ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-12-5513
DATE: 20130411
B E T W E E N:
TED THOMSON MANAGEMENT INC.
Plaintiff /Moving Party
Rahul Shastri/Joseph Kennedy, Counsel for the Plaintiff
- and -
1331503 ONTARIO LIMITED operating as JENNER GEISLER, IAN JENNER, JAMIE GEISLER, ASSANTE CAPITAL MANAGEMENT LTD., WAYNE MALCOLM and DAVID GRANNARY
Defendants /Responding Parties
Allan Sternberg, Counsel for the Defendants 1331503 Ontario Limited, Ian Jenner and Jamie Geisler
W. Michael G. Osborne/Fiona Campbell, Counsel for Assante Capital Management Ltd.
HEARD: December 17, 2012
ellies, j.
REASONS ON COSTS
INTRODUCTION
[1] For reasons released on January 11, 2013 I dismissed a motion by Ted Thompson Management Inc. (“TTMI”) to enjoin 1331503 Ontario Ltd., Ian Jenner, Jamie Geisler (collectively, the “JG Group”) and Assante Capital Management Ltd. (“Assante”) from breaching the terms of a non-competition agreement (the “2004 Agreement”) by opening a competing Assante branch down the street from the one being operated by TTMI. I found that the scope of the activity prohibited by the clauses in question was too broad to be enforceable and that, therefore, TTMI could not establish either a serious issue to be tried or a strong prima facia case with respect to those clauses. I invited the parties to make written submissions with respect to the matter of costs, if they were unable to reach agreement with respect to them. I subsequently received those submissions, for which I wish to thank counsel, and which I have now had an opportunity to consider.
POSITIONS OF THE PARTIES
[2] The JG Group seeks partial indemnity costs, including disbursements and HST, in the total amount of $57,076.31. This represents approximately 60% of the value of the solicitor and client fees paid. This amount includes the sum of $3,610.01 for disbursements.
[3] Assante seeks partial indemnity costs in the amount $63,409.55, all-inclusive. Of this amount, the sum of $9,023.45 represents disbursements.
[4] The defendants argue that these costs should be paid forthwith.
[5] TTMI submits that the issue of costs should be deferred to the trial judge. Alternatively, it argues that the JG Group’s costs and those of Assante should be fixed in the amount of $20,000 each, and made payable in the cause, or in any event of the cause.
ANALYSIS
[6] Section 131(1) of the Courts of Justice Act gives the Court broad discretion with respect to the issue of costs. It provides:
Subject to the provisions of an act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.
[7] Rule 57.01 specifies some of the principles and factors that a court may take into account when exercising its discretion under Section 131(1). I will refer only to those factors which are relevant to this matter, after I deal with the issue of whether costs should be payable at all and, if so, when.
Entitlement
[8] Ordinarily, a court that hears a motion should fix the costs and order them to be paid within 30 days (: R. 57.03(1)). However, the practice with respect to motions for injunctions is somewhat different and depends on who wins. Where the plaintiff succeeds, costs are often deferred (: Robert J. Sharpe, Injunctions and Specific Performance, loose-leaf, 4th ed., (Toronto: Canada Law Book , 2012), at para. 2.1330). This is because a trial often follows. At the motion stage, the plaintiff needs to demonstrate only that it meets the threshold test for an interim injunction. The ultimate strength of the plaintiff’s case remains to be determined.
[9] However, where the plaintiff is unsuccessful, trials are less likely because the plaintiff has been unable to meet even the threshold test. For that reason, deferring the issue of costs to the trial judge may work an injustice to a successful defendant.
[10] TTMI asserts that there is no risk of such an injustice in this case, as it intends to proceed to trial. However, as of the date of the reply submissions of the JG Group (February 13, 2013), TTMI had not yet gone beyond issuing a notice of action, despite the expiry in December of the 30 day period referred to in Rule 14.03 (3) within which to file a statement of claim.
[11] In these circumstances, I see no reason to depart from the usual rule applicable to motions for an injunction with respect to the JG Group. I cannot say the same, however, with respect to Assante.
[12] There is no right to costs (: M. Orkin, The Law of Costs, loose-leaf, 2d ed. (Toronto: Canada Law Book, 2012, at para. 202). Rule 57.01(2), which provides that a court may order costs against the successful party, makes it clear that success is no guaranty that costs will be awarded (: Sommers v. Fournier (2002), 2002 45001 (ON CA), 60 O.R. (3d) 225 (Ont. C.A.), at para. 17).
[13] The conduct of a party, both before and during the litigation, is a relevant factor and may, in an appropriate case, result in an order depriving a party of costs or, indeed, requiring the successful party to pay costs. In Schut v. Pole Venture Investments Inc., [1991] O.J. No. 2425 (Ont. Ct. (Gen. Div.)), Bolan J. required the defendants, although successful, to pay the costs of the unsuccessful plaintiffs where the defendants had “created an atmosphere in which (the plaintiffs) had no recourse but to seek the assistance of the courts”.
[14] The same result was reached in Steen v. Islamic Republic of Iran, 2011 ONSC 6464 (leave to appeal denied, 2013 ONCA 30), where Corrick J. awarded costs against the successful defendants whose pre-litigation conduct had “provoked” the litigation.
[15] Costs may also be used to sanction pre-litigation conduct on the part of a successful party that is reprehensible, scandalous or outrageous (: Sommers, ibid.). In my view, Assante’s conduct in failing to advise TTMI when it learned of the planned defection of Jenner, Geisler and the other advisors (by means of monitoring their e-mails), secretly reaching an agreement with them to open a competing Assante branch just down the street (reportedly for the good of TTMI), and then keeping that information from TTMI qualifies as outrageous, if not reprehensible. Certainly, it left TTMI with little recourse but to attempt to enforce Assante’s obligation to facilitate the agreement between the JG Group and TTMI under the 2004 agreement.
[16] For this reason, I would not award any costs to Assante.
Quantification
[17] Despite my decision regarding Assante’s costs, I will consider the quantum of costs requested by both parties so as to provide my view in the event that I have made an error of such a nature as to allow an appellate court to interfere with my discretion (: see Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27, per Arbour J.).
The Principal of Indemnity, Including the Experience of the Lawyer for the Party Entitled to Costs, as well as the Rates Charged and the Hours Spent by that Lawyer
[18] Counsel for the JG Group, Mr. Sternberg, was called to the Bar of Ontario in 1977. Certainly, he is experienced and the JG Group ought to be entitled to partial indemnity costs at a rate appropriate for senior counsel. Mr. Sternberg charged his clients at the rate of $650 per hour. The JG Group seeks partial indemnity costs at the rate of $400 per hour. In my view, this is somewhat excessive.
[19] The Costs Subcommittee of the Civil Rules Committee provided guidance with respect to the maximum partial indemnity rates of counsel, law students and clerks in their work leading up to the revocation of the costs grid in 2005. Although their work in this regard is often ignored (see Erik S. Knutsen, “The Cost of Costs: The Unfortunate Deterrence of Everyday Civil Litigation in Canada” (2010), 36 Queen’s L.J. 113, at para. 20), I believe that use of these maximums provides consistency and much needed predictability when dealing with partial indemnity costs. The maximum range for a lawyer with at least 20 years experience under the guidelines is $350 per hour. That is the rate at which I would assess Mr. Sternberg’s time in awarding partial indemnity costs to his clients.
[20] Mr. Sasso, who assisted Mr. Sternberg, was called to the bar in 2007. His time was charged to the JG Group at $300 per hour. The JG Group seeks partial indemnity costs with respect to his time at the rate of $180 per hour. This is more in keeping with the Cost Subcommittee’s guidelines and is reasonable, in my view.
[21] Mr. Osborne, lead counsel for Assante, was called to the bar in 1998. He charged his client at the rate of $550 per hour. Assante seeks partial indemnity costs at the rate of $330 per hour for his time. I find this excessive, as well. Instead, I would adhere to the Subcommittee’s guidelines and award partial indemnity costs for his time at the rate of $300 per hour.
[22] Ms. Campbell, who assisted Mr. Osborne, was called to the bar in 2011. Her time was billed to Assante at the rate of $325 per hour. Assante seeks partial indemnity costs for her time at the rate of $195 per hour. Given what I have said about Mr. Sasso’s hourly rate, I would award partial indemnity costs for Ms. Campbell’s time at the rate of $160 per hour.
[23] In addition to Ms. Campbell, Assante engaged the services of a student-at-law and two law clerks, with respect to all of whom it paid hourly fees of $195 and seeks partial indemnity costs at the rate of $117 per hour. This is also excessive, in my view. I would award partial indemnity costs at the hourly rate of $60 for the student and $80 for the law clerks.
[24] The JG Group seeks partial indemnity costs for 106 six hours of Mr. Sternberg’s time and for 25 hours of Mr. Sasso’s time. Assante seeks partial indemnity costs for 86.2 hours of Mr. Osborne’s time, 94.7 hours of Ms. Campbell’s time, 9.7 hours of the student’s time, and .7 hours of the law clerks’ time. TTMI has not specifically challenged either the hourly rates or the time spent on behalf of the defendants. Nor has it provided the court with any information on the amount of time spent on behalf of or fees charged to the plaintiff, so as to provide a point of comparison (: see Risorto v. State Farm Mutual Automobile Insurance Co., 2003 43566 (ON SC), 2003 CarswellOnt 934 (Ont. S.C. ), at para. 10). For this reason, although I do have some concerns about the amount of time spent by Ms. Campbell on the matter, I do not propose to second guess the amount of time spent on behalf of the successful defendants.
[25] Looking at the time spent on behalf of the defendants and applying the reduced rates set out above, the partial indemnity costs for counsel and support staff would work out as follows:
For Mr. Sternberg: 106 x $350 per hour = $37,100
For Mr. Sasso: 25 x $180 per hour = 4,500
Total - $41,600
For Mr. Osborne: 86.2 x $300 per hour = $25,860
For Ms. Campbell: 94.7 x $160 per hour = 15,152
For Student: 9.7 x $60 per hour = 582
For Clerk: .7 x $80 per hour = 56
Total - $41,650
The Amount of Costs an Unsuccessful Party Could Reasonably Expect to Pay
[26] TTMI’s failure to provide information on its own costs makes it difficult to apply this factor at this stage of the analysis. I will return to a discussion of what an unsuccessful party might find fair and reasonable at the conclusion of these reasons.
[27] For now, I propose to address under this heading a concern I have with respect to the disbursements sought by Assante. Those disbursements include a charge for travel expenses incurred to attend court on November 16 in the amount of $4,115.12. No details are provided. That amount seems excessive when compared to the travel expenses associated with the December 17 attendance, in the amount of $1,692.60. It also seems excessive when one considers that the amount sought by Assante for travel expenses for attending court on November 16 is more that the amount all of the disbursements sought by the JG Group in their costs outline.
[28] The amount claimed for disbursements must also be reasonable. On that basis, I would reduce the amount sought by Assante for disbursements associated with their November 16 court attendance to $2,500. This brings the overall disbursements down to $6,370.23. Adding the reduced disbursements for Assante to the reduced amount for fees produces the following overall result with respect to partial indemnity costs claimed by the defendants, namely:
For the JG Group: Legal fees $41,600.00
Disbursements 3,610.01
HST at 13% 5,877.30
Total $51,087.31
For Assante: Legal fees $41,650.00
Disbursements 6,370.23
HST at 13% 6,242.63
Total $54,262.86
The Complexity of the Proceeding
[29] I agree with TTMI’s characterization of the proceeding as being of moderate complexity. As I pointed out in my reasons on the motion, there are competing lines of authority with respect to the test to be applied in a situation such as this. With respect to the facts, seven affidavits were filed in advance of the motion and cross-examinations were conducted of the affiants.
The Importance of the Issues
[30] TTMI concedes that the issues involved in the motion were of importance to the parties. Given the affect of the outcome of the motion on the prospect of a trial, as I have referred to above, I agree with the submission made on behalf of the JG Group that the issues here were of “utmost” importance to the parties.
Whether Any Step of the Proceeding was Improper, Vexatious or Unnecessary
[31] The JG Group and Assante assert that their attendance on the first return date of the motion, November 16, 2012, was completely unnecessary and was required only because counsel for TTMI at first refused to agree to a request for an adjournment without terms. TTMI argues that the attendance of all parties was necessary on that date because the parties could not agree on a return date and one had to be fixed by the court after hearing submissions.
[32] It seems to me that if TTMI is arguing that the attendance was necessary, then there is no real issue and the costs incurred by the defendants for doing so ought to be included in this assessment. It would be different if TTMI was looking for its costs, or if TTMI was arguing that the attendance of the other parties on November 16 was unnecessary, in which case those costs associated with an unnecessary attendance would be relevant.
Any Other Matter Relevant to the Question of Costs
[33] TTMI and Assante made their submissions regarding whether costs should be payable at all as part of their submissions regarding this factor, which issue I have already addressed. In addition, Assante argues that TTMI’s failure to pass even the serious issue to be tried test with respect to the scope of the activity prohibited by the clauses in question is a relevant consideration under this factor. While it may be relevant, I disagree that it has any effect. TTMI had an arguable case. It was not so devoid of merit as to attract an increased award of costs against it.
[34] I believe that this may also be the appropriate point at which to address the issue of what is fair and reasonable. The fixing of costs is not simply a mechanical exercise involving a calculation of hours times rates (: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.), at para. 26). Overall, the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding (: Boucher, ibid).
[35] In my view, it would be neither fair nor reasonable to require TTMI to pay costs of more than $50,000 on a partial indemnity basis to each of the two groups of defendants, if it was my view that Assante should be awarded costs. This was a proceeding that lasted one day, although it did involve another brief court appearance for which counsel had to be prepared.
[36] Nonetheless, I am unable to agree with the submission made by TTMI that costs for each of the two groups of defendants ought to be fixed in the amount of $20,000, all-inclusive. That is too low, in my opinion, given what was at stake and the preparation involved.
[37] My view is that the proper quantum lies somewhere in between these amounts. It is my opinion that costs in the amount of $40,000, all-inclusive, represents an amount that is fair and reasonable for each of the two groups of defendants.
[38] For the foregoing reasons, an order will issue, requiring TTMI to pay partial indemnity costs to the JG Group in the amount of $40,000, inclusive of HST and disbursements. No costs shall be paid by TTMI to Assante.
Ellies, J.
Released: 20130411
COURT FILE NO.: CV-12-5513
DATE: 20130411
ONTARIO
SUPERIOR COURT OF JUSTICE
TED THOMSON MANAGEMENT INC.
– and –
1331503 ONTARIO LIMITED operating as JENNER GEISLER, IAN JENNER, JAMIE GEISLER, ASSANTE CAPITAL MANAGEMENT LTD., WAYNE MALCOLM and DAVID GRANNARY
REASONS ON COSTS
Ellies J.
Released: 20130411