SUPERIOR COURT OF JUSTICE – ONTARIO

(COMMERCIAL LIST)

COURT FILE NO.: CV-12-9821-00CL
DATE: 20121026

RE: FIRST LEASIDE WEALTH MANAGEMENT INC., FIRST LEASIDE FINANCE INC., FIRST LEASIDE SECURITIES INC. AND F.L. SECURITIES INC., Plaintiffs

AND:

DAVID PHILLIPS, MARGARET DAVIS AND 970877 ONTARIO INC., Defendants

BEFORE: CUMMING J.

COUNSEL: Matthew P. Gottlieb and J. Renihan, for the Plaintiffs

Bruce O’Toole, for the Defendants

COSTS ENDORSEMENT

[ 1 ] My Endorsement dated October 1, 2012 gave my reasons for granting the Plaintiffs’ motion for leave to issue a Certificate of Pending Litigation (“CPL”) and the dismissal of the defendant Margaret Davis’s cross-motion to strike certain paragraphs of the affidavit of Greg MacLeod: First Leaside Wealth Management Inc. v. Phillips , 2012 ONSC 5443 .

[ 2 ] The parties have now forwarded written submissions as to costs.

General Principles as to Costs

[ 3 ] Costs are in the discretion of the Court: s. 131 , Courts of Justice Act , R.S.O. 1990, c. C.43 and Rule 57.01 of the Rules of Civil Procedure . In Ontario, the normative approach is first, that costs follow the event, premised upon a two-way, or loser pay, costs approach; second, that costs are awarded on a partial-indemnity basis; and third, that costs are payable forthwith, i.e . within 30 days. Discretion can, of course, be exercised in exceptional circumstances to depart from any one or more of these norms.

[ 4 ] Rule 57.01 (1) lists a broad range of factors for the court to consider, including the result achieved in the proceeding, the complexity of the proceeding, the importance of the issues and whether any step in the proceeding was improper, vexatious or unnecessary.

[ 5 ] In exercising its discretion, a court must produce a result that is fair and reasonable in all the circumstances: Boucher v. Public Accountants Council (Ontario) , (2004), 2004 14579 (ON CA) , 71 O.R. (3d) 291 (C.A.).

[ 6 ] The principles to be applied in the exercising of discretion in fixing costs are authoritatively set forth in Andersen v. St. Jude Medical, Inc. , 2006 85158 (ON SCDC) , [2006] O.J. No. 508 (Div. Ct.), 264 D.L.R.(4 th ) 557, 145 A.C.W.S. (3d) 786.

Submissions

[ 7 ] The Plaintiffs correctly emphasize that the complex and detailed accounting evidence in the matter at hand was crucial to the Plaintiffs’ pursuit of being able to establish that the Plaintiffs have an “interest” in the subject Uxbridge property. As well, the Defendant Margaret Davis could have agreed to simply freeze the proceeds of the intended sale pending the ultimate determination of the underlying action by the Plaintiffs, but refused to do so. The Plaintiffs necessarily expended significant time and costs in bringing their motion to protect their “interest” in the Uxbridge property. In my view, there was no arguable merit to the cross-motion.

[ 8 ] The Plaintiffs have submitted a proper Bill of Costs, including time claimed by each participant and supporting detailed dockets and which applies partial hourly rates that conform to the costs grid set out in the Notice to the Profession that precedes Rule 57. The fees claimed on a partial-indemnity basis amount to $45,292 plus HST of $5,887.96 and disbursements of $995.12.

[ 9 ] The Defendant Margaret Davis, by new counsel, submits that the matter of costs should be reserved for the trial judge. She says she has access only to limited funds which are required to pay counsel to defend the action.

[ 10 ] She submits as well that the Plaintiffs are under Company Creditors’ Arrangements Act (“CCAA”) protection and hence, she says, it is “highly unlikely that they would be able to pay a costs order should the defendants be successful at trial”.

[ 11 ] Third, she submits that she is entitled to indemnification from First Leaside Wealth Management Inc. in respect of such costs by virtue of the company’s by-laws and by agreement but cannot receive payments as that company is under CCAA protection.

[ 12 ] Finally, Ms. Davis submits that much of the costs to the Plaintiffs are “the very same costs that would have been incurred in preparing for trial…” hence, the Plaintiffs’ “costs going forward ….will be reduced….” and therefore, that the Plaintiffs present costs should be fixed at simply $20,000.

Disposition

[ 13 ] In my view, none of the submissions put forward by Ms. Davis should properly be operative to defeat or delay a costs award in favour of the Plaintiffs. A claim of being impecunious is not a sufficient reason not to give a costs award. If Ms. Davis has a successful claim to indemnification she can pursue her claimed entitlement in due course, but any claim in this regard is independent of the present issue as to whether the Plaintiffs are entitled to costs. Finally, if the Plaintiffs’ costs have been effectively reduced for trial, as she submits, that will be implicitly evidenced in any claim for costs the Plaintiffs may have, if successful, at trial.

[ 14 ] In my view, and I so find, costs payable on a partial-indemnity basis is appropriate and fair and reasonable in all the circumstances. The Plaintiffs were successful. Costs should normally properly follow the event. The proceeding had some complexity and the relief sought was vital to protect the Plaintiffs’ interests. As well, as already noted, Ms. Davis refused to consider a freeze on the sale proceeds until a determination on the merits at trial, which would have avoided the costs seen in the Plaintiffs having to pursue leave to file a CPL.

[ 15 ] I fix the costs payable by the Defendant Margaret Davis to the Plaintiffs at $52,175.08, inclusive of all fees, applicable taxes and disbursements. This costs award is payable forthwith, i.e. within 30 days.

CUMMING J.

Date: October 26, 2012