COURT FILE AND PARTIES

COURT FILE NO.: (St. Thomas) 6155/13
DATE: 2013/10/21
SUPERIOR COURT OF JUSTICE – ONTARIO

RE: F. L. Ravin Limited and The Badder Group Incorporated (Plaintiffs)

• and –

Southwestern Ontario Student Transportation Services (Defendant)

BEFORE: A. J. Goodman J.

COUNSEL:
Jonathan C. Lisus, and Daniel A. Schwartz, for the Plaintiffs
David B. Williams & Allison M. Webster, for the Defendant

HEARD: October 7, 2013

E N D O R S E M E N T

Background:

1. This is a motion brought by the moving party defendant seeking leave to appeal a costs decision to the Divisional Court.

2. On April 2, 2013, M.J. Nolan J. granted the plaintiffs’ motion for an interim injunction which ordered that the defendant restrain from closing RFP 13-001 for student transportation services. Justice Nolan ordered costs payable to the plaintiffs.

3. As the parties were unable to agree to the scale or quantum of costs payable to the plaintiffs, written cost submissions were submitted. The plaintiffs sought costs on a partial indemnity basis in the amount of $210,000.00, inclusive of disbursements and HST. The defendant submitted that it would be appropriate to award the plaintiffs’ their costs on a partial indemnity basis in the range of $50,000.00 to $80,000.00, inclusive of disbursements and HST.

4. On August 30, 2013, Nolan J. released her Endorsement on Costs awarding costs payable to the Plaintiffs on a partial indemnity scale in the amount of $190,000.00, inclusive, and payable forthwith.

Issues:

5. Does there appear to be good reason to doubt the correctness of the costs award? Is it desirable that leave to appeal be granted?

Position of the parties:

6. The defendant submits that Nolan J. erred in her application of the relevant case law and in her exercise of discretion in awarding the quantum of costs to the plaintiffs. The defendant submits that the motions judge erred in failing to apply the tenets set out in the jurisprudence; whether costs were payable in the cause; the reasonable range of costs; and in the application of principles of fairness, reasonableness, and proportionality.

7. The defendant argues that the plaintiffs relied upon five decisions with respect to costs awarded on an interlocutory injunction or judicial review, which did not have similar facts, such as a voluminous evidentiary record, lengthy cross-examinations, detailed facta, and multi-day hearings. The defendant argued that the case law submitted by the plaintiffs was distinguishable and wholly inapplicable. The defendant argues that counsel’s rates were high and the overall costs award is grossly excessive and out of proportion to the motion proceedings.

8. In response, the plaintiffs submit that Nolan J. granted the injunction on April 2, 2013 and made key factual findings regarding the defendant’s conduct which necessitated the injunction relief sought and subsequent costs award. No appeal was taken from that decision.

9. The plaintiffs argue that the injunction was hard fought and the defendant challenged every aspect of the plaintiffs’ motion. It adopted a “scorched earth” litigation approach forcing the motion to be heard on an expedited schedule. The record was in excess of 8,000 pages; there were five affiants, multiple days of cross-examinations and numerous demands for documents that the defendant refused to produce. The hearing day took a full day and was not completed until well past normal court hours.

10. The plaintiffs submit that the defendant’s factum does not set out the correct legal test for leave to appeal costs, namely: leave is to be granted only in rare cases, and only where the party seeking leave establishes that there are strong grounds to conclude the motion judge erred in his or her exercise of discretion. It must be established that the costs award is “plainly wrong” or a significant error in legal principle has been made.

11. The plaintiffs submit that it is abundantly clear that the defendant does not identify any error in principle in Nolan J.’s reasons. Justice Nolan rejected the defendant’s argument about scope of counsel’s hours expended on this complex matter and the related and appropriate fees incurred. As such, it is argued that the defendant is merely seeking to re-argue discretionary cost factors that Nolan J. dealt with in her endorsement.

12. The plaintiff submits that before Nolan J. was an injunction raising serious and triable issues, a strong likelihood of irreparable harm and that the balance of convenience all clearly favoured granting the relief sought. The plaintiff stressed that there was a power imbalance in favour of the defendants which clearly necessitated, in part, the discretion exercised by Nolan J. All of these and other factors weigh in favour of leaving the costs award undisturbed.

Legal principles

13. An appeal from an interlocutory order of a judge of the Superior Court of Justice lies to the Divisional Court with leave. The discretion of the Court in awarding costs is guided by the factors listed in Rule 57.01(1).

14. Rule 62.02 (4) provides that leave to appeal shall not be granted unless:

A. there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or

B. there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

15. Under Rule 62.02(4)(a), the authorities postulate that an exercise of discretion which has led to a different result because of different circumstances does not meet the requirement for a “conflicting decision. While the conditions under Rule 62.02(4)(b) are conjunctive, the Judge hearing the application must have good reason to doubt the correctness of the decision and must also be satisfied that the matters involved are of such general importance that leave should be granted.[^1]

16. The legal principles on a motion for leave to appeal a costs order have been addressed by many Ontario courts, both at the Superior and Appeal Court levels. The principles under this rule were amply described by the Court of Appeal in McNaughton Automotive Limited v. Co-operators General Insurance Company, [2008] ONCA 597 at paras. 24-27:[^2]

a. Leave to appeal a costs order will not be granted save in obvious cases where the party seeking leave convinces the court that there are “strong grounds upon which the judge erred in exercising his discretion”;

b. Leave to appeal a costs order, standing alone, is granted only sparingly;

c. A court should set aside a costs award on appeal only if the trial judge has made an error in principle or the costs award is “plainly wrong”;

d. A costs award is a discretionary order and the judge at first instance is in the best position to determine the entitlement, scale and quantum of any such award.

Analysis:

17. At the outset of the hearing, the plaintiff sought to introduce fresh evidence for this motion. After submissions, the plaintiff reluctantly abandoned its attempt to introduce such evidence, without prejudice to reconsider and raise this point down the road should it become necessary to do so.

18. I am mindful that motions for leave to appeal a costs award in a case of an interlocutory motion are rare and the threshold to grant such leave is high. Deference must be shown to the motions judge as he or she is in the best position to determine the entitlement, scale and quantum of costs.

19. I have considered the costs materials filed from the injunction hearing, the history of the litigation, the updated facta and oral submissions, all in an effort to allow me to determine whether leave ought to be granted. I am cognizant that my role is extremely limited and any conclusions that I reach here are merely to address the merits of this leave application.

20. When considering Rule 62.02(4)(a), the defendant argues that there are conflicting decisions in Ontario which demonstrate a difference in the principles chosen by Nolan J. to guide her discretion in awarding costs. For example, some of the authorities advance the proposition that in this type of situation, costs are most often payable in the cause. The case law submitted by the defendant speaks to the following principle; where on a contested interlocutory injunction the proceedings are not brought to an end such that a trial is a virtual certainty, and the motion has simply protected the applicants’ position pending trial, it is appropriate to consider alternative cost orders, including that costs may be awarded in the cause.

21. I am not satisfied that the defendant has established an adequate basis for leave under the first prong of Rule 62.02(4). It is trite law that costs awards are at the discretion of the motions or trial judge. I am not convinced that the jurisprudence provides that it is the exclusive domain of the trial judge or always necessary or appropriate for costs of a motion be ordered payable in the cause, even when a trial is inevitable and the interlocutory relief is not dispositive of the issues. Second, I note that the defendant raised the very question about reserving costs to the trial judge in the circumstances of this case. While those submissions were entirely appropriate and reasonable, they were considered and rejected. Third, as the injunction decision itself invited submission of the issue of costs, and the defendants did not appeal from that order, notwithstanding their concerns about costs being reserved, by responding and filing their cost memorandum the defendant appeared to be willing and prepared to advance arguments for costs to be otherwise considered by Nolan J. in the exercise of her discretion.

22. With respect to Rule 62.02(4)(b), much of Mr. Lisus’ very eloquent and able argument focused on the merits of the injunctive application, the asymmetry between what the parties had to produce before Nolan J., the basis for the awarding the successful order for injunctive relief, the extensive time and effort that was necessitated to achieve the results obtained, the imbalance of power and resources between the parties, the potential adverse impact on the plaintiffs, and argument premised on other cases wherein counsel was successful in similar interlocutory claims.[^3]

23. Mr. Williams stressed that the costs decision appears to adopt an underlying punitive stance towards the defendants with numerous references to her views about the defendant’s conduct but having made no specific findings on the injunction motion that the defendant’s conduct was improper. It may be that the tone of the decision is “punitive” in nature and was guided by a reaction to the defendant’s position. However, this is not for me to decide.

24. I am not satisfied that counsel for the defendant has met the threshold for leave based on any of the alleged numerous errors advanced in their motion record and factum, with one exception. In my opinion, an issue that requires further consideration is that of reasonableness.

25. I have considered the overriding principles of fairness, reasonableness, and proportionality as set out by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario, (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, amongst other authorities.[^4]

26. In the case of Berry v. Scotia Capital Inc. 2010 CarswellOnt 2025 (Div. Ct.) Sachs J., wrote that the amount of a large cost award may justify careful scrutiny to ensure that it does not offend any of the proper principles regarding costs. Awards that on their face stand out as “outliers” raise a concern about whether the fundamental principle of reasonableness was followed. At para. 18 of the decision, Sachs J. held:

Applying this reasoning to the case at bar, it is my view that leave to appeal should not be granted in this case simply because of the amount of the award. However, the amount of the award does justify careful scrutiny to ensure that it does not offend any of the proper principles regarding costs. Awards that on their face stand out as “outliners” raise a concern about whether the fundamental principle of reasonableness was followed. A failure to follow that overriding principle can produce a result that is contrary to the fundamental objective of access to justice… the chilling effect of a costs award of the magnitude of the award in this case generally exceeds any fair and reasonable expectation of the parties.

27. In determining whether there is a good reason to doubt the correctness of the decision, it is not necessary for the moving party to convince the Court that the decision it seeks to appeal from is wrong or probably wrong. The threshold for this prong of the test is that the Court must be satisfied that the correctness of the order is open to very serious debate.

28. In this case, the partial indemnity costs award for a motion seeking an interlocutory injunction, argued in 1 day, and involving 5 affiants, 4 cross-examinations over 3 days, no admitted experts and no interlocutory attendances, and an award in the amount of $190,000.00 is nothing short of significant. On its face, this amount seems high. Yet, I am cognizant that a party’s disappointment over the quantum or that I might have found differently and awarded a lesser amount is not the threshold for leave.

29. However, it is my view that if it is the case that a one day injunction motion proceeding can attract a cost award of $190,000.00, such costs may effectively bar litigants from participating in the judicial process. That is especially the case in southwestern Ontario where costs awards for motions generally reflect lower counsel rates and the relative infrequency of interlocutory matters when compared to Toronto proceedings.

30. Justice Nolan dismissed the argument that the defendant’s own costs in defending the motion would guide its reasonable expectations with respect to costs payable if it were unsuccessful. It appeared that Nolan J. focussed, instead on the importance of the motion to the plaintiffs. In doing so, she may have fallen into error by failing to carefully scrutinize the reasonableness and proportionality of the plaintiffs’ costs.

31. There seems little question that the award in this case represents a high water mark, raising a concern that the fundamental principle of reasonableness was given insufficient emphasis or attention. As a result, I am persuaded that the correctness of the decision is open to serious debate.

32. I am acutely aware that leave to appeal a costs award must be granted sparingly. Despite this tenet, given the question of reasonableness, proportionality and the high quantum of costs involved here, I conclude that the concept of “general importance” contemplated by the Rules transcends the interests of the parties to this litigation and raises issues of broad significance. In my view, the impact of this decision raises matters of access to justice and public import to the administration of justice and therefore warrants resolution by the appellate Court.

Disposition:

33. The defendant’s motion for leave to appeal is granted. Costs of this motion reserved to the Divisional Court panel hearing the appeal.

Justice A. J. Goodman

Date: October 21, 2013

[^1]: See Greslik v. Ontario Legal Aid Plan of the Law Society of Upper Canada, 1988 CarswellOnt 436 (Div. Ct) at para. 7.

[^2]: Reference was made to Brad-Jay Investments Ltd. v. Szijjarto, 2006 42636 (ON CA), [2006] O.J. No. 5078 (C.A.); Inter-trust Mortgage Investment Corp v. Robinson, 1999 CarswellOnt 1733 (C.A); Doung v. NN Life Insurance Co. of Canada (2001), 2001 24151 (ON CA), 141 O.A.C. 307. Other authorities on point were considered.

[^3]: For example, Stoneleigh Motors Ltd. v. General Motors of Canada Ltd. [2010] O.J. No. 2332 (Sup. Ct.).

[^4]: I have been referred to a number of cases in both counsel’s briefs.