SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Vera Wallerstein, Plaintiff

AND:

2161375 Ontario Inc., Studio Cycle Group Inc., Walter Heilman aka Vladimir Heilman, Jagoda Heilman, Beco Motor International Inc. and Business Development Bank of Canada, Defendants

BEFORE: D. M. Brown J.

COUNSEL:
B. Frydenberg, for the Moving Party Defendant, Business Development Bank of Canada

N. Epstein, for the Plaintiff

G. Jones, for the defendants, 2161375 Ontario Inc., Studio Cycle Group Inc., Walter Heilman aka Vladimir Heilman and Beco Motor International Inc.

HEARD: February 11, 2013; subsequent written cost submissions.

REASONS FOR DECISION - costs

I. Costs on a summary judgment motion: positions of the parties

[1] By Reasons dated February 13, 2013 (2013 ONSC 976) I granted summary judgment in favour of the Business Development Bank of Canada dismissing the action against it.

[2] The parties have filed written cost submissions. The Bank seeks substantial indemnity costs in the amount of $24,999.90 or, in the alternative, partial indemnity/substantial indemnity costs in the amount of $21,069.76 on the basis of an offer to settle made November 27, 2012.

[3] The plaintiff submitted that partial indemnity costs of no more than $3,000 to $4,000 should be awarded.

II. Analysis

[4] As noted in my Reasons, by endorsement made November 6, 2012, I established a timetable for the Bank’s summary judgment motion under which the plaintiff was to file any responding materials by November 23, 2012 and any cross-examinations were to be completed by January 18, 2013. In the result Wallerstein filed no responding materials, nor did she cross-examine the Bank on its materials. Wallerstein did not file a factum. As I wrote:

Amendments to Rule 20 in 2010 did not change the basic principle that on a summary judgment motion a responding party cannot simply rely on allegations made in her pleading. To counter a summary judgment motion, a responding party must file evidence of some sort and put its best foot forward. Wallerstein has not done so in this case. Accordingly, I will proceed to consider the Bank’s motion based on the uncontested evidence it filed.

[5] As to the merits of the plaintiff’s claim against the Bank, I held that:

(i) Wallerstein pleaded that at no time did 216 borrow money from the Bank (Statement of Claim, para. 43). That assertion was wrong; the Bank proved its advances to 216;

(ii) Wallerstein had not sought or obtained leave to commence a derivative action on behalf of 216 pursuant to section 246 of the Ontario Business Corporations Act nor did her claim fall within the “wrong done to a shareholder qua individual” exception to the rule in Foss v. Harbottle. Accordingly, she had no standing to assert her claim against the Bank; and,

(iii) the Bank was justified in relying on the 216 Directors’ Resolutions and Officer’s Certificate in thinking that Jagoda Heilman was authorized to sign the Loan Agreement on behalf of 216, as well as the 216 GSA. The Bank had no indication of any improper conduct on the part of Jagoda Heilman.

In sum, I concluded that “no basis therefore exists to set aside 216’s liability for the loans made by the Bank.”

[6] On October 2, 2012, the Bank offered to settle the claim on the basis that the plaintiff consent to a dismissal of the action against the Bank on a without costs, with prejudice basis. This was not a Rule 49 offer, but it was an extremely reasonable offer. The plaintiff refused the offer, which led to my endorsement setting a timetable for this action.

[7] As noted, the plaintiff did not respond to the summary judgment motion. She made some offers, but they involved only discontinuances of the action against the Bank; one required the Bank to release its security against 216; and the other contemplated an argument over costs in court.

[8] Although elevated costs can only be awarded where the responding party has engaged in reprehensible litigation conduct, as explained by the Court of Appeal in Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.), I conclude that the plaintiff’s litigation conduct falls into that category for several reasons:

(i) There was no basis for her claim, and she lacked the standing to sue the Bank;

(ii) By not agreeing to dismiss the action against the Bank before the Bank had initiated this motion, the plaintiff forced the Bank to “jump through the hoops” of civil litigation. The Bank duly set at timetable at a 9:30 appointment, filed its materials and argued its case in open court. The plaintiff simply hung back, put the Bank to the expense of bringing a completely unnecessary motion, and then lost on the basis that her claim had no merit;

(iii) The plaintiff’s offers to settle were not reasonable in the circumstances. Through her offers she was trying to obtain that which she had no hope of securing in the action – a release of the Bank’s security against 216; and,

(iv) The plaintiff did not fail in her claim “on a technicality”, as she submitted in her cost submissions. There was no basis for her claim. She should never have sued the Bank in the first place.

[9] In this day and age of expensive litigation costs, it is not open to a responding party to put a moving party through the motion hoops, all the while simply standing on the sidelines and watching the moving party burn through unnecessary legal costs to prove the obvious – i.e. there was no merit to the responding party’s case. The litigation conduct by the responding party in this case was an abuse of the court process: she lacked the standing in the first place to initiate the claim, and she failed to respond to a most reasonable, pre-motion offer to settle. In my view, such conduct deserves the sanction of a substantial indemnity costs award. The plaintiff’s litigation conduct on this motion was a poster-case for all that is wrong with the civil motion culture in this city. Only lawyers win under that kind of approach, and the civil justice system is not about making sure the lawyers win regardless of the lack of merit of their client’s case.

[10] Accordingly, I conclude that this is an appropriate case in which to award the successful moving party substantial indemnity costs.

[11] As to the quantum, this was a simple motion, involving two affidavits from the Bank, with no cross-examinations, but given that it was a Rule 20 motion, a factum was required.

[12] I have taken 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 principle of proportionality: Rule 1.04(1). In addition, I have considered the principles 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. (3rd) 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.

[13] Mr. Frydenberg is a 1994 call. His actual billing rate was $500/hour prior to January 1, 2013, and $535.00 thereafter. I accept as reasonable a substantial indemnity rate of $500/hour throughout. I do not accept as reasonable the 37 hours claimed for Mr. Frydenberg for preparing a Statement of Defence, preparing and arguing the motion, and drafting cost submissions. I fix reasonable time at 25 hours, or about three full days of work. I allow 5, not 12 hours, for the student’s time, at $100/hour. That results in total fees of $12,500 + $500, or $13,000. The disbursements of $1,155.77 were reasonable. I therefore award total costs of $14,300.00, inclusive of taxes.

[14] I order the plaintiff to pay the Bank costs of this action and motion fixed at $14,300.00 within 30 days of the date of this order.

D. M. Brown J.

Date: March 14, 2013