SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-12-458554
COURT FILE NO.: CV-12-458556

DATE: 2013-08-01

RE: 373041 Ontario Limited, Plaintiff

– and –

King Reed & Associates Inc., King Reed & Associates LP, King Reed & Associates, Granite Global Solutions Inc., Shaw Satellite G.P., co.o.b. as Shaw Direct and Bell Expressvu Limited Partnership, Defendants

AND RE:

Kurt Pieckenhagen, Julia Pieckenhagen, Julita-Luise Pieckenhagen, Nicole Pieckenhagen, and Vera Pieckenhagen, Plaintiffs

– and –

King Reed & Associates Inc., King Reed & Associates LP, King Reed & Associates, Granite Global Solutions Inc., Shaw Satellite G.P., c.o.b. as Shaw Direct, and Bell ExpressVu Limited Partnership, Defendants

BEFORE: E.M. Morgan J.

COUNSEL:
Melvyn Solmon and Nancy Tourgis, for the Plaintiffs

Christopher Bredt and Denise Bambrough, for the Defendants, Shaw Satellite G.P., c.o.b. as Shaw Direct, and Bell ExpressVu Limited Partnership

HEARD: May 16, 2013

SUPPLEMENTARY ENDORSEMENT

[1] On June 20, 2013 I released Reasons for Judgment granting summary judgment and dismissing the action as against the Defendants, Shaw Satellite G.P., co.o.b. as Shaw Direct and Bell Expressvu Limited Partnership (“Shaw” and “ExpressVu”).

[2] At the end of my judgment I reviewed the Costs Outlines submitted by both counsel appearing at the motion, and awarded costs to Shaw and ExpressVu in the total amount of $25,000. At paragraphs 51 to 58 of my Reasons for Judgment I set out the reasons for having awarded this amount.

[3] Subsequent to the release of my judgment, counsel for Shaw and ExpressVu wrote to me and asked if they could make written submissions addressing costs. Counsel reminded me that at the end of the one day hearing on May 16, 2013, he had mentioned that although he was submitting his Costs Outline he would also like to make further submissions on costs once my ruling was known.

[4] Having been so reminded, I did recall that counsel had indeed made such a request. Accordingly, I asked counsel for Shaw and ExpressVu to provide me with their written submissions, and asked counsel for the Plaintiffs to provide me with their response to those submissions and with their own submissions as to costs. I have now received the materials from both sets of counsel and have had an opportunity to review them.

[5] While both sides have provided me with very fulsome submissions on costs, they for the most part reiterate matters that were already covered during the course of arguing the merits of the motion.

[6] Counsel for Shaw and ExpressVu submits that the Plaintiffs’ claim was so weak that the result of the summary judgment motion should have been foreseen. They have reviewed my findings and the facts of the case and have pointed out that, as they had predicted, the Plaintiffs caused Shaw and ExpressVu to incur the unnecessary expense of defending the action and preparing and serving affidavits of documents without Plaintiffs’ counsel having done sufficient investigation of the claim to determine from the outset whether it had any merit.

[7] For their part, counsel for the Plaintiffs submits that without a proper defence and affidavit of documents, and without the affidavit evidence and cross-examinations that accompanied the motion, they were not able to fully evaluate the merits of the claim. They are of the view that it would not have been possible for them to advise their client that the action was pointless without having gone through the entire process in which they have engaged to date.

[8] The one piece of information that I had not appreciated when I wrote my Reasons for Judgment is that Shaw and ExpressVu made an offer to settle early in the action. Counsel quite appropriately waited until after my ruling before appending the offer to settle to their submissions on how that offer should impact on my analysis of costs.

[9] This offer took the form of a letter dated September 14, 2012 from counsel for Shaw and ExpressVu to counsel for the Plaintiffs. It took a page to review the factual weakness of the Plaintiffs’ case, as Shaw and ExpressVu saw it. On the second page of the letter, the offer to settle was presented as follows:

In the circumstances, our clients are prepared to consent to the dismissal of the Libel Actions as against them, without cousts, provided that this offer is accepted before the close of business on Wednesday, September 19, 2012. Thereafter, our client will insist upon the payment of its full indemnity costs to the date of acceptance. Please note tha this should be treated as an offer to settle made under Rule 49 of the Rules of Civil Procedure.

[10] The Plaintiffs did not accept the offer, and Shaw and ExpressVu have now been successful in having the actions against them dismissed on summary judgment. Their counsel therefore seeks full indemnity costs, or in the alternative substantial indemnity costs, for the action and motion.

[11] Counsel for the Plaintiffs responds by pointing out that under Rule 49.10(2)(b), an offer to settle by a defendant that is not accepted by a plaintiff could only have negative cost consequences for the Plaintiffs if it had not expired before the commencement of the hearing. That is a correct reading of the Rule. Since the September 14, 2012 offer was only open for 5 days at the pleadings stage of the action, Rule 49.10 does not apply. No entitlement to increased costs arises for Shaw and ExpressVu due to this letter.

[12] Having said that, it is nevertheless open to me to consider the early offer to settle as a factor in exercising my discretion in awarding costs under section 131 of the Courts of Justice Act and Rule 57.01(1) of the Rules of Civil Procedure. This is made abundantly clear in Rule 49.13, which provides that, “[d]espite rules 49.03, 49.10 and 49.11, the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer.”

[13] It is certainly the case that the Plaintiffs’ claim against Shaw and ExpressVu was handily defeated in the summary judgment motion. I do not, however, view the Plaintiffs’ conduct in bringing or conducting the action to have been anywhere near the objectionable behaviour that would be required in order to impose full indemnity costs on them. That sanction is generally reserved for cases “where there are unsubstantiated allegations of dishonesty or where there is conduct of a party that is ‘reprehensible, scandalous or outrageous’, full indemnity costs may be appropriate”. Marcus v Cochrane, [2012] OJ No 1663, at para 11 (SCJ).

[14] That does not describe the case here. The Plaintffs’ the allegation was one of libel, not dishonesty. Moreover, the Plaintiffs pursued their case vigorously, albeit unsuccessfully, but without any reprehensible behaviour.

[15] As for Shaw and ExpressVu’s alternative request for substantial indemnity costs, Rule 20.06 provides that this elevated scale of costs may be imposed where: “(a) the party acted unreasonably by making or responding to the motion; or (b) the party acted in bad faith for the purpose of delay.” In my view, neither of these apply to the Plaintiffs in defending the summary judgment motion.

[16] The Court of Appeal has placed the burden of establishing the conditions for substantial indemnity costs squarely on the party seeking those costs. In Combined Air Mechanical Services Inc. v Flesch, 2011 ONCA 764, [2011] OJ No 5431, at para 67, the court in indicated:

…the onus is now on the party seeking substantial indemnity costs to convince the court that the other side acted unreasonably or in bad faith for the purose of delay in bringing or responding to ta motion for summary judgment. This anmendment removes a disincentive to litigants from using rule 20 by eliminating the presumption that they will face substantial indemnity costs for bringing an unsuccessful motion for summary judgment.

[17] While the court in Combined Air was addressing the incentives of a moving party in bringing a motion for summary judgment, the same logic applies to the incentives of a responding party in resisting a motion for summary judgment. The policy behind Rule 20.06 is to ensure that substantial indemnity costs are available as a sanction against objectionable conduct, but not to provide a disincentive to a party to pursue its case vigorously on the merits.

[18] I do not see the short-lived offer to settle served by Shaw and ExpressVu early in the action as a vehicle for elevating the costs to the substantial indemnity level. That offer contained only a kernel of compromise by Shaw and ExpressVu; it simply told the Plaintiffs to drop their case or else face costs later. Needless to say, every Plaintiff faces the choice of dropping their case or facing increased costs later. Rule 20.06, as the Court of Appeal noted in the Combined Air passage quoted above, is not designed to discourage claims or defences; it is designed to ensure that parties pursue those claims and defences on the merits rather than through harassing or improper tactics.

[19] I reiterate what I said at paragraph 57 of my previous ruling: “[t]he fact is that parties do not do anything wrong, and do not expose themselves to a higher scale of costs, by pursuing their claims.” That is true whether or not the opposing side says so in an offer to settle that is open for 5 days at the pleadings stage of the action.

[20] None of this is to say that the offer to settle made by Shaw and ExpressVu on September 14, 2012 was worthless. It did accurately point out the factual and legal weaknesses in the Plaintiffs’ case. While I cannot fault any party, including the Plaintiffs, from wanting their day in court, this letter should possibly have signaled to the Plaintiffs that they were in for a very uphill battle. To use a phrase more often associated with constitutional law, the letter from counsel for Shaw and ExpressVu should have triggered a ‘sober second thought’ for the Plaintiffs about the wisdom of proceeding with their actions.

[21] Having been given an explicit opportunity to re-think their claim, the Plaintiffs refused to do so. They barged ahead, as was their right, and caused the parties to go through an entire summary judgment motion, with its attendant affidavit materials, cross-examinations, legal research, factums, and oral argument, before the claim proved to be as futile as Shaw and ExpressVu had said it would be. The offer to settle may not have been tempting for the Plaintiffs to accept since it offered only that they drop their claim in return for nothing; but it should have sparked a more careful analysis of the merits.

[22] Accordingly, I consider the offer to settle as a relevant factor in exercising my discretion in quantifying the costs award to Shaw and ExpressVu. It does not provide a basis for substantial indemnity costs against the Plaintiffs, but it does prompt a slightly more generous view of the costs expended by Shaw and ExpressVu. Those Defendants together brought a motion whose odds were in their favour from the outset. Given the signal of this in their settlement offer, the response to the summary judgment motion should have been preceded by a more careful review by the Plaintiffs and their counsel.

[23] In particular, I am prepared to increase my previous costs award by half the cost of preparing the affidavits of documents on behalf of Shaw and ExpressVu. As I said in my previous ruling, one cannot fault the Plaintiffs for requiring an affidavit of documents from every defendant. However, once the Plaintiffs had all the documents at their disposal, they were in a good position to determine the relative strength of their own case as against that of Shaw and ExpressVu. What makes this case different is that the offer to settle letter, while not qualifying under Rule 49, specifically flagged for the Plaintiffs the very weaknesses that the affidavits of documents would have helped them to verify.

[24] The costs payable by the Plaintiffs to Shaw and ExpressVu are therefore increased by $10,000 from my previous ruling. The Plaintiffs are to pay Shaw and ExpressVu a total of $35,000, inclusive of disbursements and HST, in place of the $25,000 previously awarded to them.

Morgan J.

Date: August 1, 2013