SUPERIOR COURT OF JUSTICE - ONTARIO

Court File No.: C-490-09

Date: 2013-04-25

RE: Paul Gdanski - Plaintiff

AND:

Calico Medical Inc. - Defendant

BEFORE: D.A. Broad, J.

COUNSEL:
Steven D. Gadbois - for the Plaintiff

J. Greg Murdoch - for the Defendant

COSTS ENDORSEMENT

[1] The parties have now delivered their written submissions on costs as directed in my Reasons for Judgment released February 11, 2013. The following is my disposition with respect to costs.

[2] The Plaintiff’s action for wrongful dismissal was dismissed following a four-day trial. Until the eve of trial the proceeding consisted of the Plaintiff’s action for wrongful dismissal in the sum of $108,000.00 and a counterclaim by the Defendant for an injunction and damages for $200,000.00 based upon an alleged obligation not to compete.

[3] Counsel for the Defendant advised that the counterclaim would not be pursued at the commencement of the trial. It was therefore necessary for the Plaintiff to fully prepare for a trial of the counterclaim.

[4] The Plaintiff states that it is entitled to partial indemnity costs of the counterclaim, which should be set-off against the costs to be awarded to the Defendant in respect of the main action.

[5] Rule 23.05(1), which was amended on October 19, 2009 by Ontario Regulation 349.09, provides as follows:

“If all or part of an action is discontinued, any party may, within thirty days after the action is discontinued, make a motion respecting the costs of the action.”

[6] The former Rule 23.05(1) provided as follows:

…where a plaintiff discontinues an action against a defendant, the defendant is entitled to costs of the action...unless the court orders otherwise.

[7] Rule 23.05(1) applies with necessary modifications to counterclaims by virtue of Rule 23.07.

[8] As indicated by McCarthy, J. in Digiuseppe v. Todd 2102 ONSC 1028 (SCJ) at para. 13, one of the effects of the amendment was to remove the prima facie entitlement to costs following a discontinuance and to permit the court to make a determination on costs in favour of either party.

[9] The Defendant, in its Reply submissions, argues that the counterclaim was not actively pursued and was not complicated, based upon the allegations. Moreover, he argues that the Plaintiff has failed to identify how much time was spent preparing for issues related to the counterclaim.

[10] The Defendant also submits that, at the pre-trial, he admitted that the counterclaim was not strong and would likely not be pursued. I would not give effect to this submission. Rule 50.09 provides that no communication shall be made to the judge presiding at the hearing of the proceeding with respect to any statement made at a pre-trial conference. Maintenance of confidentiality of pre-trials promotes full and frank discussion at the pre-trial. Reference to statements made at the pre-trial in costs submissions serves to undermine the purpose of pre-trials as set forth in Rule 50.01. Parties should be free to speak freely at a pre-trial, without fear that their comments would be referred to later in costs submissions. It is noted that both parties made reference to discussions at the pre-trial in their costs submissions, a practice which, in my view, should be discouraged for the reasons set forth above.

[11] I have not been provided with any basis to suggest that the Plaintiff should not be entitled to at least some costs referable to the counterclaim. No motion was made by the Defendant pursuant to Rule 23.01(1)(b) for leave to discontinue the counterclaim without costs. The counterclaim was not abandoned at the pre-trial, but was abandoned effectively on the eve of trial by letter dated February 4, 2013. Earlier, following the pre-trial, counsel for the Defendant wrote to counsel for the Plaintiff confirming that the counterclaim would be pursued.

[12] I find that the Plaintiff is entitled to costs of the counterclaim on a partial indemnity basis until discontinuance at the commencement of trial. The difficulty is how the quantum of costs referable to the counterclaim should be determined in circumstances where they have not been separately tracked or accounted for.

[13] Under section 131 of the Courts of Justice Act, R.S.O. 1990, c. C. 43, the court has discretion with respect to the costs of and incidental to a proceeding. Rule 57.01 sets forth the factors which the court may consider in the exercise of that discretion. Included in the factors are the principle of indemnity, as well as the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding under consideration.

[14] The Defendant made an Offer to Settle on January 16, 2013 which remained in place at trial and which called for payment to the Plaintiff of the sum of $30,000.00, plus costs on a partial indemnity basis, with payment to be made over a five year period. Counsel for the Defendant references the case of H.L. Staebler Co. v Allan 2008 64396 (ON SC), [2008] O.J. No. 5001 (SCJ) by which Taylor, J. held that a defendant who makes a substantial offer to settle prior to trial may be awarded substantial indemnity costs following dismissal of the action by the combined operation of Rules 49.13 and 57.01.

[15] I am not satisfied that the principle in H.L. Staebler Co. v Allan is applicable where the offer to settle provides for payment of the offered amount by instalments or at some future date. An offer to settle providing for deferred payment, particularly without adequate security, does not promote the principles underlying rule 49 referred to by Justice Taylor in the Staebler case.

[16] I agree with the submission of counsel for the Plaintiff that the amount claimed by the Defendant for partial indemnity costs up to the date of trial should be discounted by some factor on the basis that some of the costs incurred by the Defendant can be regarded as having been incurred in prosecuting the counterclaim.

[17] Beyond this submission, neither party takes issue with the amount of time claimed by the other. However, counsel for the Plaintiff submits that the partial indemnity rate of counsel for the Defendant should be set at 60% of his actual hourly rate.

[18] Given the rather incomplete record respecting the breakdown, on both sides, of the costs incurred as between the main action and the counterclaim, I am left to do the best I can to make a just determination of the costs, based upon what I have before me. I accept that regardless of the amounts claimed in the main action and the counterclaim, the primary focus of the proceeding was the main action, and accordingly, it would not be appropriate to ascribe 50% of the pre-trial costs on both sides to the counterclaim, as submitted by the Plaintiff. An allocation of 25% would in my view, be more appropriate.

[19] I would therefore reduce the fee portion of the Defendant’s pre-trial costs by 25% from $15,965.00 to $11,973.75 based upon a partial indemnity rate of $200.00 per hour (rather than $220.00 claimed). The Defendant’s total costs on a partial indemnity basis are therefore:

Pre-trial $11,973.75

Trial 8,200.00

Total fee 20,173.75

HST 2,622.59

Disbursements 1,778.58

TOTAL $24,574.92

[20] The Plaintiff’s pre-trial fees referable to the counterclaim, set at 25% of the actual time, on a partial indemnity basis, are $5,910.75, plus HST totalling $6,679.15. I would also allow the Plaintiff’s for the costs of reproduction of the document brief for trial in the sum of $674.96. The amount of the Plaintiff’s costs to be offset against the Defendant’s costs are therefore $7,354.11

[21] The total net amount to be paid by the Plaintiff to the Defendant in respect of costs is therefore the sum of $17,220.81.

D.A. Broad J.

Date: April 25, 2013