BARRIE

COURT FILE NO.: CV-11-0050

DATE: 20130314

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

WILLIAM JOHN ADAMS

Plaintiff

– and –

McLEAN & DICKEY LTD. and 2192464 ONTARIO LIMITED

Defendants

AND BETWEEN:

McLEAN & DICKEY LTD.

Plaintiff by Counterclaim

-and-

WILLIAM JOHN ADAMS

Defendant by Counterclaim

M.M. Miller, for the Plaintiff/Defendant by Counterclaim

P. Lassaline, for the Defendants/Plaintiff by Counterclaim

HEARD: by written submissions

REASONS FOR DECISION ON COSTS

DiTOMASO J.

INTRODUCTION

[1] This matter proceeded to trial on December 4, 5, 6 and 7, 2012.

[2] The dispute concerned the value of one Common Share in McLean & Dickey Ltd. owned by Mr. Adams as at December 31, 2008. Mr. Adams claimed that his one Common Share was valued in the amount of $385,552. McLean & Dickey and 2192464 Ontario Limited countered that the value of his share was zero.

[3] In addition, McLean & Dickey asserted that it was entitled to the remedy of rectification which would have altered the formula for valuing Mr. Adams’ Common Share. In the end, if rectification were granted, the value of Mr. Adams’ share would still be zero and his action ought to be dismissed.

[4] For written reasons dated February 15, 2013, I granted judgment in favour of Mr. Adams against McLean & Dickey Ltd. in the amount of $254,430 with interest at the rate of 7.5 percent from April 12, 2009 to the date of judgment. Post-judgment interest was fixed on the judgment amount at the same rate of 7.5 percent per annum. The counterclaim seeking the remedy of rectification was dismissed.

[5] The parties agreed that the issue of costs would be determined by way of written submissions. I have received those written submissions from the parties and these are my Reasons on Costs.

POSITION OF THE PARTIES

Position of the Plaintiff William John Adams

[6] Mr. Adams submits that he was the successful party in this action and costs should follow the event. He requests that costs of the action be fixed on a partial indemnity basis prior to October 26, 2012 and on a substantial indemnity basis after that date. He relies on an Offer to Settle dated October 26, 2012 whereby he offered to settle the action upon payment from McLean & Dickey of the sum of $225,000 with prejudgment interest fixed pursuant to the Courts of Justice Act at 1.3 percent per annum. Mr. Adams achieved a result at trial substantially higher than the Offer to Settle. Pursuant to rule 49.10(1)(c) and pursuant to the principles enunciated in rule 57.01, he seeks costs in the amount of $60,458.99.

Position of the Defendant McLean and Dickey Ltd.

[7] Notwithstanding Mr. Adams’ favourable Offer to Settle, McLean & Dickey submits that this is a case where it would not be inappropriate to either deny Mr. Adams his costs, or, alternatively, limit his costs to partial indemnity costs throughout. McLean & Dickey challenges the disbursement charge associated with Mr. Ferguson’s fee for preparing an Accounting Report and some of the fees claimed by Mr. Adams’ counsel. On a partial indemnity scale, it is submitted that the total fees, disbursements and taxes should be $36,367.83.

ANALYSIS

Costs Generally

[8] I find that the Plaintiff was successful in this action and there is no reason to vary from the normal rule that the successful party should be entitled to his costs of the action. I find that costs follow the event and Mr. Adams is entitled to his costs. I specifically reject that this is the kind of case where Mr. Adams would be entitled to no costs.

Rule 49 Offer to Settle

[9] McLean & Dickey Ltd. offered to settle the proceedings by way of Offer to Settle dated October 22, 2012. McLean & Dickey offered to pay Mr. Adams the sum of $54,000 inclusive of interest and costs in full and final settlement of its claims.

[10] By Offer to Settle dated October 26, 2012 Mr. Adams served an Offer to Settle wherein he was prepared to settle his claims upon payment by McLean & Dickey of the sum of $225,000 plus prejudgment interest pursuant to the Courts of Justice Act. As for costs, Mr. Adams offered that McLean & Dickey Ltd. should pay his costs of the action on a partial indemnity basis as agreed upon or assessed. Further, the counterclaim ought to be dismissed.

[11] If interest had been fixed pursuant to the Courts of Justice Act, the interest rate would have been 1.3 percent and the interest on the sum of $225,000 would have been fixed at $11,246.04 to the date of judgment.

[12] Mr. Adams obtained judgment in the amount of $254,430 which is substantially higher than the Offer to Settle for $225,000. In addition, Mr. Adams was awarded prejudgment interest at the rate of 7.5 percent pursuant to the Share Purchase Agreement, rather than the substantially reduced rate of interest provided by the Courts of Justice Act. The prejudgment interest on the sum of $225,000 at 7.5 percent amounts to the sum of $73,401.12 to the date of judgment.

[13] Mr. Adams’ Offer to Settle inclusive of prejudgment interest was in the amount of $236,246.04. Mr. Adams recovered a judgment at trial substantially higher in the amount of $327,831.12 exclusive of prejudgment interest. The judgement is $91,585.08 higher than what would have been due under the Offer to Settle if accepted.

[14] Rule 49.10(1)(c) provides:

Where an offer to settle is not accepted by the defendant and the plaintiff obtains a judgment as favourable as or more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer to settle was served and substantial indemnity costs from that date, unless the court orders otherwise.

[15] I find that there is nothing in the conduct of Mr. Adams during the course of these proceedings or in the circumstances of this case which would cause me to negate the application of Rule 49. Accordingly, I find that Mr. Adams is entitled to partial indemnity costs to the date of the Offer to Settle dated October 26, 2012 and substantial indemnity costs from that date to the date of judgment.

Rule 57.01 Principles

[16] I find that the rate sought and the hours charged are appropriate given the experience of counsel, the complexity of the case and the reasonable expectations of the unsuccessful party.

[17] I find that the documents that were adduced and referred to were complex agreements and financial documents which required extensive review in preparation for trial. Those documents included three Share Purchase Agreements, a Shareholders Agreement, a Purchaser Agreement and Corporate Financial Statements along with expert reports.

[18] Further, the amounts claimed and recovered were substantial and the arguments officially complex to warrant the fees charged.

[19] From the evidence led at trial and given the considerable course of unsuccessful negotiations which led to litigation, both parties considered the issues of extreme importance to them.

[20] I find that both parties took all the necessary steps to ensure that the proceedings were not unduly lengthened and that no steps taken in the proceedings were improper or unnecessary. A Joint Book of Documents was filed as an exhibit. The defence agreed that there were several issues at trial which were resolved on a common sense approach by the defendant; the unsigned Promissory Note was admitted as a true copy of the lost Note; the interest rate was admitted via a print-out from a bank website; and a late revision to Mr. Adams’ expert report was admitted without challenge.

[21] There is nothing in my review of the principles enunciated pursuant to Rule 57.01 that would warrant any assessment of costs adverse to Mr. Adams in these proceedings.

Quantum

[22] Having considered the effect of Rule 49, the principles enunciated pursuant to rule 57.01 and the reasonable exercise of my discretion pursuant to s.131 of the Courts of Justice Act, I now consider the quantum of costs claimed by Mr. Adams.

[23] I am guided by the overarching principles of fairness, reasonableness and proportionality. See Davies v. Clarington (Municipality) 2009 ONCA 722 paras. 51 and following.

[24] I have considered McLean & Dickey’s submissions that the disbursements regarding Mr. Ferguson’s fees for preparing the Report and attending at trial may be inappropriate in respect of the charge for his Report in the amount of $4,500. I disagree. The charge is fair and reasonable in all the circumstances.

[25] As for Mr. Miller’s fees claimed before the Offer to Settle and after, I find they are fair and reasonable given commercial litigation of this nature. The rates charged and the time spent are also fair, reasonable and proportional. It is agreed that Mr. Christie’s time is either excessive or outside the litigation. I disagree. Time spent is properly claimed.

[26] In all the circumstances, I find that Mr. Adams’ claim for fees on a partial indemnity scale to October 26, 2012 in the amount of $13,131.25 is appropriate. I further find that his claim for fees after October 26, 2012 in the amount of $30,417.50 is also appropriate. Having considered the cost submissions by the parties and Mr. Adams’ Bill of Costs, I find that the claim for costs in the amount of $60,458.99 broken down as follows is fair, reasonable and proportional:

Total time $43,548.75

HST on time $ 5,661.34

Total Disbursement $10,053.95

HST on disbursements $ 1,194.95

TOTAL $60,458.99

DISPOSITION

[27] For the reasons above, I order that costs in the amount of $60,458.99 be paid by McLean & Dickey Ltd. to William John Adams within the next 30 days.

DiTOMASO J.

Released: March 14, 2013