SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO: CV-12-444850
DATE: 20130125

RE: Sunlogics Inc.

Applicant

• and -

Dan Giesbrecht and 0803356 B.C. Ltd. and Michael Matvieshen and

Sunlogics Power Fund Management Inc., Tammy Drapak and Maximum
Sports & Entertainment Ltd.

Respondents

BEFORE: The Honourable Mr. Justice Robert F. Goldstein

COUNSEL:
David E. Mende,
for the Applicant

Thomas S. Kent,
for the Respondents

HEARD: Written submissions

E N D O R S E M E N T

AS TO COSTS

[1] On December 10 2012, I granted a declaration to the Applicant that it was entitled to the cooperation of 0803356 B.C. Ltd. pursuant to an Acknowledgement and Corporation Agreement. See: Sunlogics Inc. v. Giesbrecht [2012] O.J. No. 5869, 2012 ONSC 6904. The declaration was the primary relief sought by the Applicant, although I did not grant other remedies sought by the Applicant, including a mandatory injunction and an injunction to prevent the sale of the shares of 0803356 B.C. Ltd. In my judgment I invited costs submissions from the parties.

[2] A successful party is entitled to costs unless there are very good reasons not to award such costs: Schreiber v. Mulroney, 2007 31754 (ON SC), [2007] O.J. No. 3191 (Sup.Ct.) at para. 2. In this case, the Applicant is entitled to at least some of its costs, as it has achieved the primary relief sought.

[3] Costs are within the discretion of the Court: Courts of Justice Act, s. 131(1). Rule 57.01(1) sets out the factors that the Court may consider in awarding costs:

57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs.

[4] In Boucher v. Public Accountants Council for Ontario, 2004 14579, 71 O.R. (3d) 291, [2004] O.J. No. 2634 (C.A.), Armstrong J.A. stated at para. 26:

Subrule (1) lists a broad range of factors that the court may consider in exercising its discretion to award costs under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The express language of rule 57.01(3) makes it clear that the fixing of costs is not simply a mechanical exercise. In particular, the rule makes clear that the fixing of costs does not begin and end with a calculation of hours times rates. The introduction of a costs grid was not meant to produce that result, but rather to signal that this is one factor in the assessment process, together with the other factors in rule 57.01. Overall, as this court has said, the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.

[5] The Applicant suggests that substantial indemnity costs are warranted because of a pattern of deceitful conduct and bad faith on behalf of the Respondent. I disagree. I made no such finding in my reasons. There is no doubt that both parties engaged in tactical maneuvers prior to the hearing but tactical maneuvers are not necessarily indicative of bad faith. I also suggested the possibility of some underhanded behavior by Mr. Matvieshen in respect of the Right of First Refusal, but I did not make an actual adverse finding.

[6] The Applicant also suggests that substantial indemnity costs are warranted because it made an offer to settle which was not accepted prior to the hearing and invokes Rule 49.10(1), which states:

49.10 (1) Where an offer to settle,

(a) is made by a plaintiff at least seven days before the commencement of the hearing;

(b) is not withdrawn and does not expire before the commencement of the hearing; and

(c) 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.

[7] The Applicant’s submission is an excellent example of the tactical maneuvering to which I refer. The Applicant submitted an offer to settle on September 18 2012. The hearing of the application took place before me on September 19 2012. Given that the Respondent’s counsel was en route from Calgary to Toronto on September 18 2012 it was unrealistic to expect the Respondent to deal with the offer in a meaningful manner. In any event, the offer is not caught be the Rule because it was made less than seven days prior to the hearing. Substantial indemnity costs are not warranted.

[8] In my view the most important factor to consider in this case is the reasonable expectation of the parties. The application was somewhat factually and procedurally complex, and was dealt with by experienced counsel on both sides.

[9] The Applicants, in their detailed costs outline, suggest a partial indemnity amount of $62,145.34 inclusive of HST and disbursements, is appropriate. The Respondents, as might be expected, suggest a much smaller number: $34,673.93, also inclusive of disbursements and HST.

[10] How is it that the reasonable expectations of the parties are so different? An examination of the costs outline of the parties reveals that the main difference between them is that Mr. Mende simply spent more time on the matter than Mr. Kent, and that more lawyers from Mr. Mende’s firm worked on the file. That is not an adverse comment on Mr. Mende, but may well reflect the fact that his client felt that there was more at stake in the application and, therefore, that a more intense effort was required.

[11] That said, in my view given the fact that success was not complete, a more realistic amount on a partial indemnity basis is $40,000.00 inclusive of HST and disbursements. In my view, this takes into account the amount of work actually done but also discounts the award on the basis that the Applicant did not achieve all of the relief sought.

GOLDSTEIN, J.

DATE: January 25, 2013