that impugned the integrity and reputation of the respondents. The evidence referred to by the respondents in support of this submission goes nowhere near the level that would entitle costs to be awarded on a substantial indemnity basis, and I decline to make any such order.

[ 3 ] The offer to settle by the respondents essentially provided the same relief to the applicants as contained in my judgment. Rule 49.10(2) provides that were an offer to settle is made by a defendant and the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless the court orders otherwise. Thus in this case, if rule 49.10(2) is applied and no order is made otherwise, the applicants would be entitled to their costs on a partial indemnity basis to the date of the offer and the respondents would be entitled to their costs on a partial indemnity basis after the date of the offer.

[ 4 ] The partial indemnity costs claimed by the applicants to the date of the offer to settle are $131,275, including expert fees of approximately $106,000. The partial indemnity costs claimed by the respondents after the date of the offer are $75,251, including expert fees of approximately. $22,000. The respondents would thus have a losing proposition if the rule were applied without any other order. They contend, however, that an order should be made denying the applicants their costs up to the date of the offer to settle.

[ 5 ] They contend first that the conduct in question in the application was not theirs but rather BDO and that they were forced to respond and defend BDO's conduct to protect their own contractual rights. Second, the applicants and their experts failed to establish 16 of the 17 purported deficiencies and the relief obtained was minor. Third, the working capital issue only became a focus of the application after delivery of the respondents’ expert report at which time the offer to settle was made. Fourth, the applicants’ litigation approach in this case required costs to be incurred on a front-end load basis, mainly due to the large disbursements for expert reports delivered prior to the offer to settle by the respondents. I have considerable doubt that these reasons would be sufficient to deny the applicants their costs.

[ 6 ] The applicants point out that in the E & Y Report, the impact of BDO's failure to apply proper standards to the working capital assessment might have the effect of undervaluing the shareholdings by $3.3 million and that it was only through the bringing of this application and tendering expert evidence of E & Y that the respondents eventually acknowledged that the report did not fully comply with valuation instructions. The applicants also contend that the quantum of costs sought by the respondents is excessive.

[ 7 ] So far as the bulk of the deficiencies contained in the E & Y report not being either pursued or successful, making a cost order on a distributive basis in this case is questionable. See Skye v. Matthews (1996), 47 C.P.C. (3d) 222, 87 O.A.C. 381 (C.A.). Also the fact that it was the conduct of BDO rather than that of the respondents that was an issue does not detract from the fact that the respondents chose to defend the BDO report, at least to the point when the offer to settle was made by them.

[ 8 ] The applicants’ position is that as success has been divided, the original order that there be no costs should stand. Their further position is that rather than engaging in a detailed review of the costs incurred by both parties, it is appropriate to conclude that the costs incurred were relatively even. This position is somewhat generous to the respondents as on the face of it, if rule 49.10(2) were applied, the applicants would be entitled to payment from the respondents as their costs on their face to the date of the offer to settle are considerably more than the costs of the respondents after the date of the offer.

[ 9 ] I am not persuaded that in all of the circumstances my original cost order should be varied to require costs to be paid by the applicants to the respondents. I make no order as to costs different from that originally made, namely there should be no costs ordered to be paid by either side.

Newbould J.

DATE: September 27, 2012