St. Catharines Court File No.: 53982/12
December 20, 2013
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN: )
VERGE INSURANCE BROKERS ) Stephen F. Gleave and LIMITED, 172968 ONTARIO INC., ) Richelle M. Pollard, for the MARICK BROS. INVESTMENTS INC., ) plaintiffs/moving parties and MARK SHERK )
Plaintiffs )
− and − )
RICHARD SHERK, DANIEL SHERK, ) John M. Wigle, for the MARTIN, MERRY & REID LIMITED ) defendant/responding party, and CAL SHULTZ INSURANCE ) Richard Sherk BROKERS LTD. )
) George Limberis, for the ) defendant/responding party, Defendants ) Daniel Sherk ) Gerard Barosan, for the ) defendant/responding party, ) Cal Schulz Insurance ) Brokers Ltd.
J.W. Quinn J.: −
I INTRODUCTION
[1] An internecine war has erupted in a 60-year-old, family-owned, insurance agency in southern Ontario. It is alleged that a co-owner of the agency (and brother of the other co-owner) and his son, a recently-fired employee, armed with confidential information, intended to transform another agency into a competitor in the field of commercial insurance.
[2] Two motions were brought by the plaintiffs. One sought production of documents (“production motion”) from three defendants and their re-attendance for cross-examination and the other asked for injunctive relief as against those same defendants.
[3] The production motion was heard first. It consumed one week of court time and subsequently was stayed on consent. The injunction motion was settled and never argued.
[4] The motions were ferociously prosecuted and vigorously defended.[^1] I must now determine the matter of costs.
[5] The principal issues are these: (1) Should costs be fixed and payable forthwith or, as often occurs in injunction motions, reserved to the trial judge? (2) What is the appropriate scale of costs? (3) Should the three responding parties to the motions be jointly and severally liable for the costs?
[6] The plaintiffs seek substantial-indemnity costs of $392,091.21. This scale of costs is said to be appropriate largely because the defendants denied any wrongdoing in the face of documents that clearly revealed otherwise and, the defendants, by their conduct, lengthened the proceedings.
[7] The written costs arguments of counsel have been made with fastidious attention to detail. There are 15 sets of written submissions (in recognition of the milky way of points raised by counsel, I permitted submissions by way of reply, rebuttal, surrebuttal and beyond). I do not have the requisite life-expectancy to address all of the points in these Reasons. The parties will have to take my word that if an argument is not mentioned by me it may be assumed that it was considered and rejected as irrelevant to the issue of costs. Nevertheless, because of the comprehensiveness of the written arguments, I feel compelled to be more detailed in my Reasons than otherwise would be necessary. A great deal of money is at stake.
[8] There is much about this case that resembles a Family Court proceeding involving an adulterous spouse: passion has pilfered all perspective; judgment that would otherwise be insightful is clouded; bitterness hangs in the air; and, the IQs of the parties have temporarily dropped to the ambient temperature of the courtroom (otherwise, why would this family be exposing its dirty corporate laundry in such a public forum).
[9] The parties are discovering that revenge has an odour – it is the smell of burning money.[^2]
II BACKGROUND
1. The parties to the motions
(a) the moving parties
[10] The plaintiff, Verge Insurance Brokers Limited (“Verge”), is a company that carries on business as an insurance broker. The head office of Verge is located in the City of St. Catharines. Verge and its related and subsidiary companies constitute the largest general insurance brokerage in the Niagara Peninsula.
[11] The plaintiff, Mark Sherk (“Mark”), is the president and managing director of Verge. He owns 50% of its shares.
[12] Although the other two corporate plaintiffs are moving parties, their role is such that I need not mention them further.
(b) the responding parties
[13] The defendant, Richard Sherk (“Richard”), is the brother of Mark. He is an officer and director of Verge and he owns the other 50% of the shares.
[14] The defendant, Daniel Sherk (“Daniel”), is a former salesperson at Verge and the son of Richard.
[15] The defendant, Cal Schultz Insurance Brokers Ltd. (“CSI”), is a company that carries on business as an insurance broker in the City of Burlington. It is alleged that CSI is the competitor who knowingly benefited from the wrongdoing of Richard and Daniel.
[16] The remaining corporate defendant is not involved in the motions.
2. The genesis of the action
[17] On April 3, 2012, Richard, having reached the age of 65 years, retired from Verge. On April 26th, Daniel, a 13-year employee, was fired (effective May 2nd) on the grounds of incompetence, insubordination and sexual harassment. I am not aware that the retirement of Richard was controversial (it being age-related), however, Daniel disputes the grounds for his firing.
[18] The timing of these two events (the retirement and the firing) is curious and permits some obvious theorizing. I expect that Sherk family gatherings were sparsely attended well before April of 2012. It is conjecture to conclude, but highly probable, that serious problems permeated Verge before that date. In any event, it is easy to see how Richard and Daniel could become aligned against Verge from May of 2012 onward.
3. The nature of the action and the defences
[19] On October 10, 2012, a statement of claim was issued and subsequently amended.
[20] The amended statement of claim is 31 pages in length and has 113 paragraphs. Every cause of action imaginable is alleged,[^3] and five types of damages are sought, totalling more than $29 million dollars.[^4]
[21] According to the amended statement of claim, it is explained that Verge earns revenues by commissions on the sale of insurance products to clients, with the commissions being based upon a percentage of the premiums paid by the clients to insurance companies. Verge also is paid monies by insurance companies in accordance with the level of sales of the products of those companies by Verge. Consequently, a loss of clients produces, at least, a double-barreled direct financial loss to Verge.
[22] In their amended statement of claim, the plaintiffs allege, in part, that Richard: (1) breached his employment contract with Verge; (2) “breached the non-competition covenant in the Shareholders Agreement by entering into competitive activities against Verge and directing and encouraging clients to take their business to another brokerage”; (3) “breached his duty of confidence at common law and under his employment contract to keep all confidential information belonging to Verge in strict confidence”; (4) “breached his fiduciary duties owed to Mark and Verge by using confidential information and encouraging and assisting clients to cease doing business with Verge”; (5) “knowingly and intentionally used unlawful means and interfered in Verge’s contractual relations by using confidential information relating to clients to encourage and assist the clients and insurance companies to take their business to a competitor”; and, (6) “conspired with Daniel, CSI, French [a co-owner of CSI], Pluska [the other co-owner of CSI] [and] Senn [a former senior executive of Verge] . . . to misappropriate the clients and confidential information of Verge for the purpose to injure Verge’s business.”
[23] Similar allegations are made in the amended statement of claim against Daniel, but the central complaint seems to be that he wrongfully solicited the clients of Verge by using confidential information, including a client list he is said to have stolen from Verge when his employment was terminated, for the purpose of transferring business to CSI.
[24] Daniel has counterclaimed, alleging wrongful dismissal.
[25] As for CSI, the amended statement of claim contends that it: (1) “intentionally and knowingly encouraged and assisted” Daniel and Richard to breach their duties to Verge; (2) “has an ongoing plan to work with Daniel and Richard to use Verge’s confidential information to solicit clients and take their business from Verge and assign the business to CSI”; (3) “misappropriated and misused Verge’s confidential information relating to its clients”; (4) “knowingly and intentionally [together with Richard and Daniel] interfered with Verge’s contracts and induced breach of contract”; and, (5) “conspired with Daniel and Richard to wrongfully terminate the contracts and relationships between Verge and its clients.”
[26] I hope that it is sufficient for me to say that Daniel, Richard and CSI deny all allegations. In addition, it is the position of Richard[^5] that his dealings with CSI consisted of “providing mentoring to a novice producer and giving general advice to the proprietors of CSI.” I will have more to say later about this “mentoring” defence.
4. The valuation application
[27] The Shareholder Agreement between Richard and Daniel (actually, between their holding companies), as amended by a Memorandum of Understanding, contains a provision whereby if either Richard or Mark retires from Verge, he shall be paid a sum for his shares equal to their fair market value.
[28] In accordance with the process agreed upon for the buy-out and for the valuation of the shares, Richard and Mark each retained an expert. As their respective valuations were more than 10% apart, a third expert was to be appointed to conduct an independent valuation. Agreement could not be reached on the selection of the third expert and there also was a dispute regarding the operative valuation date.
[29] Therefore, on October 29, 2012, Richard commenced a court application to resolve the valuation issues (“the valuation application”).
5. The Rule 15.02 motion by Richard
[30] In late December of 2012, Richard brought a motion, pursuant to Rule 15.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to stay the action on the grounds that Verge had failed to pass a resolution authorizing its commencement. The Rule 15.02 motion was returnable for January 17, 2013. It does not have much bearing on the issues before me, but it is part of the narrative, surfaces from time to time, and so requires mentioning.
6. The injunction notice of motion
[31] By notice of motion dated and served on January 7, 2013, and returnable the week of January 21st,[^6] the plaintiffs moved for injunctive relief against Richard, Daniel and CSI.
[32] The injunctive relief requested was for six specific orders described in Schedule “A” to the notice of motion. I will set out the orders sought because it will be necessary for me to mention them again in these Reasons when carrying out a comparison with the orders actually made:
(a) an order requiring the defendants to deliver up any of Verge’s confidential documents and information in the defendants’ possession, power or control, including, but not limited to all confidential information;
(b) an order prohibiting the defendants from using, reproducing, selling, disseminating or otherwise disclosing documents and confidential information belonging to Verge;
(c) an order requiring the defendants and their officers, directors, employees and agents to preserve all written communications between themselves, each other and clients regarding the use of Verge’s confidential information including e-mails and other electronic communications;
(d) an order requiring the defendants and their officers, directors, employees and agents to diarize all verbal communications they have had or may have in the future relating to the confidential information of Verge and dealings with Verge’s clients;
(e) an order prohibiting the defendants from soliciting or servicing Verge’s present or former clients and prohibiting the defendants from interfering with Verge’s contractual relations and economic interests;
(f) an order that Richard is prohibited from working for, financially supporting and advising CSI or its officers, directors, shareholders and employees or, in the alternative, Richard is ordered to resign as a director of [Verge] forthwith.
[33] The grounds for the motion included the following:
Richard and Daniel are former employees of Verge. They now work for CSI. Verge sued Richard and Daniel for, among other things, breaching their contractual and common law duties, taking and using Verge’s confidential information, inducing breach of contract and/or interfering with contractual relations and conspiring against Verge.
CSI is located in Burlington . . . CSI is a small financially distressed brokerage. CSI benefited from Richard’s transfer of Verge’s confidential information, know-how, business processes and senior staff to CSI as well as his services as a consultant.
In effect, Richard [and] Daniel . . . helped CSI establish a commercial insurance department to become a competitor of Verge. A dozen clients to date have transferred their business to CSI due to the solicitation of Daniel and Richard . . .
Mark and Richard are 50/50 shareholders in Verge and the only two directors. Richard’s conduct has created a shareholder/director deadlock . . .
The defendants continue to misuse Verge’s confidential information, business processes, know-how and senior employees to solicit Verge’s clients and wrongfully compete against Verge.
Richard is a fiduciary (at statute and common law) and he is causing irreparable harm to Verge and its reputation and goodwill in a small market . . .
7. Adjournment of the injunction motion and failure to agree on terms
[34] With the injunction motion having been served on January 7th and set for hearing on January 22nd, Daniel brought a motion with a return date of January 17th, seeking an adjournment. Although Richard was not asking for an adjournment, he did seek an order that his Rule 15.02 motion be heard in advance of the injunction motion.
[35] The plaintiffs argue, often and strenuously, that the adjournment of the injunction motion sought by Daniel was unnecessary and a deliberate attempt to delay proceedings and that, furthermore, Richard, Daniel and CSI refused to engage in any meaningful discussions regarding settlement of the terms for the proposed adjournment.
[36] Between January 14th and January 22, 2013, there were a great deal of communications among the parties concerning both the adjournment and acceptable terms for the adjournment:[^7]
Jan.14
Counsel for the plaintiffs sent this fax letter to counsel for Daniel:
We are in receipt of your motion record which was served on Friday afternoon in respect of your client’s motion to adjourn the injunction proceedings and quash the summons to witness.
We are disappointed with the lack of cooperation that we have received from your office to date . . .
There is no doubt that you understood our discussion that we were proceeding with the motion for injunctive relief on January 21, 2013 as is evidence by you serving a motion record for an adjournment of that date . . .
Jan.14
At 12:48 p.m., counsel for Daniel replied to counsel for the plaintiffs:
I have received your correspondence of today’s date, and just sent to me . . .
With respect to argument of the motion, we can at least argue the adjournment on the 17th, given the urgency of the same . . .
I have been and still am willing to discuss a possible resolution . . .
Jan.14
Counsel for the plaintiffs sent a fax letter to all counsel setting out “the terms on which the [the plaintiffs] will consent to the adjournment” of the injunction motion on January 22nd “pending its return on the long motion list in April 2013.”
The proposed terms were such that the plaintiffs were demanding that the defendants consent to the relief sought in their notice of motion in consideration for the adjournment.
[37] January 15, 2013 was a particularly active day for counsel:
Jan.15
At 10:35 a.m., counsel for Daniel sent an e-mail to counsel for the plaintiffs:
Further to your letter of yesterday’s date, enclosing your client’s offer, I have reviewed the same with my client and it did not reflect the option of existing Verge clients that we wish to bid on . . . However, the point may be moot as I have seen you have not reached an agreement with Rick Sherk or CSI . . .
I think it might be beneficial to have a call with all parties and if you are available this afternoon, I will attempt to schedule the same . . .
Jan.15
At 12:21 p.m., counsel for the plaintiffs replied to the above e-mail by text message:
Please call my cell . . .
Jan.15
At 1:53 p.m., counsel for Daniel responded by e-mail:
I just tried calling you, please let me know when you have a minute.
Jan.15
Counsel for the plaintiffs sent this text message at 1:57 p.m.:
Call again.
Jan.15
At 3:03 p.m., counsel for Daniel e-mailed counsel for Richard and counsel for CSI, saying:
Please see below. I have taken the language from [counsel for the plaintiffs]’ motion record, with my adjustments, to alleviate any further dispute. I have also attached Schedule ‘A’ to the order which lists the clients that will be excluded.
Please let me know if the language is satisfactory as soon as possible and I will send the same to [counsel for the plaintiffs] in order for him to get instructions and let him know we are still waiting on our client instructions.
Jan.15
At 3:33 p.m., counsel for Richard replied to counsel for Daniel:
I just finished a conference call. Let me read this then call you in 5 to 10 minutes. Okay?
Jan.15
At 3:39 p.m., counsel for Daniel e-mailed counsel for Richard:
I am on the line. Is there any other comments regarding the language of the terms?
Jan.15
At 4:08 p.m., counsel for Daniel e-mailed counsel for the plaintiffs:
Please see below for the terms to the [proposed] adjournment. Everyone is obtaining instructions from their clients and I anticipate their answer before 5:00. Please let us know so I can prepare for tomorrow.
Eight terms were set out. They largely are the same as those found in the 3:03 p.m. e-mail, but with some amendments.
Jan.15
At 4:27 p.m., counsel for the plaintiffs answered with this text message:
. . . thanks for this. Do we also agree with the definition of Verge as noted in our order is to be incorporated into the consent interim order?
Also what happens with Richard’s [Rule 15.02] motion on Thursday? [January 17th]
Jan.15
At 4:31 p.m., counsel for CSI e-mailed counsel for Daniel and Richard:
. . . can we:
leave out (b) – I really hate that one. That will get resolved at exams or discoveries.
in respect to (c), (d), could we restrict the application to clients other than those listed in Schedule ‘A’.
forget about diarizing and delete (e).
in respect of (f) – has to also exempt any client that came to CSI while Dan was still at Verge. CSI may have old Verge clients that came over without Dan’s or Rick’s involvement.
Jan.15
At 4:39 p.m., counsel for Daniel replied to the 4:27 p.m. text message from counsel for the plaintiffs:
I think ‘Verge’ should be the company that is operating the business, Verge Insurance Brokerage, and not the other plaintiffs.
Jan.15
At 4:53 p.m., counsel for Daniel e-mailed counsel for Richard and CSI:
There seems to be no settlement. [Counsel for the plaintiffs] wanted the order to be all plaintiffs. I advised him that we would only agree that the injunction was for Verge and not Mark and all other plaintiffs. He said then there is no deal . . .
[38] On January 16th, there were further communications:
Jan.16
Counsel for the plaintiffs faxed a letter to the other counsel, dealing with terms of the adjournment of the injunction motion, the motion by Richard to stay the action and the motion by Daniel to adjourn the injunction motion, the motion for leave to bring a derivative action “both of which are scheduled for . . . January [22nd] . . .”
Jan.16
Counsel for Richard sent a comprehensive, four-page letter to counsel for the plaintiffs, in response to the above fax letter, dealing with the various pending motions.
[39] The motions by Daniel (for an adjournment of the injunction motion) and by Richard (for a stay of the action under Rule 15.02) came before Walters J. on January 17th. Walters J. agreed that the Rule 15.02 motion brought by Richard should be heard first on January 22nd and that the injunction motion would be adjourned to a long-motion date in April.
Jan.17
The endorsement of Walters J. reads:
There are several motions before the court. After reviewing all materials and hearing submissions from counsel, it is apparent that these matters require more time than that allotted on the short motion list.
The original motion of the plaintiffs is set for Tuesday, January 22/13 @ 10 a.m. In my view, all motions shall be adjourned to that date to be dealt with at one time. It is specifically understood that, except for the defendant Rick Sherk’s motion pursuant to Rule 15.02 [to determine whether plaintiffs had authority to commence their action], court will be adjourned to another long motion date (likely April) after cross-examinations are completed. The presiding Justice will need to deal with terms of the adjournment and fixing of a schedule for the orderly completion of the motions.
The parties are permitted to file any additional materials necessary for Tuesday’s motion by Friday, January 18/13 @ 4 p.m.
8. The January 22nd interim injunction granted by Ramsay J.
[40] The injunction motion and the Rule 15.02 motion came before Ramsay J. on January 22, 2013.[^8] It being agreed that the injunction motion was to be adjourned, Ramsay J. set the contested terms for the adjournment.
[41] Ramsay J. made seven orders “governing the adjournment of the plaintiffs’ motion for injunctive relief.” (Collectively, from time to time, I will refer to them as “the January 22nd interim injunction” or perhaps “the January 22nd order” or maybe even “the January 22nd interim order.” I cannot make up my mind.)[^9]
[42] The first four orders made were identical to the first four orders requested in Schedule “A” to the notice of motion, at paragraphs (a) through (d).
[43] The fifth order made by Ramsay J. has a sentence added to that which appears in the notice of motion at paragraph (e).
[44] The seventh order made was not expressly sought in the notice of motion.
[45] I will set out the orders requested in Schedule “A” of the notice of motion and those orders granted by Ramsay J., underlining the additions in the latter to permit comparison with the former:
| Orders sought in notice of motion | Orders made by Ramsay J. |
|---|---|
| (a) an order requiring the defendants to deliver up any of Verge’s confidential documents and information in the defendants’ possession, power or control, including, but not limited to all confidential information; | (1) THIS COURT ORDERS that the defendants, Richard Sherk, Daniel Sherk and CSI Insurance Brokers Ltd. (‘CSI’), deliver up any of Verge’s confidential documents and information in the defendants’ possession, power or control, including, but not limited to all confidential information. |
| (b) an order prohibiting the defendants from using, reproducing, selling, disseminating or otherwise disclosing documents and confidential information belonging to Verge; | (2) THIS COURT FURTHER ORDERS that the defendants, Richard Sherk, Daniel Sherk and CSI are prohibited from using, reproducing, selling, disseminating or otherwise disclosing documents and confidential information belonging to Verge. |
| (c) an order requiring the defendants and their officers, directors, employees and agents to preserve all written communications between themselves, each other and clients regarding the use of Verge’s confidential information including e-mails and other electronic communications; | (3) THIS COURT FURTHER ORDERS the defendants, Richard Sherk, Daniel Sherk and CSI and their officers, directors, employees and agents to preserve all written communications between themselves, each other and clients regarding the use of Verge’s confidential information including e-mails and other electronic communications. |
| (d) an order requiring the defendants and their officers, directors, employees and agents to diarize all verbal communications they have had or may have in the future relating to the confidential information of Verge and dealings with Verge’s clients; | (4) THIS COURT FURTHER ORDERS the defendants, Richard Sherk, Daniel Sherk and CSI and their officers, directors, employees and agents requiring the defendants and their officers, directors, employees and agents to diarize all verbal communications they have had or may have in the future relating to the confidential information of Verge and dealings with Verge’s clients. |
| (e) an order prohibiting the defendants from soliciting or servicing Verge’s present or former clients and prohibiting the defendants from interfering with Verge’s contractual relations and economic interests; | (5) THIS COURT FURTHER ORDERS that defendants, Richard Sherk, Daniel Sherk and CSI, are prohibited from soliciting or servicing Verge’s present or former clients and from interfering with Verge’s contractual relations and economic interests. CSI is not prohibited from servicing Verge’s former clients who have decided to go to CSI without having been solicited by the defendants, Richard Sherk, Daniel Sherk and CSI. |
| (f) an order that Richard is prohibited from working for, financially supporting and advising CSI or its officers, directors, shareholders and employees or, in the alternative, Richard is ordered to resign as a director of [Verge] forthwith. | (6) THIS COURT FURTHER ORDERS that Richard Sherk is prohibited from working for, financially supporting and advising CSI or its officers, directors, shareholders and employees.[^10] |
| (7) THIS COURT FURTHER ORDERS that for the purposes of this order, the plaintiff, Verge, includes the following companies: Stewart McGuiness Insurance Brokers Ltd. 1254224 Ontario Inc. (Reimer-Verge) Kannegieter-Zimmerman Ins. Brokers Ltd. A.B. & J.L White Insurance Brokers Ltd. 1255653 Ontario Inc. (Milmine Insurance) 1729628 Ontario Inc. Niagara Insurance Managers Ltd. Marick Bros. Investments Ltd. 1760107 Ontario Inc. |
9. The endorsement of Ramsay J.
[46] In his handwritten endorsement of January 22nd, Ramsay J. observed that Richard had not, at this point, filed an affidavit in opposition to the injunction motion and that the plaintiffs had a strong prima facie case against Richard for breach of fiduciary duty:
This is an uncontested adjournment, but the terms are contested. On the evidence before me, which Richard Sherk has not contested, although he had time to do so, at least to the extent of filing an affidavit, the plaintiffs have a strong prima facie case of breach of fiduciary duty by him with resulting irreparable harm. The balance of convenience favours these two considerations in all of the circumstances . . .
In the case of Daniel Sherk and CSI, the prima facie case . . . is not as strong as the one against Richard Sherk. It is still significant however . . .
[47] Ramsay J. then adjourned the injunction motion and went on to stipulate a timetable for the filing of further material and for cross-examinations:
The motion for an interlocutory injunction is adjourned to be heard on a long motion list April 11, 2013 . . . I order the following timetable:
Plaintiffs to file their material by Feb. 15, 2013
Defendants to file reply material by Feb. 22, 2013
Cross-examinations to be completed by Feb. 28, 2013
Factums to be served and filed by April 5, 2013.
[48] Costs were reserved to the judge hearing the injunction motion.
[49] The Rule 15.02 motion, brought by Richard, was dismissed with costs:
The plaintiffs did better than they offered. I order costs against the defendant, Richard Sherk, on a partial indemnity basis.
[50] Those costs were fixed at $5,000.00 and have been paid.
10. Taking out the January 22nd order – a saga
[51] In litigation, conflict is a contagious condition. It is not unusual for counsel to manifest a level of conflict varying directly with that exhibited by their client. Here, this phenomenon can be seen in respect of the settling of the form and content of the interim injunction that was granted on January 22nd by Ramsay J. I will trace some of the communications touching on the matter:
Jan.25
Counsel for the plaintiffs sent a fax letter to all counsel at 12:17 p.m.:
Yesterday we sent the draft terms of Justice Ramsay’s order to you for approval as to form and content. I have not heard from any counsel yet and I require that the order be signed off and approved by the end of the day today,[^11] failing which we will seek an appearance before Justice Ramsay next week to have the order issued and entered.
It is important for the interim injunction to be in a court order[^12] and my client has discovered today that one of Daniel Sherk’s clients has cancelled its policy and the terms of discussion with this client gives rise to serious concerns that the defendants are not complying with the court order.
Jan.25
In response to the 12:17 p.m. fax, the law clerk to counsel for Daniel sent an e-mail to counsel for the plaintiffs:
. . . [Counsel for Daniel] is currently out of the office today. I will bring your letter to his attention on Monday.
January 25th was a Friday.
Jan.25
Counsel for the plaintiffs replied by e-mail six minutes later:
Thank you, however, this letter should be provided to him now.
[52] January 29th was a busy day in the quest to settle the form and content of the January 22nd order:
Jan.29
Counsel for Daniel sent an e-mail to counsel for the plaintiffs at 9:45 a.m.:
Paragraph 7 of your order does not comply with the endorsement. The companies listed therein are not the companies listed in Schedule ‘A’ of your notice of motion.
Jan.29
At 9:53 a.m., counsel for the plaintiffs sent a text message to counsel for Daniel:
I don’t follow you. Paragraph 7 reflects the companies listed in Schedule ‘A’ when we define Verge. Please be more specific as to the problem as we will be seeking a date this week before Justice Ramsay if the order is not approved by the parties.
Jan.29
Three minutes later, counsel for Daniel responded with this e-mail:
Perhaps I’m mistaken but the Schedule ‘A’ I have does not list all of those companies.
You have mentioned making an appointment with His Honour a couple of times. You are obviously free to do so as you wish.
Jan.29
At 10:00 a.m., counsel for the plaintiffs sent this e-mail to counsel for Daniel:
It is our duty as counsel to agree on the terms and going to court is the last resort.
Please be specific how our order is defective.
Jan.29
At 10:07 a.m., the assistant to counsel for the plaintiffs sent an e-mail to counsel for Daniel:
Please see attached a copy of Schedule ‘A’ (p.15, 16) from our motion record. The companies listed are the same as in our draft order.[^13]
Jan.29
At 11:43 a.m., counsel for the plaintiffs forwarded a further text message to counsel for Daniel and all other counsel:
Now that you have the documents before you, are your concerns resolved?
May I hear from other counsel if they approve the order?
Jan.29
Counsel for Daniel replied to counsel for the plaintiffs at 11:58 a.m.:
I am in discoveries. Unless there is an urgent reason to keep e-mailing me, I will advise you when I am done. Thanks.
Jan.29
Counsel for the plaintiffs sent this e-mail to all counsel at 4:11 p.m.:
Gentleman, quite frankly, I have never seen anything like this. A court order on an injunction deserves the utmost respect by the parties and requires counsel to approve the order in a timely way. The silence here is unprecedented.
We are contacting the court to arrange an appointment to settle the order. We will keep you posted.
Jan.29
Eighteen minutes later, counsel for the plaintiffs sent a follow-up e-mail to all counsel:
We have an appointment before Justice Ramsay on Monday at 10 a.m. in St. Catharines. We will serve the notice tomorrow. In the interim, please direct any concerns about the draft order to me.
I do hope this appointment can be avoided.
Jan.29
At 4:46 p.m., counsel for Daniel e-mailed counsel for the plaintiffs:
I have responded and intend to discuss this matter with counsel tomorrow.
Jan.29
At 5:28 p.m., counsel for the plaintiffs forwarded this e-mail to all counsel:
Gentleman, my client has lost three clients in Dan’s book this week. This is a serious issue.
Jan.29
Counsel for CSI sent this e-mail to counsel for the plaintiffs at 6:52 p.m.
You are making a statement and the inference is that the clients were lost to Dan/CSI. Please provide some specificity as to the clients lost and to whom they were lost so that I can discuss this with my client.
[53] And January 30th also was a full day:
Jan.30
At 6:39 p.m., counsel for the plaintiffs forwarded this e-mail to all counsel:
You have a professional and ethical duty to approve our court order. Is there a reason why no one has done so or pointed out real problems with it?
I am at a loss to what counsel believe they are doing.
Jan.30
At 6:44 p.m., counsel for Daniel replied to counsel for the plaintiffs:
I am sorry but I have been dealing with a personal emergency all day and have not been in the office. However, rest assured we are dealing with your draft order.
I have had a chance to discuss your order with counsel and I believe they are preparing a response. If we cannot resolve the issue then we may well have to go before Justice Ramsay. However, I would appreciate scheduling the date with counsel as I cannot attend Monday morning.
This may fall on deaf ears but I would appreciate dealing with this tomorrow when I am back at the office and our joint response has been received. Thank you.
Jan.30
At 6:46 p.m., counsel for the plaintiffs sent this e-mail to counsel for Daniel:
This is embarrassing for counsel on the defendants (sic) side.
Jan.30
Eight minutes thereafter, counsel for Daniel e-mailed counsel for the plaintiffs:
So I can understand; I advised you that I have been [dealing] with a personal emergency and ask for the courtesy of dealing with this tomorrow after you receive our joint response and, without knowing anything more, you respond with [your 6:46 p.m. e-mail]?
I am surprised with the lack of professional courtesy and we can deal with this tomorrow when you receive our joint response.
Jan.30
At 7:03 p.m., counsel for the plaintiffs replied to counsel for Daniel by e-mail:
Please raise my lack of professional courtesy on Monday before Justice Ramsay.[^14]
[54] Counsel for Daniel provided something of a summary letter on January 31st:
Jan.31
Counsel for Daniel sent a letter to counsel for the plaintiffs by way of an e-mail attachment, summarizing the matters addressed in recent e-mails and communications and providing additional information. I will set out some passages: (Emphasis in original)
. . . With respect to my objection [to the content of the January 22nd order], while your position may be that I am wrong, I am required to discuss the matter with opposing counsel, review the endorsement AND the transcript, to determine if His Honour dealt with Verge being defined as it was in paragraph 7 of your draft order. Given the severity of the order, I do not think that is reasonable.
Furthermore, I think it is important that we review the time line of your letters and demands that we approve your clients’ draft order.
You sent us your clients’ proposed draft order on Friday afternoon. My assistant advised you that I was not in the office and that she would bring the same to my attention on Monday, and you presumed to instruct her to send it to me that day.
On Tuesday morning, I sent you an e-mail outlining a concern I have with your order, to which you responded. At that time, I was in examinations . . . and advised you that . . . unless the matter was urgent, to please e-mail me tomorrow. You ignored my e-mail and continued to e-mail me stating that you would bring the matter before Justice Ramsay. This was two business days following your initial letter enclosing the draft order.
On Tuesday night, I was dealing with a family emergency and I was not able to deal with this issue that night or most of the day Wednesday. While I am embarrassed to reveal such a sensitive personal issue and find it improper and unprofessional to have to, your conduct and allegations that I am doing something untoward have left me no choice. [Counsel then explained that his wife was having problems with her pregnancy.] . . . Consequently, while I am sure my personal matters are ‘irrelevant’ to you, they are very relevant to me and are why I have not been able to deal with this as quickly as you demand.
. . . in my e-mail responding to yours sent to me last night, I advised you that I was dealing with a personal emergency and that you respect my time and deal with this issue in the morning. You ignored the same and sent insulting e-mails to me.
Furthermore, it was two business days from you sending your draft order to you making an appointment with Justice Ramsay. Again, with no input from myself.
The letter then went on to address the problems with the draft order:
I was able to schedule a conference call with all counsel yesterday to deal with your draft order and, more importantly, review the transcripts of Justice Ramsey’s endorsement. I can advise you that your draft order does not comply with the endorsement for the reasons in my previous e-mails and Mr. Wigle’s letter of even date.
The letter concluded by dealing with the attendance upon Justice Ramsay:
. . . I once again advise you that I am unavailable on Monday as I have to attend a Board of Directors meeting at 8:00 a.m. for the Ronald McDonald House. However, I am available any other day but Thursday, as I need to attend the hospital with my wife.
If you are intending to proceed on the Monday date, please advise right away.
11. The February 4th attendance to settle the January 22nd order
[55] At the insistence of counsel for the plaintiffs, on February 4, 2013, all counsel attended upon Ramsay J. to settle the terms of the January 22nd order.
[56] In particular, counsel for Richard and counsel for the plaintiffs disagreed on the contents of paragraph 6 of the order. After hearing submissions, Ramsay J. granted the request by counsel for Richard and added this sentence to paragraph 6:
Richard Sherk is allowed to support his son Daniel in the context of a father-son relationship.
[57] I will set out paragraph 6 in its three incarnations, with the sentence added by Ramsay J. underlined:
| Notice of motion | Order made on January 22nd | Order amended on Feb. 4th |
|---|---|---|
| (f) an order that Richard is prohibited from working for, financially supporting and advising CSI or its officers, directors, shareholders and employees or, in the alternative, Richard is ordered to resign as a director of [Verge] forthwith. | (6) THIS COURT FURTHER ORDERS that Richard Sherk is prohibited from working for, financially supporting and advising CSI or its officers, directors, shareholders and employees. | (6) THIS COURT FURTHER ORDERS that Richard Sherk is prohibited from working for, financially supporting and advising CSI or its officers, directors, shareholders and employees. Richard Sherk is allowed to support his son Daniel in the context of a father-son relationship. |
[58] Consequently, it cannot be said, as is argued by the plaintiffs, that there was anything improper in the refusal by the defendants to approve the draft January 22nd order prepared by counsel for the plaintiffs.
12. Interpretation difficulties over the January 22nd order
[59] With the content of the January 22nd order finally resolved, one would think that counsel could proceed to other issues. One would be wrong.
[60] There arose a difference of opinion over the interpretation of paragraphs 1 and 3 of the January 22nd order. In paragraph 1, reference is made to the obligation on the defendants to “deliver up” confidential documents and, in paragraph 3 of the order, the defendants are asked to “preserve all written communications between themselves . . . regarding the use of Verge’s confidential information including e-mails and other electronic communications.”
[61] Counsel for the plaintiffs took the position, from the outset, that “preserve” was the equivalent of “produce,” with the result that there were demands on behalf of the plaintiffs not just for confidential documents but for the production of all e-mails and text messages.
[62] Counsel for the defendants argued, correctly, in my view, that there is a distinction between the two terms. “Preserve” does not mean “produce.”
[63] This dispute in interpretation is evident in the way the cross-examinations were conducted and in the surrounding documentary chaos.
13. Documentary chaos
[64] Leading up to the commencement of the cross-examinations of the parties on their affidavits, scheduled to begin on February 25th, there was a frenzied exchange of communications in respect of the documents that were being demanded by counsel for the plaintiffs:
Feb.20
There was a telephone conference call involving all counsel during which they “discussed a timetable for the cross-examination of several deponents of affidavits.”
Feb.21
Counsel for Richard forwarded a letter to all counsel, following the conference call on February 20th, and setting out the timetable and scheduling of the cross-examinations. The letter included this reference:
I believe that [counsel for the plaintiffs] proposed that notices of examination not be required. I will consider this proposal, but I am not waiving our right to serve such a notice.
Feb.22
Counsel for the plaintiffs wrote to all counsel:
Pursuant to Justice Ramsay’s order, we are required to conduct our cross-examinations next week and to date the defendants have failed to comply with Justice Ramsay’s order to produce the confidential information of Verge that is in their possession.
As might be expected, this breach of Justice Ramsay’s order will negatively affect our ability to cross-examine the defendants. Therefore, we reserve the right to continue the cross-examination of the defendants once the confidential information is produced pursuant to Justice Ramsay’s order.
In addition, Verge has learned today that Brenda French [the co-owner of CSI] contacted Brownstone Insurance Managers in Ancaster in the summer of 2012 for the purpose of brokering a $2.5 million book that is coming available to her as a result of hiring a new producer, Daniel Sherk, and the book is presently held by Verge Insurance in St. Catharines. In the course of this meeting, she provided a business plan to substantiate her request for the brokering arrangement. Please produce the business plan submitted to Brownstone by the end of business today.
[65] Imagine receiving the following e-mail on a Saturday and two days in advance of scheduled cross-examinations:
Feb.23
Counsel for the plaintiffs sent an e-mail to counsel for Richard at 10:59 a.m. (the 23rd was a Saturday):
Please find below the documents that we require your clients to produce for their cross examinations.
Request:
For the purposes of this request, ‘Verge’ is defined in the same way as in Schedule ‘A’ to Justice Ramsay’s order. ‘Documents’ means anything in paper or electronic form.
(Emphasis in original)
Dan Sherk’s Productions
drafts or final contract of employment or for service with CSI
all paper and electronic (including emails, texts, facebook or tweets) between Dan and the other defendants, Senn [a former senior executive with Verge] and Holbrook and Verge clients or prospective Verge clients between May 2011 and the present
all CSI’s or Daniel’s marketing documents (in paper or electronic form) created and or sent to existing Verge clients or CSI’s existing or prospective clients in the Niagara Region
the commission and bonus paid to Dan by CSI and all paycheques and supporting documents from CSI in the period of May 2012 to the present
Dan’s legal accounts or bills or invoices in the period of May 2012 to the present
all notes of document or draft versions relation to Dan’s employment or service contract with CSI
all documents (in paper or electronic form) relating to correspondence between Dan, Sandra Cleland, Sandra McQuaid whether in Dan’s email, phone, blackberry, computer or any other electronic storage device in the period of the May 2011 to the present
any legal opinions in draft or final form provided to Dan and CSI regarding the validity of his employment contract with Verge and his right to compete against Verge after the termination of his employment and all documents relating to Dan’s efforts to buy his book of business from Verge including correspondence or plans to have a broker, reinsurer, insurer or some other entity finance or assist in the purchase of Dan’s book from Verge
all documents (in paper or electronic form) with insurers, brokers, reinsurers, Verge clients regarding the defendants’ dispute with Verge
Rick Sherk’s Productions
his draft or final employment or service contract with CSI
all paper and electronic correspondence between Rick, Dan and CSI, Senn, French, Pluska in the period of the summer of 2011 to the present
all documents (in paper or electronic form) relating to discussions that Rick had with Verge producers (past and present) or employees (past and present) regarding their departure from Verge to start a competing brokerage against Verge in the period of 2010 to the present (including Ed Plutt, Ryan Lindsay and Scott McMullen)
all documents (in paper or electronic form) between Rick and present or past Verge clients from 2010 to the present
any records or cheques relating to payments made to Dan or on his behalf including his legal fees or expenses from May 2012 to the present
CSI’s Productions
any business plan submitted to Aviva, Brownstone or any other insurer, reinsurer, broker, bank or any other entity in connection with the financing of the purchase of Verge clients or Dan’s book of business or where Verge clients or Dan’s book of business is discussed as consideration for access to markets or any other purpose from May 2012 to the present
drafts or final contract for employment or services between CSI and Rick or Dan or Senn or Holbrook
the market submissions and all client information used relating to the accounts that CSI wrote in regard to Verge past or present clients in the period of May 2012 to the present
all marketing documents sent to existing or past Verge clients or existing or prospective CSI clients or for the Niagara Region general market including insurers and other brokers in the period of May 2012 to the present, as well as all marketing or correspondence relating to the hiring of Dan Sherk in the same period
any business plan in draft or final form or any discussion papers or any documents regarding the expansion of CSI into the Niagara Region
all documents bearing the name of CSI Niagara or identifying CSI as having a presence in the Niagara market
all documents relating to the commission rates or bonus or payments to Dan Sherk from May 2012 to the present, including all paychecks issued to him and supporting documents.
A notice of examination was not served.
[66] And the following exchange of e-mails took place the day before the scheduled cross-examinations:
Feb.24
At 4:14 p.m., counsel for Daniel forwarded an e-mail to counsel for the plaintiffs:
Further to Justice Ramsay’s Order we would like to respond as follows:
We have complied with paragraph 1 as Dan does not have any of Verge’s confidential information;
We have complied with paragraph 2 and not used, nor will/can we use, any of Verge’s confidential information;
Given we have not used any of Verge’s Confidential information, we have complied with paragraph 3. While there are no emails dealing with confidential information to preserve, Dan is preserving any and all emails on Dan’s blackberry used during his employment with Verge. In order to obtain all emails, texts, etc., we will require the four digit PIN with the service provider so we can obtain any and all emails, texts messages, etc. Please provide.
We have complied with paragraph 4 of the Order and diarized any and all verbal communications;
In accordance with paragraph 5 of the Order, we have not solicited or serviced any Verge client
N/A
N/A
This letter goes on to raise the interpretation difficulty that I mentioned earlier:
I further note that Justice Ramsay’s order is simply a preservation order and, other than paragraph 1 of the Order, we do not have an obligation to produce any further documents, and consequently have complied with the order.
Feb.24
At 04:38 p.m., counsel for Daniel sent an e-mail to counsel for the plaintiffs:
Firstly I would like to put you on notice that many statements in your clients reply material (which include all affiants) is not in reply to our affidavit, but raise many new issues that may require additional information from our client. I have attached a short affidavit dealing with some of the blatant issues and if you take issue with the same, we can deal with it at the motion.
Secondly, we would be happy to produce relevant documentation to assist in the examinations, but the timeliness of your request is unreasonable and impossible. You requested exhaustive list of documents sent on Saturday, which I saw on Sunday afternoon for the first time, for examinations on Monday; is unreasonable. With the greatest of respects, it seems that the request was made with knowledge or expectation that it could not be complied with, for reasons we can only assume. You have had my client’s material for over a week and if you required documentation, the same should have been requested at some point last week, during the work week, and not the eve of examinations, when everyone is home for the weekend.
I note that we have given you over 10 days to comply with our request for documentation, and expect the same brought to Mr. Sherk’s examinations.
However, without admitting or stating our position with respect to the relevance and/or admissibility of your requested documents, we respond as follows.
(Emphasis in original)
drafts or final contract of employment or for service with CSI – in the possession of Verge – will attempt to produce any and all agreements in our possession.
all paper and electronic (including emails, texts, facebook or tweets) between Dan and the other defendants, Senn and Holbrook and Verge clients or prospective Verge clients between May 2011 and the present Cannot obtain, review and/or assess relevancy in less than 24 hours and consequently will not be produced
all CSI’s or Daniel’s marketing documents (in paper or electronic form) created and or sent to existing Verge clients or CSI’s existing or prospective clients in the Niagara Region – Cannot obtain, review and/or assess relevancy in less than 24 hours and consequently will not be produced
the commission and bonus paid to Dan by CSI and all paycheques and supporting documents from CSI in the period of May 2012 to the present - Cannot obtain, review and/or assess relevancy in less than 24 hours and consequently will not be produced
Dan’s legal accounts or bills or invoices in the period of May 2012 to the present Will not produce, Not in our affidavit, not relevant
all documents (in paper or electronic form) relating to correspondence between Dan, Sandra Cleland, Sandra McQuaid whether in Dan’s email, phone, blackberry, computer or any other electronic storage device in the period of the May 2011 to the present – Require PIN from Verge and will work with Verge to obtain once PIN is provided
any legal opinions in draft or final form provided to Dan and CSI regarding the validity of his employment contract with Verge and his right to compete against Verge after the termination of his employment and all documents relating to Dan’s efforts to buy his book of business from Verge including correspondence or plans to have a broker, reinsurer, insurer or some other entity finance or assist in the purchase of Dan’s book from Verge - Cannot obtain, review and/or assess relevancy in less than 24 hours, given not in my possession, and consequently will not be produced. However our initial position is that we will not produce any legal opinions as the same was obtained in the context of Dan’s counterclaim and therefore it is privileged.
all documents (in paper or electronic form) with insurers, brokers, reinsurers, Verge clients regarding the defendants’ dispute with Verge - Cannot obtain, review and/or assess relevancy in less than 24 hours and consequently will not be produced.
Feb.24
At 4:50 p.m., counsel for the plaintiffs forwarded an e-mail to counsel for Daniel:
We don’t practice law like that. We know the request was with short notice but we were responding to the defendants’ late production of affidavits.
The Defendants also refused to produce the documents under Ramsay J order nor have they attempted to review them to date.
As a result, we expect that there will undertakings to produce documents and we can handle the document production that way. Perhaps there may be continuation of the crosses of the defendants due to the lack of production under Ramsay J’s order.
In any event, I am not happy with your tactics of attacking our professionalism. We need to decrease the conflict here.
[67] There even were communications on Monday, February 25th, the day of the cross-examinations:
Feb.25
Counsel for Daniel sent an e-mail to counsel for the plaintiffs at 9:33 a.m.:
Firstly, my productions were not late and served in time.
[Co-counsel for the plaintiff]s email did not indicate that you wished to proceed with the documentation as you have indicated below. In fact it stated they were needed FOR our clients’ cross-examinations. If your intention was to proceed as set out below, I would have hoped it would have been in the email requesting the documentation.
Further, I am not attacking your professionalism in my email. Given Mrs. Pollard’s email, I needed to respond and outline my client’s position.
With respect to the conduct of the parties and decreasing conflict, the emails speak for themselves and I will let the courts decide the issue when we argue costs, as opposed to getting into an argument with you and increasing conflict.
[68] Based upon the above chaotic chain of communications, is anyone really surprised that the cross-examinations did not proceed uneventfully?
14. The cross-examinations on affidavits
[69] In accordance with the timetable established by Ramsay J., Richard and Daniel were cross-examined on their affidavits on February 25, 2013, during which they were asked to produce documents alleged by the plaintiffs to be relevant to the motions. As I understand the matter, the plaintiffs had a particular interest in all communications between or among Richard, Daniel and CSI since the summer of 2011. Production was denied (and rightly so if the request was for all communications, without any concern for relevance).
[70] Thereafter, additional cross-examinations were held as follows:
Feb.26
Brenda French, co-owner of CSI, swore an affidavit in response to the injunction motion. Among other matters, it specifically addresses the affidavits from Mark sworn January 7 and 16, 2013 and February 7, 2013.
Feb.26
Brenda French was cross-examined on her affidavits of January 18th, February 15th, 2013 and February 26th.
Mar.1
Mark was cross-examined, during which he alleged that Spectrum Healthcare and at least five other customers in Richard’s former book of business were “lost” or were “under attack.” However, the plaintiffs now concede that Spectrum Healthcare is the only such customer to have left Verge (and it did so of its own volition).
Mar.4
Sandra Cleland, a Verge employee, was cross-examined on her affidavit sworn January 4, 2013.
Mar.4
Christine Aucoin, an employee of Verge, was cross-examined on her affidavit.
Mar.7
Doug Homeniuk, an account executive with Aviva Insurance Company of Canada, was cross-examined on his affidavit sworn January 18, 2013.
15. The New Productions
[71] On April 8, 2013, Richard reconsidered his refusal to produce communications with the other defendants and he supplied approximately 50 pages worth of heavily redacted e-mails and text messages. Counsel have referred to this material as “the New Productions” and, sometimes, “the New Documents.”
16. The production motion
[72] Unhappy with the completeness of the documentary disclosure from the defendants that occurred in conjunction with the cross-examinations, the plaintiffs served a motion on April 10, 2013 to compel production of the New Documents/New Productions and, in addition, seeking what are being called “Further Documents” from Richard, Daniel and CSI. In part, the notice of motion asks that they “produce all communications, in a complete and unredacted form” among themselves and other named persons “whether in printed or electronic form . . . from May 2011 to the present.”
[73] On April 10th, counsel for the plaintiffs stated in a letter to all counsel:
At the cross-examination of your clients, you refused to provide copies of all relevant communications, electronic or otherwise, between your clients and the other defendants for the period from May 2011 to present. Subsequent to his cross-examination, Richard Sherk on April 8, 2013 produced copies of a number of heavily redacted e-mails and text messages between the various defendants that clearly evidence ongoing communications between your clients and various other defendants. . .
In light of this development, we again ask that your clients produce copies of all communications between Daniel Sherk, Richard Sherk, Brenda French [co-owner of CSI], Ruth Pluska [the other co-owner of CSI], Andree Senn [a former senior executive with Verge], Maureen Holbrook . . .
We will be seeking an order from Justice Quinn on April 22, 2013 requiring your clients to produce these documents and re-attend cross-examination should you fail to consent to this arrangement.
[74] Having received the above letter and been served with the motion record of the plaintiffs, counsel for CSI sent a fax letter to counsel for the plaintiffs on April 12th:
In response to your letter . . . dated April 10, 2013, please be advised that our client will not attend on Monday to ‘continue the cross-examinations on new documents produced by Richard Sherk and the further documents produced by your clients.’ We consider your request to be inappropriate . . .
We confirm receipt of your clients’ motion record [the production motion] this afternoon with respect to a motion purportedly made returnable April 22, 2013, which was served late. We do not believe your clients are entitled to bring this motion . . . It seems that your clients are attempting by this motion to sidetrack the injunction motion . . .
[75] The notice of motion for the production motion was comprehensive and requested the following relief:
- An order that Daniel Sherk, Richard Sherk and Brenda French produce all communications, in a complete and un-redacted form, between Daniel Sherk, Richard Sherk, Brenda French, Ruth Pluska, Andree Senn [a former senior executive with Verge], Maureen Holbrook and any other employee or agent of Cal Schultz Insurance Brokers Ltd. (‘CSI’), whether together or not, whether in printed or electronic form, in the period of May 2011 to the present, regarding:
(a) any former or current client of Verge Insurance Brokers Limited (‘Verge’) as defined in Justice Ramsay’s order of January 22, 2013;
(b) any solicitation, contact with or discussion with or about a present or past Verge client;
(c) any servicing of any former or present Verge client, including communications with insurers, brokers, agents, consultants or intermediaries;
(d) any operational or financial input into or advice by Richard Sherk into CSI’s business, human resources, finances, markets, clients or otherwise;
(e) any transmittal or reference to or discussion of Verge’s client list or confidential information as defined in section 7 of Verge’s standard employment contract;
(f) any storage or holding of commissions for Daniel Sherk or prepayment of commissions to Maureen Holbrook as a result of Daniel Sherk’s efforts.
(g) any records or discussions relating to ‘producer code A4,’ as referenced in certain documents produced by Richard Sherk subsequent to his cross-examination on his affidavit (“New Documents”);[^15]
(h) any discussions or records relating to contracts between CSI and/or Daniel Sherk, Richard Sherk, Maureen Holbrook or any formal or informal understanding of the relationship between CSI and Richard Sherk and Daniel Sherk and Maureen Holbrook;
(all of which documents are hereinafter referred to as the “Further Documents”);
Leave, if necessary, to file the New Documents and the Further Documents with the Court for use on the hearing of the motion for the injunction;
An order that Daniel Sherk, Richard Sherk and Brenda French re-attend to be cross-examined, at their own expense, at a time a place to be agreed or as determined by the plaintiffs, on all issues arising from or related to the New Documents or the Further Documents;
An Order requiring the defendants to identify all media devices and email accounts (including email address) used during the period of May 2011 to present including but not limited to all computers, smartphones, ipads, tablets, usb sticks, memory sticks, external hard drives (‘the Identified Media Devices and Email Accounts’) in which relevant documents might be stored;
An Order requiring the defendants to preserve the Identified Media Devices and Email Accounts including metadata as follows:
(i) Computers/Smartphones/Ipads/Tablets/USB Sticks/Memory Sticks External Hard Drives: Preserve all such devices by having a forensically sound copy made which preserves all metadata;
(ii) Blackberries: Preserve all such devices by having a forensically sound copy made which preserves all metadata;
(iii) Webmail: Preserve all such webmail accounts by first re-activating any closed accounts then downloading the account from the webmail account into an archive and maintaining full headers and documenting the process used;
- An order requiring the defendants to review all documents (whether in hardcopy or electronic form) in the defendants’ possession, power or control, including but not limited to all documents residing on the Identified Media Devices and Email Accounts, including deleted emails or documents, for the purposes of determining if they contain any of the New Documents or Further Documents and to produce complete and un-redacted copies of any New Documents or Further Documents;
[76] The plaintiffs rely upon these grounds in their notice of motion (which provide a useful summary of how the parties reached this point):
Daniel Sherk, Richard Sherk and Brenda French (collectively the ‘Affiants’) have all filed affidavits in response to a motion for an injunction brought in this action by the plaintiffs;
The Affiants were all cross-examined on their affidavits filed in respect of the motion for an injunction;
Despite a specific request made of each of the Affiants, to bring all documents relevant to the motion for an injunction with them to their respective cross-examinations and in particular, ‘all paper and electronic (including emails, texts, facebook or tweets)’ between the defendants for the period between May 2011 and the present, the Affiants failed to produce any of the New Documents or the Further Documents;
Further, when asked on cross-examination to produce copies of all relevant communications between the defendants for the period between May 2011 and the present, each of the Affiants refused to do so;
Subsequent to his cross-examination, Richard Sherk, on April 8, 2013, produced to counsel for the plaintiffs, the New Documents, consisting of approximately 500 email and text messages between Daniel Sherk, Richard Sherk, Brenda French, Ruth Pluska, Andree Senn, Maureen Holbrook and other employees or agents of CSI and concerning various matters relevant to the motion for an injunction, many of which were heavily redacted;
Despite further requests made of Richard Sherk, he has refused to produce un-redacted copies of the New Documents or to produce copies of the Further Documents that might be in his possession or control;
Despite further requests made of Daniel Sherk and Brenda French, they have refused to produce copies of the Further Documents in their possession or control;
A review of the New Documents indicates that there were continuing and numerous communications between Daniel Sherk, Richard Sherk, Brenda French, Ruth Pluska, Andree Senn, Maureen Holbrook and other employees or agents of CSI that are relevant to the motion for the injunction and that a number of further relevant documents may exist that have not been produced;
As many of the New Documents were redacted prior to production, it is not possible for the plaintiffs to ascertain the entire contents of those documents or determine if relevant information has been deleted;
The plaintiffs will be prejudiced if they are required to proceed with the motion for an injunction without having complete and un-redacted copies of the New Documents and the Further Documents and an opportunity to cross-examine the Affiants on any such documents;
In particular, it is the position of the plaintiffs that many of the New Documents contradict the evidence of the Affiants and, accordingly, the plaintiffs are obliged to put those documents to the Affiants to allow them to address these alleged contradictions in accordance with the Rule in Browne v. Dunn;
Procedural fairness requires that the plaintiffs have access to and an opportunity to cross-examine on complete and un-redacted copies of the New Documents and the Further Documents prior to the hearing of the motion for the injunction in this matter;
The plaintiffs have incurred additional costs, and will continue to incur additional costs, as a result of the conduct of the Affiants in failing to produce relevant documents at their cross-examinations or in response to subsequent requests made of them;
[77] The notice of motion cites Rules 34.10, 34.12 and 34.14 of the Rules of Civil Procedure. During oral argument of the production motion, counsel for the plaintiffs added Rule 34.15 as a further Rule being relied upon.
[78] Rule 34.10(2)(b) requires a person to bring to “any examination . . . all documents . . . that the notice of examination . . . required the person to bring.”
[79] Rule 34.10(3)(a) provides that a notice of examination “may require the person to be examined to bring to the examination . . . all documents . . . relevant to any matter in issue in the proceeding that are in his or her possession, control or power . . .”
[80] Also, during an examination, “where a person admits . . . that he or she has possession, control or power over any other document that is relevant to a matter in issue in the proceeding . . . the person shall produce it . . .”: see Rule 34.10(4).
[81] If, during an examination, the person being examined improperly refuses to produce a relevant document, the examination may be adjourned to permit a motion for directions: see Rule 34.14(1)(d).
[82] Rule 34.15(1) addresses certain situations, including the failure of a person “to produce a document . . . that he or she is required to produce . . .” But, the powers of the court in clauses (a), (b) and (c) do not contemplate an order to produce documents as a remedy. Clause (d), however, does allow the court to “make such other order as is just.”
[83] I am not fully satisfied that the production motion is technically permitted. In this case, it seems to me that the plaintiffs have one of three choices: (1) move to compel the production of a document listed in a notice of examination; (2) move to compel production of a document requested during a cross-examination; (3) move to require fulfillment of an undertaking, given on a cross-examination, to produce a document or documents. It is not open for the plaintiffs to move for the production of documents other than in those three situations.
[84] The production motion was stayed before my dissatisfaction crystallized.
[85] Counsel for Daniel argues that the production motion was brought “to delay the injunction motion from going ahead” and “the longer the motion for the injunction took to be argued, the more likely the issue would be moot.” Although delay by the party who has an interlocutory injunction tucked safely in his pocket is usually advantageous to that party, the delay here did not have an ulterior origin. It is more likely that the production motion is the offspring of the procedural and documentary chaos that enveloped these proceedings in the early months of 2013.
17. The continuation of Richard’s cross-examination
[86] On April 16, 2013, Richard submitted to questioning as a continuation of his February 25th cross-examination.
18. The settlements
[87] The production motion and the injunction motion came before me on April 22nd. The production motion was heard first and, after approximately one week of argument, it, effectively, was settled (at least temporarily) because it was stayed. The injunction motion was not argued and was settled.
(a) the order of May 6, 2013
[88] On May 6, 2013, Richard, Daniel and the plaintiffs signed minutes of settlement in respect of the motions (CSI did not join in the settlement at that time). I made an order on May 6th, only two paragraphs of which are relevant for the purposes of my current task. They are paragraphs 1 and 2:
THIS COURT ORDERS that Mr. Justice Ramsay’s interim order dated January 22, 2013 (‘the January 22nd interim order’) shall continue as against Rick and Dan until the trial of this action, except that the following language shall be substituted for paragraph 5 of the January 22nd order:
THIS COURT ORDERS that Rick and Dan are prohibited from soliciting or servicing the present customers of the plaintiff Verge Insurance Brokers Limited (‘Verge’) and from interfering with Verge’s contractual relations and economic interests and that Rick and Dan are prohibited from soliciting or inducing producers presently employed by Verge to leave Verge and to seek employment elsewhere in the insurance brokerage in Ontario.
THIS COURT ORDERS that the plaintiffs’ motion to compel [that is to say, the production motion] as against Rick and Dan is stayed.
[89] To permit easy comparison between paragraph 5 of the interim order of January 22, 2013 and its amended version in my order of May 6, 2013, I will set them out side by side:
| The interim order of January 22, 2013 | The order of May 6, 2013 |
|---|---|
| 5. THIS COURT FURTHER ORDERS that defendants, Richard Sherk, Daniel Sherk and CSI, are prohibited from soliciting or servicing Verge’s present or former clients and from interfering with Verge’s contractual relations and economic interests. CSI is not prohibited from servicing Verge’s former clients who have decided to go to CSI without having been solicited by the defendants, Richard Sherk, Daniel Sherk and CSI. | 5. THIS COURT ORDERS that Rick and Dan are prohibited from soliciting or servicing the present customers of the plaintiff Verge Insurance Brokers Limited (‘Verge’) and from interfering with Verge’s contractual relations and economic interests and that Rick and Dan are prohibited from soliciting or inducing producers presently employed by Verge to leave Verge and to seek employment elsewhere in the insurance brokerage in Ontario. |
[90] The italicized sentence in the January 22nd order does not appear in the May 6th order. The underlined passage in the May 6th order is not found in the January 22nd order.
(b) the order of August 1, 2013
[91] On June 28, 2013, CSI signed minutes of settlement with the plaintiffs regarding the production motion and the injunction motion. The minutes of settlement were embodied in an order that I signed at Welland on August 1, 2013, stating that the interim order of January 22, 2013 would continue as against CSI until trial subject to certain amendments. The amendments in paragraphs 1-4 were substantively slight. I will set out both the interim order of January 22nd and the August 1st order for comparison, with the amendments or changes in the latter underlined:
| The interim order of January 22, 2013 | The order of August 1, 2013 |
|---|---|
| 1. THIS COURT ORDERS that the defendants, Richard Sherk, Daniel Sherk and CSI Insurance Brokers Ltd. (‘CSI’), deliver up any of Verge’s confidential documents and information in the defendants’ possession, power or control, including, but not limited to all confidential information. | 1. THIS COURT ORDERS that the defendants, Richard Sherk, Daniel Sherk and CSI Insurance Brokers Ltd. (‘CSI’), deliver up any of Verge’s confidential documents and confidential business information in the defendants’ possession, power or control, including, but not limited to all confidential information. |
| 2. THIS COURT FURTHER ORDERS that the defendants, Richard Sherk, Daniel Sherk and CSI are prohibited from using, reproducing, selling, disseminating or otherwise disclosing documents and confidential information belonging to Verge. | 2. THIS COURT FURTHER ORDERS that the defendants, Richard Sherk, Daniel Sherk and CSI are prohibited from using, reproducing, selling, disseminating or otherwise disclosing confidential documents and confidential business information belonging to Verge. |
| 3. THIS COURT FURTHER ORDERS the defendants, Richard Sherk, Daniel Sherk and CSI and their officers, directors, employees and agents to preserve all written communications between themselves, each other and clients regarding the use of Verge’s confidential information including e-mails and other electronic communications. | 3. THIS COURT FURTHER ORDERS the defendants, Richard Sherk, Daniel Sherk and CSI and their officers, directors, employees and agents to preserve all written communications between themselves, each other and clients regarding the use of Verge’s confidential information including e-mails and other electronic communications. |
| 4. THIS COURT FURTHER ORDERS the defendants, Richard Sherk, Daniel Sherk and CSI and their officers, directors, employees and agents requiring the defendants and their officers, directors, employees and agents to diarize all verbal communications they have had or may have in the future relating to the confidential information of Verge and dealings with Verge’s clients. | 4. THIS COURT FURTHER ORDERS the defendants, Richard Sherk, Daniel Sherk and CSI and their officers, directors, employees and agents requiring the defendants and their officers, directors, employees and agents to diarize all verbal communications they have had or may have in the future relating to the confidential business information of Verge and dealings with Verge’s clients. |
[92] In paragraph 5, the amendments were more significant:
| Order sought in motion | January 22nd order | August 1st order |
|---|---|---|
| (e) an order prohibiting the defendants from soliciting or servicing Verge’s present or former clients and prohibiting the defendants from interfering with Verge’s contractual relations and economic interests; | (5) THIS COURT FURTHER ORDERS that defendants, Richard Sherk, Daniel Sherk and CSI, are prohibited from soliciting or servicing Verge’s present or former clients and from interfering with Verge’s contractual relations and economic interests. CSI is not prohibited from servicing Verge’s former clients who have decided to go to CSI without having been solicited by the defendants, Richard Sherk, Daniel Sherk and CSI. | 5. THIS COURT ORDERS that CSI shall not solicit or service present Verge clients in the Niagara Region or in those areas forming part of the City of Hamilton which have the postal codes beginning with L8E, L8G, L8H, L8J, L8K, L8L, L8M, L8N, L8P, L8R, L8T, L8V, L8W, L9A, L9B and L9C as shown on the Hamilton Urban FSAs map attached hereto as Appendix “A,” however, if a Verge client approaches CSI to handle their business without solicitation by CSI, CSI is free to do business with that client . . . [‘solicitation’ is then defined]. |
[93] On behalf of CSI it is argued that paragraph 5 of the August 1st order, in contrast with paragraph (e) of Schedule “A” of the notice of motion in the injunction motion and paragraph 5 of the January 22nd order, “completely revamped the restriction placed on CSI.” In other words, it is said that the order of August 1st differs substantially from what the plaintiffs sought in the injunction motion such that the August 1st order is closer to the position taken by CSI than that of the plaintiffs. I will repeat the three paragraphs:
| Order sought in motion | January 22nd order | August 1st order |
|---|---|---|
| (e) an order prohibiting the defendants from soliciting or servicing Verge’s present or former clients and prohibiting the defendants from interfering with Verge’s contractual relations and economic interests; | (5) THIS COURT FURTHER ORDERS that defendants, Richard Sherk, Daniel Sherk and CSI, are prohibited from soliciting or servicing Verge’s present or former clients and from interfering with Verge’s contractual relations and economic interests. CSI is not prohibited from servicing Verge’s former clients who have decided to go to CSI without having been solicited by the defendants, Richard Sherk, Daniel Sherk and CSI. | 5. THIS COURT ORDERS that CSI shall not solicit or service present Verge clients in the Niagara Region or in those areas forming part of the City of Hamilton which have the postal codes beginning with L8E, L8G, L8H, L8J, L8K, L8L, L8M, L8N, L8P, L8R, L8T, L8V, L8W, L9A, L9B and L9C as shown on the Hamilton Urban FSAs map attached hereto as Appendix “A,” however, if a Verge client approaches CSI to handle their business without solicitation by CSI, CSI is free to do business with that client . . . [‘solicitation’ is then defined]. |
[94] The January 22nd order excludes non-solicited clients from the prohibition sought in the notice of motion. The August 1st order adds a geographical component. Overall, the changes are not sufficient to affect the issue of costs.
III SOME LEGAL PRINCIPLES
1. Statutory provisions regarding costs
(a) jurisdiction
[95] The jurisdiction of this court to award costs is found in s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43:
131(1) 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.
(b) Rule 57.01(1)
[96] Rule 57.01(1) of the Rules of Civil Procedure lists some of the factors for the court to consider when exercising its jurisdiction under s. 131 of the Courts of Justice Act:
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.
(c) Rule 57.01(3)
[97] Rule 57.01(3) states:
57.01(3) When the court awards costs, it shall fix them in accordance with subrule (1) and the Tariffs.
(d) Rule 57.01(4)
[98] Rule 57.01(4) reads:
57.01(4) Nothing in this rule or rules 57.02 to 57.07 affects the authority of the court under section 131 of the Courts of Justice Act,
(a) to award or refuse costs in respect of a particular issue or part of a proceeding;
(b) to award a percentage of assessed costs or award assessed costs up to or from a particular stage of a proceeding;
(c) to award all or part of the costs on a substantial indemnity basis;
(d) to award costs in an amount that represents full indemnity; or
(e) to award costs to a party acting in person.
(e) Rule 57.03(1)
[99] In accordance with Rule 57.03(1), the normal course is for costs on a contested motion to be fixed and payable within 30 days:
57.03(1) On the hearing of a contested motion, unless the court is satisfied that a different order would be more just, the court shall,
(a) fix the costs of the motion and order them to be paid within 30 days; or
(b) in an exceptional case, refer the costs of the motion for assessment under Rule 58 and order them to be paid within 30 days after assessment.
2. Case law regarding costs generally
(a) presumption that costs are to be fixed
[100] “[T]here is now a presumption that costs shall be fixed by the court unless the court is satisfied that it has before it an exceptional case”: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) at para. 15.
[101] “[I]f a judge is able to effect procedural and substantive justice in fixing costs, she ought to do so”: see Boucher, supra, at para. 16, citing Murano v. Bank of Montreal (1998), 1998 CanLII 5633 (ON CA), 41 O.R. (3d) 222 at 245 (C.A.).
(b) overall sense of what is reasonable
[102] “An overall sense of what is reasonable may be factored in to determine the ultimate award [of costs]”: see Boucher, supra, at para. 25, citing Murano, supra, at 249.
[103] “[T]he objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding . . .”: see Boucher, supra, at para. 26.
[104] “. . . a central controlling principle for the fixing of costs . . . is to ascertain an amount that is a fair and reasonable sum to be paid by the unsuccessful litigant, rather than any exact measure of the actual costs to the successful litigant . . .”: see Stellarbridge Management Inc. v. Magna International (Canada) Inc. (2004), 2004 CanLII 9852 (ON CA), 71 O.R. (3d) 263 (C.A.) at para. 97, leave to appeal to the Supreme Court of Canada dismissed January 27, 2005.
[105] The Court of Appeal in Zesta Engineering Ltd. v. Cloutier, 2002 CanLII 25577 (ON CA), [2002] O.J. No. 4495 at para. 4, made these statements in respect of fixing costs on an appeal (but I think that they are equally applicable to motions):[^16] (Emphasis added)
We have considered the bills of costs submitted by the appellant. However, we make no specific finding with respect to the amount of time spent or the rates charged by counsel. In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.
(c) fixing costs not simply a mechanical exercise
[106] “[T]he fixing of costs is not simply a mechanical exercise . . . the fixing of costs does not begin and end with a calculation of hours times rates”: see Boucher, supra, at para. 26.
(d) expectation of the parties
[107] “In deciding what is fair and reasonable . . . the expectation of the parties concerning the quantum of a costs award is a relevant factor”: see Boucher, supra, at para. 37, citing Toronto (City) v. First Ontario Realty Corp. (2002), 2002 CanLII 49482 (ON SC), 59 O.R. (3d) 568 at 574 (S.C.J.).
(e) preparation too perfect?
[108] “While it has often been accepted that the court should be reluctant to second-guess experienced counsel on the amount of time reasonably required for preparation, it has also been recognized that preparation time may reflect a standard of perfection and diligence for which an opposing party should not reasonably and fairly be required to pay”: see Farkas v. Sunnybrook & Women’s College Health Sciences Centre, 2005 CarswellOnt 10096 (S.C.J.) at para. 2.
[109] I cannot see myself punishing the productive pursuit of perfection.
(f) costs in other cases
[110] I find it generally unhelpful to try and create a range for costs by reference to other cases. There is never sufficient similarity in the facts. Litigation is not like baking a cake, where you mix together a defined list of ingredients and place them in an oven at a specific temperature for a fixed period of time.
(g) time spent directly related to motion
[111] An award of costs on a motion should reflect time that was spent “directly related to the motion”: see Farkas, supra, at para. 3.
[112] This was a valuable legal principle for my purposes.
(h) senior counsel performing routine services
[113] Where “[s]ome of the tasks performed by . . . senior counsel . . . were simple and otherwise of a routine nature such that clerical staff, or lawyers of less expertise . . . could have properly performed them . . . the costs awarded for them should be discounted . . . from the rates he or she usually charges . . .”: see Paletta v. Paletta, 2003 CarswellOnt 5181 (S.C.J.) at para. 7.
[114] I did not see any evidence of this practice.
(i) costs in the cause to the loser?
[115] “[C]osts in the cause has the virtue that sometimes it is fair that a party should recover costs for an interlocutory motion – win or lose – if that party ultimately succeeds in the action”: see Smith (Estate) v. National Money Mart Co., (2008) 2008 CanLII 45406 (ON SC), 92 O.R. (3d) 224 (S.C.J.) at para. 13.
3. Case law specific to costs on injunction motions
(a) unusual to award costs in interlocutory injunctions
[116] “. . . it would be unusual to award costs on an interlocutory motion to the successful plaintiff prior to trial. As there has been no final determination of the rights of the parties, but rather an order to protect the plaintiff’s position pending trial, the preferable course is to reserve the question of costs to the trial judge”: see Robert J. Sharpe, Injunctions and Specific Performance (Toronto: Canada Law Book), p. 2-91, cited with approval in numerous cases, including Quizno’s Canada Restaurant Corp. v. 1450987 Ontario Corp., 2009 CanLII 31599 (ON SC), 2009 CarswellOnt 3512 (S.C.J.), at para. 9.
[117] “Where a plaintiff succeeds in obtaining an interlocutory injunction it is the preferable (although not inevitable) course to reserve costs to the trial judge, which is to say make costs in the cause. This is the preferable course because it allows the court to have the benefit of hindsight and to avoid the possible injustice of awarding costs to a plaintiff for having succeeded in obtaining an order to protect his or her position pending trial when the outcome of the trial reveals that the plaintiff’s position was not worthy of having been protected”: see Quizno’s, supra, at para.10.
(b) where trial virtual certainty despite the interlocutory injunction
[118] In Rogers Cable T.V. Ltd. v. 373041 Ontario Ltd., [1994] O.J. No. 1087 (Gen. Div.) it was said that, when considering the issue of costs, motions for an interlocutory injunction attract different considerations and regard must be had for whether the result of the injunction motion puts an end to the action. The court stated, at para. 4:
Where it is clear that the granting of the interlocutory injunction will put an effective end to the proceedings it is appropriate for the court to make a costs order which reflects this fact and to fix the amount of costs. However, in a case such as this in which a trial is a virtual certainty[^17] the court will consider the usual alternatives: plaintiff’s costs in any event of the cause; plaintiff’s costs in the cause; costs in the cause; or costs reserved to the trial judge.
[119] In other words, a trial may place the allegations of the parties in a different light than the one illuminating the motions.
(c) rule in Rogers Cable not mandatory
[120] Despite the rule in Rogers Cable, supra, the decision in Intercontinental Forest Products S.A. v. Rugo, 2004 CanLII 33353 (ON SCDC), at para. 3, speaks of a residual discretion in the motions judge to order costs payable forthwith:
It is our view that the Rogers Cable decision does not establish a mandatory rule but that the residual discretion of the judge with respect to costs is preserved and that, in a particular case, the motions judge may determine to award costs on a motion for an interlocutory injunction payable forthwith, rather than reserving costs to the trial judge.
[121] The court, at para. 4, points out that Rogers Cable, and those cases decided in the eight years thereafter, pre-dated the coming into force, on January 1, 2002, of Rule 57.03(1) and states, at para. 5:
The new Rule by its terms applies to motions for an interlocutory injunction. The new Rule does not however, in our view, detract from the residual discretion of the motions judge in determining what costs order would be just. In making such a determination, the judge on a motion for an interlocutory injunction should consider the principles in Rogers Cable that, in the usual case where a trial is a virtual certainty, the award of costs should be reserved to the trial judge.
(d) but sometimes costs are ordered payable forthwith
[122] In Precision Fine Papers Inc. v. Durkin et al., 2008 CanLII 26690 (ON SC), following an argued motion, an injunction was granted to the plaintiff against James Durkin and his daughter, Wendy Durkin, and their new employer, the corporate defendant. Mr. Durkin was found to be a fiduciary and to have participated in the solicitation of customers of the plaintiff.
[123] After granting the injunction sought by the plaintiff and without being able to say that a trial was a “virtual certainty” or “inevitable,” the court, at para. 20, nevertheless, found it “appropriate to order costs payable forthwith” for these reasons:
(a) I found that on the key issues, the plaintiff had not simply established a serious issue to be tried, but also a strong prima facie case; (b) the misconduct of the defendants was egregious – although described as an ‘unpaid consultant,’ Mr. Durkin was actively working behind the scenes, with his daughter Ms. Durkin, using confidential information and in breach of his fiduciary duties and in breach of his non-solicitation agreement, to solicit Precision’s customers; (c) in order to expose the defendants’ misconduct, which was disputed by the defendants every step of the way and on every possible ground, the plaintiff had to engage in lengthy and expensive investigations and litigation procedures; and (d) the plaintiff was substantially successful on the most important issues.
[124] In Grillo and Grillo & Associates v. D’Angelo et al., 2009 CanLII 2913 (ON SC), “the defendants, who were three associate lawyers and a paralegal with the plaintiff law firm, left the firm without notice on December 24, 2008, taking with them some two hundred and fifty of the firm’s contingency fee files, leaving a note which was not discovered by Mr. Grillo, the principal of the firm, until December 29th. The defendants had contacted some of the clients of the firm before their departure, and continued to do so immediately after they left, to obtain directions that the clients’ files be transferred to the defendants’ new firm”: see para. 2.
[125] An interlocutory injunction was granted to the plaintiff in Grillo and costs were ordered payable forthwith by the defendants. The court observed, at para. 9, “that at the hearing of this motion there was no serious effort made by the defendants to suggest that their conduct was proper.”
4. Corporate defendant jointly and severally liable for costs?
[126] In Precision Fine Papers Inc., supra, it was found that the corporate defendant (comparable to CSI, at bar) was aware that the individual defendants had obligations to their former employer (including a non-solicitation agreement) and knowingly benefited from their misconduct. The court held the corporate defendant jointly and severally liable for costs, along with the individual defendants, stating, at para. 37:
. . . Inter-World should be jointly and severally liable for the costs. Inter-World was aware of Mr. Durkin’s non-solicitation agreement and . . . Inter-World was aware of the Durkins’ breach of duty and knowingly received the benefit of their misconduct. Inter-World should have taken steps to ensure that the Durkins complied with their obligations to their former employer. It was complicit in their breaches of duty and it should bear the full consequences.
5. Should court go behind settlements to ascertain merits?
[127] Counsel for CSI argues that the court should not go behind the settlements negotiated with the plaintiffs to consider the merits of the factual allegations of the plaintiffs. Reliance is placed upon O’Brien v. O’Brien, 2009 CarswellOnt 7194 (S.C.J.), where the parties reached a settlement before trial but left the issue of costs to be determined by the court. At para. 8, the court stated:
. . . counsel for both parties wanted to argue the issue of entitlement to costs on the basis of the merits of their clients’ respective positions with respect to the substantive issues had this matter proceeded to trial. In my view, it is not appropriate for me to decide the issue of costs as though the parties were arguing this case at trial . . .
At para. 9, the court went on to say:
. . . the most important factor in determining both entitlement to and quantum of costs is the reasonableness and timeliness of the parties’ respective settlement offers.
6. Substantial-indemnity costs are rare
[128] “Solicitor-and-client costs [now known as substantial-indemnity costs][^18] should not be awarded unless there is some form of reprehensible conduct, either in the circumstances giving rise to the cause of action, or in the proceedings, which makes such costs desirable as a form of chastisement”: Orkin, The Law of Costs, 2nd ed. (Aurora: Canada Law Book, 1993) at p. 2-92, cited with approval in a number of cases, including Hunt v. TD Securities Inc., 2003 CanLII 3649 (ON CA), at para. 123.
[129] Care must be taken not to award substantial-indemnity costs as a punishment for pre-litigation conduct that is “at the very heart of the proceedings and, as such, is compensable in damages.” To do so is to award costs “twice for the same wrongdoing”: see Hunt v. TD Securities Inc., supra, at para. 130. A similar sentiment was expressed in Grillo, supra, at para. 21, where partial-indemnity costs were awarded:
While the conduct of the defendants at the time of their departure from the law firm and immediately thereafter may well attract censure, I have concluded that it would not be appropriate to award substantial indemnity costs to condemn that conduct because other remedies are available . . . The actions of the defendants may ultimately result in an award of damages under several heads that would reflect the court’s denunciation of their conduct. It seems to me that this issue is best addressed on a full evidentiary record, following trial.
[130] In Precision Fine Papers Inc., supra, costs also were awarded on the partial-indemnity scale following the same reasoning.
IV DISCUSSION
1. The decision to settle
[131] On behalf of the plaintiffs it is submitted that Richard, Daniel and CSI settled the injunction motion because “they saw the writing on the wall, re-evaluated their positions and sought the best possible outcome for themselves.”
[132] This suggested impetus for settlement may be a worthwhile working hypothesis for the plaintiffs, but I am not in a position to determine why the defendants settled the injunction motion (or agreed to a stay of the production motion). Litigants settle for a multitude of reasons, not all of which reflect an admission of fault or wrongdoing.
2. Proportionality
[133] On behalf of Richard it is argued that the number of hours docketed by the lawyers representing the plaintiffs is excessive and “not a proportionate response” to the actions of Richard and Daniel. It is pointed out that: (1) the plaintiffs have approximately 22,000 insurance policies comprised of 4,000 commercial policies and 18,000 personal policies; (2) when Richard retired on April 3, 2012, his book of business consisted of 70 policies, mostly commercial, distributed among 30 customers, only one of which (Spectrum Healthcare) left Verge, but did so for its own internal needs; (3) when Daniel’s employment was terminated, he was one of 17 producers, and his book of business consisted of 730 policies distributed among about 500 customers; (4) of the 500, only seven left Verge and followed Daniel to CSI (although the plaintiffs say that those seven customers translated into the loss of 20 policies); (5) the policies written by CSI for the seven customers amount to a decrease of .09% in Verge’s total number of policies.
[134] Citing the small number of clients who moved their accounts to CSI, counsel for Richard submits that “this meagre statistic alone refutes the plaintiffs’ allegation that [Richard] had engaged in a conspiracy against Verge.” The “meagre statistic” may refute the success of the conspiracy, but not necessarily the fact of the conspiracy.
[135] CSI adds that “Verge has framed its injunction motion against the defendants as a necessary defensive step to repel an all-out attack by the defendants on its clients. To this end, Verge has expended hundreds of thousands of dollars in legal fees and disbursements. Yet, there were only a handful of clients who transferred their business to Verge and they signed letters indicating that they had not been solicited.” It may be true that the direct financial damage to Verge, caused by the conduct of the defendants, will prove to be much less than initially feared. However, when the statement of claim was issued and while the motions were being prosecuted, it was prudent for Verge to assume the worst and it was reasonable for Verge to carry out the litigation-equivalent of carpet-bombing. I have no quarrel with such an approach. Litigation is nasty.
3. The valuation motivation
[136] In a futile effort to keep the factual narrative as tidy as possible, I had hoped to avoid getting into the valuation issues (being the valuation date and the value of the Verge shares). But I must say something about them, because they have been raised by Richard as a possible motive for the action and the motions.
[137] In paragraph 49 of the affidavit sworn by Richard on February 17, 2013, he deposes that the allegations being made against him by Mark make no sense and he describes a motive behind the allegations:
- . . . Before and since my retirement in early April 2102 I have wanted to sell my shares in Verge to . . . Mark’s holding company at fair market value in accordance with the valuation process in the Shareholder Agreement and the [Memorandum of Understanding]. If I had engaged in any of the improper, unethical or illegal business activities that Mark alleges I have been doing, I acknowledge that the results of those activities could materially and adversely affect Verge’s gross revenue, net profit and ultimately the value of Mark’s shares and my shares . . . I believe that Mark has made these unfounded allegations against me in an effort to convince the third valuator and ultimately the judge who hears the valuation application that the value of my and his (Mark’s) shares in Verge has markedly dropped. I believe that Mark’s intention and strategy is to then offer less money and to ultimately pay less money for [my] shares in Verge . . .
[138] Therefore, Richard submits that the action proper and the two motions represent an effort by Mark “to gain a tactical advantage . . . in connection with the valuation application.”
[139] Although these proceedings could have the effect of diminishing the value of Verge (after all, there might be customers who choose not to do business with a brokerage owned by a dysfunctional family who have become full-time litigants and, thus, must be part-time insurance producers), this is not the motive for the action or for the motions.
4. Will the action continue?
[140] The amended statement of claim seeks 12 declaratory orders, an accounting, five different types of damages and only one item of injunctive relief. The plaintiffs ask for an injunction “to prevent the defendants from using the confidential information of Verge to solicit or service Verge’s present or former clients and to prohibit the defendants from interfering with Verge’s contractual relations and economic interests.”
[141] I think that the injunction-component of the action is spent (among other things, Daniel has resigned from CSI, Richard has surrendered his licence to sell insurance and the exodus of clients from Verge never materialized). Nevertheless, there are additional issues in the action that are highly probable to fuel a trial.[^19]
[142] It may be the case that the quick action of the plaintiffs has capped their financial loss at a relatively modest amount leaving, as the only issues to litigate, whether the defendants should be monetarily punished for their conduct by means of the various types of damages pleaded (and the counterclaim by Daniel for wrongful dismissal).
[143] The importance of my finding that the injunction-component of the action has fizzled out is that it eliminates the common argument in favour of deferring, until trial, the determination of costs in an injunction motion.
5. Did CSI benefit from the wrongful conduct of Richard and Daniel?
[144] Brenda French, the vice-president and co-owner of CSI, had provided consulting and training services for Verge in the period 2006-2009. In her cross-examination, on February 26, 2013, in answer to Q. 200, she conceded knowledge that Daniel had a fairly large volume of business:
A. . . . What I knew prior, when I had been working with Verge Insurance as a consultant, is that Dan was one of their more successful brokers, sales people. And I knew that he had a fairly large volume of business . . .
[145] Brenda French also knew that Daniel, upon his departure from Verge, was prohibited from soliciting or doing business with the clients in his former book of business.
[146] In his affidavit sworn January 15, 2013, Mark deposes, at paragraph 15:
. . . approximately 10 clients (representing 25 insurance policies) have moved their business from Verge to Daniel’s new employer, CSI . . . These policies represent approximately $82,000.00 in lost annual commissions and contingent profit commissions.
[147] At paragraph 16, Mark goes on to say:
Verge has a solid record of retaining clients for approximately 10 years. Therefore, Verge’s losses in respect of these clients over a 10-year period would be approximately $815,000 . . .
[148] In that same affidavit, Mark speaks of the need, in some instances, to reduce premiums “to retain the client’s business” and to attempts by Daniel to solicit four other clients (whom he labels “files presently under attack”) and concludes that over 10 years he expects the losses to Verge, from the wrongful conduct of Daniel, to be, in total, approximately 1.3 million dollars.
[149] The allegations in this affidavit may be stale-dated because it seems now to be conceded by the plaintiffs that the number of clients who moved their business from Verge to CSI, because of Daniel, is seven: no more; no less. Presumably, this fact reduces the loss calculations.
[150] The evidence in support of the monetary losses alleged by Verge is rough, but it was not the subject of any coherent opposition by, for example, Brenda French who, at Q. 438 of the transcript of her cross-examination, could do nothing more than say that Verge is “gaming the system.”
[151] On these motions, it is not necessary for me to calculate the benefit to CSI from the wrongful conduct of Daniel and Richard. This calculation will be left for trial. It is sufficient for me to find that there was a benefit and CSI would have known that there was a benefit. The existence, and knowledge, of this benefit favours treating CSI the same as Daniel and Richard for the purposes of fixing costs.
6. The “I-was-not-solicited” letters
[152] A problem in the action for the plaintiffs is that CSI has produced letters from five of the seven clients who followed Daniel from Verge to CSI, all saying that they transferred their business unsolicited.[^20]
[153] The letters are attached as exhibits to the affidavit of Brenda French, sworn January 18, 2013. Three of the letters have identical wording:
To Whom It May Concern
Re: Placement of Insurance Business with CSI Niagara
This letter will serve as a formal statement that our business was not enticed or solicited by Dan Sherk. At our initiative we have requested brokerage services from Dan Sherk, due to our longstanding association.
[154] These letters were prepared by CSI staff.[^21] Brenda French gave this evidence on her cross-examination:
Q.490 So you had no knowledge of when these letters were going out or how they were created?
A. I knew they were being put together and I knew that that was something we were doing, but I didn’t know the specific content of each letter.
[155] It will be observed that the three letters refer to “CSI Niagara.” CSI has taken the position that its “trading territories” are Burlington and the Greater Toronto Area and, therefore, it does not compete with Verge, a company largely devoted to the Niagara Peninsula.[^22] The plaintiffs argue that the reference to “CSI Niagara” is evidence that Daniel was intending to expand the trading territory of CSI into Niagara. When asked about this on her cross-examination, Brenda French testified:
Q.483 So if there is no intention to move into Niagara and there is no CSI Niagara, why would someone in your office just put ‘CSI Niagara’ on a letter?
A. Because they live there.
Q.484 Who is ‘they’?
A. The account manager that does the processing of the paperwork.
[156] I have heard some silly explanations in my years on the bench. This one deserves a coloured ribbon.
[157] The “CSI Niagara” reference advances the conspiracy theory of the plaintiffs, which will play a prominent role in the trial. For my purposes, it does not affect the entitlement to, or the scale of, costs on the motions. It merely reinforces the notion that CSI should be equally liable for costs along with Richard and Daniel.
7. Did the defendants unnecessarily lengthen the motions?
[158] The plaintiffs contend that Richard, Daniel and CSI “engaged in conduct which unnecessarily lengthened the [motions] and resulted in additional time and expense,” including: (1) the adjournment of the January 22, 2013 injunction motion; (2) the refusal to produce relevant documents; and, (3) their denials of wrongdoing.
[159] This impugned conduct appears to be the primary justification for the plaintiffs demanding that costs be fixed, payable now and calculated on the substantial-indemnity scale.
(a) the adjournment
[160] I have already mentioned that the plaintiffs are critical of the fact that Daniel sought an adjournment of the injunction motion on January 22, 2013. Adjourning a motion on the first return date is not uncommon. The injunction motion involved a substantial amount of material which had been served earlier in the month. It is not surprising that Daniel wanted an adjournment. I certainly do not think that the adjournment merits judicial punishment.
[161] As early as November 8, 2012, counsel for the plaintiffs had advised all of the defendants that Verge “will be bringing a motion for injunctive relief” since “it is now evident that CSI and Daniel Sherk are using a client list to systematically solicit Verge’s clients for the purpose of transferring business to CSI . . .” However, this does not mean that the defendants should have been prepared to argue the injunction motion on January 22nd. Being warned about a motion is not the same as being served with a motion.
[162] In a related complaint, the plaintiffs further say that the defendants “refused to engage in any meaningful discussions” regarding the terms being suggested by the plaintiffs for the adjournment.
[163] The plaintiffs were proposing that, in consideration for the adjournment, the defendants consent to an interim injunction in accordance with the terms found in Schedule “A” to the notice of motion. In other words, the plaintiffs sought complete capitulation in return for the adjournment; apparently, any talk of less would not be “meaningful discussions” in the eyes of the plaintiffs.
[164] The fact that Ramsay J. granted an interim injunction largely on the terms contained in the notice of motion does not render the requested adjournment, or the failure to settle the motion, deserving of criticism.
[165] Earlier in these Reasons, I traced the communications among counsel in respect of the adjournment and the terms being suggested for the adjournment. I do not find any fault with the conduct of the defendants in this regard.
(b) refusal to produce relevant documents – Richard and Daniel
[166] It is a fact that the production issues delayed this matter, added to the time and expense involved in the litigation and, of course, generated the production motion.
[167] The plaintiffs argue that Richard and Daniel failed to produce relevant documents when cross-examined on their affidavits on February 25, 2013. This complaint is found in the initial written submissions of the plaintiffs, at paragraphs 20-29, which I shall excerpt.
[168] First, the types of productions requested are identified:
. . . Richard and Daniel were cross-examined on their affidavits on February 25, 2013.
In the course of the cross-examinations, counsel for the plaintiffs asked Richard and Daniel to produce documents it deemed to be relevant on the [injunction] motion. The documents requested included but were not limited to: (1) communications between the defendants between the summer of 2011 to the present; (2) Richard’s and Daniel’s communications with Verge’s clients following their departures from Verge; (3) contracts of employment/services between CSI and Richard and Daniel; and (4) marketing efforts by CSI and/or Richard and Daniel to the Niagara insurance market.
Amongst these requests, the plaintiffs were particularly concerned about the defendants’ communication with one another, as one of the primary allegations advanced against the defendants is that they were working together from the summer of 2011 onwards to transform CSI into a competitor of Verge in commercial insurance. On the plaintiffs’ theory of the case, the defendants were achieving this objective by using Richard’s knowhow and relationship with insurance markets and Daniel’s relationship with Verge’s commercial clients.
[169] Next, the response to the request for this documentation is described, including the New Productions supplied by Richard:
Daniel’s counsel refused all requests for documents . . . made by the plaintiffs in the course of his cross-examination . . . not a single document was . . . produced. Daniel refused to provide any of his communications with the other defendants on the basis that the plaintiffs’ request was too broad . . .
Although Richard initially refused to produce any of the communications between himself and the other defendants . . . he reconsidered this refusal and provided approximately 50 pages worth of e-mails and text messages on April 8, 2013, which were highly redacted and incomplete (. . . “the New Productions”) . . .
[170] There were efforts to conduct further cross-examinations of Richard and Daniel in respect of the New Productions:
Upon receipt of the New Productions, the plaintiffs sought to cross-examine Richard and Daniel. A notice of examination was served on Richard which contained a list of documents that both were expected to bring to the cross-examination.[^23] The plaintiffs specifically requested that Richard bring all unredacted copies of the New Productions to the examination.
Daniel refused to attend the cross-examination[^24] . . . While Richard attended the cross-examination, he refused to bring unredacted copies of the New Productions or disclose the full extent of his communications with the other defendants on the basis of relevancy. His counsel also refused on the basis that full documentary disclosure would not be provided until discoveries.
[171] I pause here to offer the view that it is no defence to a request for production of 71levant documentation on a cross-examination to say that the material will be supplied on examinations for discovery.
[172] The refusals referred to in paragraph 25 of the written submissions prompted the production motion:
As a result of Richard’s and Daniel’s refusal to produce the documents requested, the plaintiffs were forced to bring a motion for production [the production motion] to be heard before the injunction motion . . . [The production motion] consumed a week of the court’s time and involved a litany of materials including the plaintiffs’ motion record, factum, book of authorities and numerous aids to arguments that were drafted and compiled throughout the course of the week.
The costs of the production motion were truly borne by the plaintiffs. Neither Richard nor Daniel put together a responding record for the motion. Although counsel for Richard did draft a factum in response to the motion, much of the response was saved for oral argument.
The production motion could have been avoided had Richard and Daniel disclosed the requested documents during their first cross-examination . . .
There is little doubt that the New Productions provided by Richard on April 8th were clearly relevant. They showed that Richard was making important decisions for CSI, was meeting with clients and was actively seeking to grow CSI’s commercial brokerage together with Daniel. These productions unravelled the defendants’ case, showing that all three parties, CSI, Daniel and Richard, were involved in a conspiracy to harm the plaintiffs and destroy a family business.
[173] It is beyond useful debate to deny that the New Productions were damaging to the defendants.
[174] And, finally, the plaintiffs pose this theory in their written submissions:
- It would appear that Richard and Daniel’s sudden willingness to resolve the injunction motion on the terms requested by the plaintiffs was influenced by the likelihood of production of their secret e-mails. They knew what existed in e-mail or text form but did not want to disclose it. In this regard, the production motion played a pivotal role in the proceedings.
I do not have sufficient information upon which to agree or disagree with the accuracy of this theory.
[175] Richard relies upon the wording of paragraph 3 of the order of Ramsay J. which required the defendants “to preserve all written communications between themselves . . . regarding the use of Verge’s confidential information . . .” Richard seizes on the word “preserve” and it is submitted on his behalf that “preserve” does not mean “produce.” I agree with that submission, but it does not affect the overriding obligation to produce all documentation relevant to the issues raised by the injunction motion. The January 22nd order in no way limited that obligation.
[176] On the February 25th cross-examination of Richard, he was asked by plaintiffs’ counsel to produce copies of all electronic communications. On its face, such a request is overly broad. It was reasonable for Richard’s counsel to have refused until he had an opportunity to review the preserved e-mails and text messages and to vet them for relevance.
(c) refusal to produce relevant documents – CSI
[177] The plaintiffs also complain about the lack of documentary disclosure made by CSI, contending that CSI denied to the plaintiffs “the relevant documents in advance of the injunction motion” and thereby “CSI engaged in tactics which resulted in wasted judicial time and resources.”
[178] When Brenda French was cross-examined on February 26, 2013, she was asked to produce the e-mail correspondence between her and the other defendants and with Andree Senn (a former senior executive with Verge). Counsel for CSI refused, at p. 30:
COUNSEL: And I am going to refuse production at this stage. Production will happen in the discovery context, and the test for discovery will apply at that time. I am going to refuse production for purposes of today’s cross-examination. It is a cross-examination on an affidavit.
And later, at p. 31:
COUNSEL: . . . going . . . back to Justice Ramsay’s order, there is no requirement for production. There is just the requirement for preservation . . .
[179] Once again, the “preserve” versus “produce/deliver up” confusion surfaces. It will be remembered that paragraph 1 of the January 22nd order required the defendants to “deliver up” certain documentation, whereas paragraph 3 obligated the defendants to “preserve” all written communications. The preservation order did not replace or dilute the duty of the defendants to produce or to deliver up documents relevant to the motion.
[180] CSI was advised, by letter dated April 10, 2013, that the plaintiffs would be seeking the requested documents on the return of the production motion.
[181] CSI did not take the position that the documents requested by the plaintiffs were irrelevant, only that they would be produced as part of the discovery process. That is an untenable position. All documents relevant to the motion must be produced. Relevance is defined by the motion or by the affidavit upon which cross-examination takes place (whichever is the broader).
[182] The plaintiffs argue that the production motion “played a pivotal role in the proceedings” as the “fear of what may be disclosed” in the productions sought is the reason why “CSI then entered into settlement discussions.” This argument, like the one made in respect of Richard and Daniel, is only speculation.
(d) denials of wrongdoing – Richard and Daniel
[183] Wrongdoing that is the subject-matter of the action itself should not be used to bolster a claim for costs on a motion.
[184] The court must be cautious regarding allegations of wrongdoing for another reason: defendants are entitled to require plaintiffs to prove their case; defendants are not obliged to assist plaintiffs with that proof. Nevertheless, defendants must not mislead plaintiffs and defendants must comply with the Rules of Civil Procedure, in particular as to documentary production and disclosure.
[185] Did the defendants engage in wrongdoing relevant to the issue of costs?
[186] In their affidavits, Richard and Daniel deny all allegations of wrongdoing. Yet, some allegations turned out to be true based upon the evidence that came to light after their affidavits were sworn, in particular, the New Productions.
[187] In the injunction motion record, the plaintiffs allege “that Richard breached his fiduciary duties to Verge, as a shareholder, director and officer by taking Verge’s confidential information and business processes and using it to the benefit of CSI for the purpose of setting up a commercial insurance department at CSI to solicit Verge’s clients.” In making these allegations, the plaintiffs rely upon e-mails between Richard and Brenda French (a co-owner of CSI) which reveal that they had been communicating with each other since June of 2011. The plaintiffs further rely upon evidence from a private investigator, Glenn D’Ostillo, who allegedly overheard Brenda French, in a conversation with Daniel, say that Richard would be a sub-contractor with CSI.
[188] In response to these allegations, Richard maintains that he was acting as a coach or mentor to CSI and that Mark was aware he was doing so. At paragraph 35 of his affidavit of February 17, 2013, Richard deposes, in part: (Emphasis added)
I describe what I did as coaching or mentoring. Mark was fully aware of my coaching activity and he never questioned or opposed it during the 15 or more years that I did it before my retirement in early April 2012 . . . I regard my occasional visits and telephone conversations with Ms. French to be more recent examples of coaching that I had done with broker owners.
[189] At paragraph 43 of his February 17th affidavit, Richard states that he had no desire to remain in the insurance industry following his retirement from Verge on April 3, 2012.[^25] And, in an affidavit sworn the next day, on February 18th, Richard stated, at paragraph 11:
I repeat that I have no intention of creating a second [CSI] office in the Niagara Region.
[190] However, the New Productions contain an e-mail on October 2, 2012, from Richard to Andree Senn, at 7:14 p.m., saying:
We are going to have to be careful of [e-mails] between CSI and me. Remember my g-mail account.
[191] If Richard believed there was nothing wrong in his dealings with CSI or that he was merely “coaching or mentoring,” would there be a need to send this e-mail or to seek secrecy?
[192] There also is an e-mail on October 4, 2012, at 9:35 a.m., from Richard to one Mike McDonald, an insurance-industry contact: (Emphasis added)
[Daniel] and I like everything you do and want to work at strengthening and expanding the relationship for our mutual benefit. Another thing to bring up is that we are actively looking for a commercial producer who lives in the Hamilton area and might be interested in changing brokerages for a better financial relationship. If you or Kevin might know of anyone please let [Daniel] or I know as we want to actively grow the brokerage.
[193] This e-mail seems to show that Richard, as alleged by the plaintiffs, “was working behind the scenes with CSI in an attempt to grow [CSI].” (It is worth remembering that Richard still was a 50% shareholder in, and director and fiduciary of, Verge.)
[194] Furthermore, while insisting that he had not done anything wrong, “Richard admitted, during cross-examination, that he advised CSI on such things as: how to organize a brokerage for growth staffing, removing financial barriers to selling commercial insurance, training salespersons, budgeting and dealing with insurers or the markets. Richard also maintained that there was nothing wrong with him recommending Daniel and Andree Senn to work for CSI when he knew that both individuals could play an instrumental role in turning CSI into a commercial brokerage with the resources to compete with Verge in the Niagara insurance market.”
[195] The suggestion by Richard that he was providing “coaching or mentoring” is utter nonsense. Richard is not the Johnny Appleseed of the Southern Ontario insurance industry, as he would have us believe.
[196] Regarding Daniel, in the injunction motion the plaintiffs allege that he “took Verge’s client list and was using this information to wrongfully solicit clients to transfer their business from Verge to CSI.” Several employees of Verge swore affidavits to the effect that “the client renewal lists were missing from Daniel’s office immediately following his termination.” Daniel denies taking any confidential information and insists that he did not solicit the clients of Verge – they came to him unsolicited. There also are the “I-was-not-solicited” letters.
[197] On these motions, I am unable to ascertain whether Daniel took client lists when his employment was terminated. A trial is needed to dispose of that issue with any confidence.
[198] During his cross-examination, Daniel was asked to produce a contract of employment or service between himself and CSI (or a draft thereof). He denied the existence of a contract. Yet, in the course of answering an undertaking from its cross-examination, CSI produced a Letter of Intent dated October 15, 2012 between Daniel and CSI. On October 17th, Daniel and Brenda French signed the Letter of Intent, outlining “in broad terms the future employment arrangements between Dan Sherk and CSI Brokers & Financial Services [formerly Cal Shultz Insurance Brokers Ltd.].” By its terms, an employment contract was to be drafted “within 30 days.”
[199] And then there is an undated e-mail from an unknown person (believed to be Brenda French) to Richard:
Hi Rick . . . Here are 3 contracts to work from . . . first attachment is the Co-Broker Agreement we [gave] to both you and Dan back in early May . . .
[200] There is merit in the submission that Daniel and Richard were not “open and honest with the court in their evidence,” having denied facts that have proved to be correct.
(e) denials of wrongdoing – CSI
[201] The plaintiffs argue that, “at all times, [Brenda French] the vice-president of CSI (who served as the main deponent on the motions) denied any wrongdoing. However, the documents disclosed in the course of the production motion showed clear wrongdoing on her part, which included assisting Richard and Daniel to breach their ongoing obligations to Verge.”
[202] The plaintiffs further contend that of the three defendants against which the injunction was sought, Brenda French was the most insistent in her denials of wrongdoing.
[203] The principle allegation made against CSI is that it “induced and assisted Richard and Daniel in breaching their ongoing duties to Verge, namely using the resources of Richard as a statutory director and shareholder of Verge to set up a commercial insurance department at CSI . . . through the use of Verge’s confidential information.”
[204] At paragraph 59 of her February 26, 2013 affidavit, Brenda French swore that Richard “has acted as a ‘friendly coach’ similar to our other industry contacts.” I have already expressed my view of this coaching/mentoring defence.
[205] An example of the active involvement by Richard in the business of CSI and his efforts to assist CSI in competing against Verge can be seen in an e-mail from Brenda French to Richard on October 29, 2012 regarding a meeting with a potential client:
Meeting confirmed . . . can’t talk today, will meet you at clients, we can talk while on the road to get our dog & pony show[^26] in order. Thanks for your help.
This e-mail betrays a level of involvement by Richard in the business of CSI that is well beyond coaching or mentoring.
[206] There also is an e-mail on November 2, 2013 from Maureen Holbrook, an account manager at CSI, to Richard:
Hi Rick. Here is the proposal for MPS Micropaint. Insured’s name is Philippe Bourbonniere.
[207] And there is a further e-mail, this one dated November 16th, from Brenda French to Maureen Holbrook, Richard and Andree Senn (former vice-president of operations at Verge), discussing a Broker of Record (BOR) form[^27] that was sent regarding one of Verge’s policies:
Hi Maureen. I wanted to let you know that the BOR has been forwarded to Intact and now Verge has their 10 days.
[208] When questioned about whether she and Richard ever had a conversation with Daniel or Richard about “the possibility of Richard joining CSI at any point,” she replied, “That is ridiculous.” However, we have the e-mail of October 4, 2013, that I mentioned earlier, from Richard to an insurance-industry contact. I will set it out again, in part: (Emphasis added)
. . . we are actively looking for a commercial producer who lives in the Hamilton area and might be interested in changing brokerages for a better financial relationship. If you or Kevin might know of anyone please let [Daniel] or I know as we want to actively grow the brokerage.
[209] Finally, there is the affidavit evidence of Glenn D’Ostillo, a private investigator who was conducting surveillance for the plaintiffs on November 21, 2012. During a luncheon meeting between Brenda French and Daniel, he overheard and noted that Ms. French advised Daniel that Richard “will be considered a sub-contractor, two days per week.”
(f) conclusion
[210] The matter of the adjournment does not have an impact on costs.
[211] Having earlier reviewed the chain of communications in respect of the documentary disclosure, I think that the blame for the chaos surrounding this issue rests on all parties: the plaintiffs misinterpreted the order of January 22nd; the scheduling of cross-examinations was rushed; the demands for documentary disclosure made by the plaintiffs were dumped on the defendants at the last minute; and, the defendants did not correctly distinguish their disclosure obligations on a cross-examination from those on an examination for discovery.
[212] The communications among the parties have been recounted above in minute detail for the period January-April 2013. All in all, the conduct of the defendants does not affect the issue of entitlement to costs and is not sufficiently serious to increase the scale of costs.
[213] As I understand it, the purpose for the wrongdoing-lengthened-the-proceedings argument of the plaintiffs is threefold: to justify fixing costs now; to warrant the substantial-indemnity scale; and, to render CSI jointly and severally liable for those costs. Unfortunately for me, it was not until I had journeyed deep into these Reasons that I realized this argument would not have a bearing on my decision. I have decided to fix and award costs now based upon the results achieved on the motions and upon the fact that, in my opinion, the injunction-component of the action, effectively, is spent; and, I have rejected a finding of joint-and-several liability on the simple ground of fairness.
8. Request for source documents leads to some reductions
[214] Counsel for Richard submitted that, if this court were inclined to award and fix costs against Richard (and I was), he would like “all source documents that relate to and/or support the amounts claimed in the Costs Outline for the two motions” to be produced and he requested the opportunity thereafter to make additional submissions. This was a reasonable request. Payor parties are not obliged to blindly accept the hours and totals in a bill of costs (although it prolonged an already painfully long process and added three sets of written submissions to the 12 then in hand).
[215] Counsel for Richard served a magnificent, colour-coded booklet of submissions in which he sliced, diced and, in a couple of instances, puréed, the fees claimed by counsel for the plaintiffs. He argued that Richard should not be required to pay costs connected to the following services recorded in the dockets that were provided: (a) the statement of claim and its subsequent amendments; (b) the Demand for Particulars served on behalf of Richard; (c) a discussion to remove Richard as a director of Verge; (d) a summons to witness served on Richard and a motion to stay; (e) the cross-examinations of the other defendants; (f) a pension issue; (g) the counterclaim; (h) the attendance of both counsel for the plaintiffs on the cross-examinations of Richard; and, (i) the general duplication of lawyerly effort on behalf of the various lawyers in the law firm representing the plaintiffs.
[216] I will review each of these nine points.
(a) the statement of claim and its subsequent amendments
[217] The statement of claim is a complex, detailed document. It was amended (once I had thought but now twice I am told) and, as I mentioned long, long ago in these Reasons, it is 31 pages in length. Counsel for the plaintiffs defend its inclusion in the bill of costs for the injunction motion by saying, “Verge could not have commenced the injunction proceedings without issuing a statement of claim . . . this was part and parcel of the injunction process.” I do not agree. The statement of claim, initially or as amended, cannot be viewed as directly related to the injunction motion. The costs associated with the statement of claim are costs of the action.
[218] There are 15 docket entries dealing with the statement of claim and the actual amount billed to the plaintiffs for them is $26,609.00. Conservatively stated, the partial-indemnity scale of costs is approximately 60% of the actual rate charged to a client (and this happens to be the percentage that counsel for Richard has suggested). This produces a figure of $15,965.00 which should be deducted from the partial-indemnity costs of the plaintiffs as not being the responsibility of any of the defendants in respect of the motions.
(b) the Demand for Particulars served on behalf of Richard
[219] After service of the statement of claim, counsel for Richard delivered a Demand for Particulars. Counsel for the plaintiffs reviewed that demand and provided a response. Counsel for Richard also served a Request to Inspect Documents to which counsel for the plaintiffs responded.[^28]
[220] There are six docket entries for these matters. They are not directly related to the motions. The actual rate charged to the plaintiffs for them is $1,539.00. This produces a partial-indemnity amount of $923.00 which should be deducted from the partial-indemnity costs of the plaintiffs as not being the responsibility of any of the defendants in connection with the motion.
(c) a discussion to remove Richard as a director of Verge
[221] The dockets reveal one entry in respect of a discussion with Mark about removing Richard as a director of Verge. That discussion is not directly related to the motions. It was billed to the plaintiffs for $187.00 which, on the partial-indemnity scale, is $112.00 and should be deducted from the partial-indemnity costs of the plaintiffs.[^29]
(d) a summons to witness served on Richard and a motion to stay
[222] On January 7, 2013, counsel for the plaintiffs served a summons to witness upon Richard, in respect of the injunction motion, requiring him to attend for “examination-out-of-court as witness before hearing” on January 15th. The summons was a nullity because it is reserved for non-parties: see Rule 34.04(4) of the Rules of Civil Procedure. Richard moved to quash or to stay the summons and, on January 15th, counsel for the plaintiffs agreed not to proceed with the summons and, in return, counsel for Richard consented to withdraw the motion without costs.
[223] Consequently, the services rendered in respect of this aspect of the case should be excluded from the costs claimed by the plaintiffs.
[224] Around the same time, Richard brought his motion under Rule 15.02 (which I described previously) for which Ramsay J. ordered costs on January 22nd. Services provided in conjunction with January 22nd should also be excluded from the costs now being claimed.
[225] Combined, these matters seem to occupy four entries in the dockets. The actual amount billed to the plaintiffs was $7,937.00. Therefore, the partial-indemnity figure is $4,762.00 and it should be deducted from the partial-indemnity costs.
(e) the cross-examinations of the other defendants
[226] Counsel for Richard went to considerable effort to separate the services in connection with the cross-examinations of Richard on his affidavits and those services rendered in the preparation for, and attendance at, the cross-examinations of the other defendants, arguing that the latter should not be included in any costs payable by Richard.
[227] However, counsel for the plaintiffs advance a sensible and persuasive opposing argument, which I accept. It is to be remembered that the allegations on the injunction motion (and in the action) are that Richard, Daniel and CSI conspired to compete with Verge. Thus, as those defendants are said to be co-conspirators, the cross-examinations of Daniel and CSI are relevant to the case against Richard (similarly, the cross-examinations of Richard and CSI are relevant to the allegations against Daniel and the cross-examinations of Daniel and Richard are relevant to the claims against CSI).
[228] The result is that all cross-examinations have generated one pot of costs, not three.
(f) a pension issue
[229] Richard has a pension plan with Verge and an issue arose (unrelated to the two motions) which required legal services. A docket entry for May 9, 2013 must be disallowed as it concerns the pension. The actual charge to the plaintiffs is $3,750.00 or $2,250.00 at the partial-indemnity rate, the latter of which shall be deducted from the partial-indemnity costs.
(g) the counterclaim
[230] There is an entry in the dockets on June 18, 2013 for a number of services, including “review counterclaim” with an actual charge to the plaintiffs of $541.00 (partial-indemnity – $324.00). The only counterclaim at the time was one by Daniel and it did not apply to the motions. Because the actual charge is not particularized and relates only in part to the counterclaim, I will arbitrarily allow half of the $324.00 or $162.00 and the other half must be excluded.[^30]
(h) the attendance of two counsel on cross-examinations of Richard
[231] It is argued that the two motions were not overly complex and that it was unnecessary for both counsel representing the plaintiffs to attend on each cross-examination of Richard.
[232] As I have now reached paragraph [232] of these Reasons, I am unsympathetic to the argument that the motions were “not overly complex.” At some point in a case, the volume of materials generated, the layer upon layer of issues raised and “the ongoing and changing nature of the circumstances” (in the words of counsel for the plaintiffs) mean that the sheer mass of the matter creates its own complexity. Two counsel for the plaintiffs are needed to follow the bouncing ball.[^31] Richard, Daniel and CSI each had their own counsel who worked together, in tag-team fashion, defending the motions. Even with two counsel for the plaintiffs, they were outnumbered three to two.[^32]
(i) the general duplication of lawyerly effort
[233] Counsel for Richard submits that there was a “general duplication of lawyerly effort on behalf of the various lawyers in the law firm representing the plaintiffs.” I think otherwise. There was no over-lawyering here. The seven lawyers working on this file for the plaintiffs ranged in experience from two years to 28 years. In my opinion, all of the services were rendered by the lawyer with the appropriate experience.
(j) conclusion
[234] The result of all of this is that the sums in paragraphs (a)-(d), (f) and (g) above, which total $24,174.00, shall be deducted from the partial-indemnity costs of the plaintiffs (“the source-documents deduction”).
[235] Although it could be said that I have just engaged in the line-by-line analysis typical when assessing costs, but not appropriate when fixing them, the dollars involved justify the effort.
9. The February 4th court attendance – a further reduction
[236] I also exclude, from the costs liability of the defendants, the attendance before Ramsay J. on February 4th, to settle the form and content of the January 22nd order. This was a “win” for the defendants (Richard and Daniel, at least, and even if it was not a “win” for the defendants, it is not something for which the plaintiffs should receive costs) and the associated services rendered on behalf of the plaintiffs should not be recoverable by them. From what I can see, there are eight docket entries pertaining to the February 4th court attendance. The actual fees charged to the plaintiffs are $9,040.00, which means that the partial-indemnity portion is $5,424.00. Accordingly, I shall deduct the sum of $5,424.00 from the partial-indemnity costs of by the plaintiffs (“the February 4th deduction”).
10. Rule 57.01(1) factors
[237] Rule 57.01(1) of the Rules of Civil Procedure lists a number of factors that a court may consider when dealing with costs, the most important of which, in almost every instance, are the result in the proceeding and the existence of any written offer to settle.
[238] Ours is a result-oriented legal system. Here, the plaintiffs obtained, in very large measure, the injunction that they were seeking. The injunction motion, although settled, was a “win” for the plaintiffs.
[239] With the production motion being stayed, it was not a “win” for anyone. I would regard the result there as a “draw.”
[240] There were no written offers to settle or settlement proposals sufficiently identifiable to warrant consideration.
[241] I will now begin the ritualistic review of the remaining factors in Rule 57.01(1).
[242] I have no difficulty in concluding that the rates charged by the lawyers representing the plaintiffs were reasonable, the hours spent were necessary (subject to the source-documents deduction and the February 4th deduction) and the division of labour among those lawyers was appropriate: see Rule 57.01(1)(0.a).
[243] Rule 57.01(1)(0.b) speaks of “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.” I confess that I have never found this factor to be of much assistance. How helpful can it be to use, as a guide, the expectation of someone whose judgment is so flawed that he or she was unable to correctly gauge the outcome of the proceeding? Also, the level of expertise and industriousness among members of the litigation bar varies wildly. Who does the unsuccessful party have in mind when forming his or her expectation? And, is the expectation of the unsuccessful party to be determined when the motion is served? When it is argued? At some point in between? Here, I expect that no one could have anticipated, when the injunction motion was served, that it would unfold as it did. Yet, as the months passed, anyone paying attention would have known that the tab was escalating rapidly.
[244] Counsel for the plaintiffs were required to do much more preparation for the motions than were counsel for the defendants, as would be expected. The defendants had the luxury of mounting a focused and selective defence. They, not the plaintiffs, knew what they had done and what there was to find.
[245] Rule 57.01(1)(a) is not applicable at bar, being “the amount claimed and the amount recovered.”
[246] Rule 57.01(1)(b) deals with “the apportionment of liability.” On behalf of Richard, it is submitted that, if costs are to be awarded, they should be apportioned among the three responding parties, with each being liable for one-third. I agree. I see no rational basis for determining that one of the defendants is more or less at fault than the others. Richard, Daniel and CSI participated in a corporate ménage à trois and I am unable to distinguish, in any meaningful way, their respective liability for costs. However, if I were to hold them jointly and severally liable for costs, as argued by the plaintiffs, it would mean that an individual defendant could, in the end, become liable to pay a large percentage, or perhaps all, of those costs. Such an outcome would not be fair. Consequently, I think that the liability of each of the defendants should be capped and I choose to do this by ordering that Richard, Daniel and CSI each shall be responsible for one-third of the costs that I intend to order.
[247] The motions were factually complex (Rule 57.01(1)(c)) and of high importance to all parties (Rule 57.01(1)(d)). To the extent that the conduct of the defendants lengthened the proceedings (and it probably did not), this affected the amount and nature of the services rendered on behalf of the plaintiffs and, therefore, this fact is somewhat reflected in their bill of costs (Rule 57.01(1)(e)).
[248] I do not know whether the February 4th deduction properly falls under Rule 57.01(1)(e) (“the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding”), Rule 57.01(1)(f) (“whether any step in the proceeding was (i) improper, vexatious or unnecessary, or (ii) taken through negligence, mistake or excessive caution”) or Rule 57.01(1)(i) (“any other matter relevant to costs”).
[249] Richard complains that “there was unnecessary duplication of materials” in the many volumes filed on the motions by the plaintiffs such that the photocopying costs of $5,200.00 “should be substantially reduced.” No. It is a matter of general convenience for the motions judge that each volume be a stand-alone product.
[250] Although fixing costs is not merely an arithmetic exercise of multiplying hours worked by hourly rates, it is a good starting point. Once the docket-based costs have been calculated, I proceed to a consideration of overall reasonableness and to the factors in Rule 57.01(1). A court should not depart from the docket-based costs unless presented with a sound basis for doing so. In an era when the quality of advocacy is inconsistent, those counsel who prepare carefully and argue thoroughly should not suffer judicial tinkering with their bill of costs. If the docket-based costs survive the test of reasonableness and the scrutiny of Rule 57.01(1), why should they not be allowed as claimed?
11. Ability to pay costs
[251] It is argued on behalf of Richard that the costs order sought by the plaintiffs “would compromise his financial ability to defend the . . . action and to prosecute the valuation application.”
[252] There is insufficient evidence to support this argument. I would require, from Richard and his wife, a sworn list of their assets, debts and living expenses (in other words, something similar to a Financial Statement (Form 13.1) in a family law proceeding). However, even if such evidence were available, in commercial litigation, I do not consider the ability to pay costs to be terribly relevant when fixing costs.
12. Quantum
[253] Both motions were prosecuted with the thoroughness that I would expect in litigation of this type and the defendants, in particular Richard, mounted a spirited and comprehensive attack on the quantum of costs claimed.
[254] Having read the boxes of materials filed on the motions, I (although resentful) think that I am in a good position to consider the submissions of counsel and to determine the reasonableness of the services rendered and the associated fees and disbursements.
[255] The costs requested by the plaintiffs were broken down by their counsel in this fashion (the actual costs are shown for comparative purposes only – they are not being claimed):
| Part.-indemnity costs | Subst.-indemnity costs | Actual costs | |
|---|---|---|---|
| Production motion fees | 30,154.50 | 45,198.75 | 60,517.00 |
| HST on fees | 684.09 | 962.03 | 1,301.63 |
| Disb. with HST | 915.34 | 915.34 | 915.34 |
| Total | 31,753.93 | 47,076.12 | 62,733.97 |
| Injunction motion fees | 192,682.50 | 286,306.00 | 395,702.50 |
| HST on fees | 25,048.73 | 37,219.78 | 51,441.33 |
| Disb. with HST | 21,489.31 | 21,489.31 | 21,489.31 |
| Total | 239,220.54 | 345,015.09 | 468,633.14 |
| GRAND TOTAL | $270,974.47[^33] | $392,091.21 | $531,367.11 |
[256] As I have said, the plaintiffs should be seen as having succeeded with their injunction motion. It is my view that, with the matter of the injunction unlikely to go to trial, the plaintiffs are entitled to partial-indemnity costs for the injunction motion. There is no basis for an award of costs on the substantial-indemnity scale.
[257] However, the partial-indemnity fees for the injunction motion, as set out in the above table ($192,682.50), are calculated at only 49% of the actual amount billed to the plaintiffs ($395,702.50). If, instead, I were to allow the plaintiffs 60% this would produce an additional $44,739.00 in fees for a total of $237,421.50.[^34] Bearing in mind that the primary argument for the plaintiffs is that they should be awarded their costs on the substantial-indemnity scale, my function is not simply to choose one scale or the other but to fix a fair figure using the appropriate scale.
[258] I think the starting point for that fair figure should be $237,421.00 (exclusive of HST and disbursements). From that amount I will apply the source-documents deduction of $24,174.00 and the February 4th deduction of $5,424.00. The result is that the allowable fees are $207,823.00 with HST of $27,016.99 for a total (exclusive of disbursements) of $234,839.99.
[259] As for disbursements on the injunction motion, they are set out in the above table at $21,489.31. However, counsel for the plaintiffs recently reduced that figure by $1,091.72. The disbursements now total $20,397.59.
[260] Thus, the total partial-indemnity costs to which the plaintiffs are entitled are $255,237.58 ($234,839.99 + $20,397.59) which I shall round down to $255,237.00.
[261] The production motion was stayed and, therefore, was a “draw” for which neither side should receive costs.
V CONCLUSION
[262] Without intending to detract from the detail and the circumstances set out in these Reasons, I will, for convenience, summarize my fundamental findings:
The injunction motion was a “win” for the plaintiffs.
In my opinion, the injunction-component of the action is spent. There is nothing meaningful left to litigate in respect of that form of relief.
Therefore, the plaintiffs are entitled to their costs of the injunction motion, but on the partial-indemnity scale (there being no basis to award a higher scale).
Those costs shall be reduced by the source-documents deduction and by the February 4th deduction.
The production motion was stayed. This is a “draw” for all of the parties. There shall be no costs of that motion (at least at this time; should the motion be revived, costs will also be revived).
The total costs to which the plaintiffs are entitled, net of the deductions that I have just mentioned, and inclusive of HST and disbursements, are $255,237.00.
Richard, Daniel and CSI shall each be responsible for one-third of those costs.
[263] Accordingly, I order that each of Richard, Daniel and CSI pay costs to the plaintiffs in the sum of $85,079.00, all-inclusive, and they shall do so on or before January 25, 2014. I will entertain a motion by the plaintiffs, on notice, to strike the pleadings of any defendant by whom costs are unpaid by that date.
[264] Finally, I have never had the opportunity to hear argument on costs in respect of costs. I look forward to being advised that counsel are unable to reach agreement on the matter and I will set a timetable for written submissions. I am confident that, with a little effort, we can emulate, in a litigation context, the circular flight of the Wampus Bird.[^35]
The Honourable Mr. Justice J.W. Quinn
RELEASED: December 20, 2013
COURT FILE NO.: 53982/12
DATE: December 20, 2013
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
VERGE INSURANCE BROKERS LIMITED, 172968 ONTARIO INC., MARICK BROS. INVESTMENTS INC., and MARK SHERK
Plaintiffs
- and -
RICHARD SHERK, DANIEL SHERK, MARTIN, MERRY & REID LIMITED and CAL SHULTZ INSURANCE BROKERS LTD.
Defendants
REASONS FOR COSTS
J.W. Quinn J.
Released: December 20, 2013
[^1]: In total, the plaintiffs filed 17 volumes of materials consisting of numerous affidavits (by 11 or more different affiants). The defendants delivered five affidavits. Cross-examinations on the affidavits took place over a period of two weeks. Extensive facta were prepared for the motions (the factum of the plaintiffs on the injunction motion alone exceeded 70 pages in length). The materials and supplementary materials of the plaintiffs surpassed 1,000 pages. Prosaically put, the filings by all of the parties filled nine bankers’ boxes. Hearing these motions was as much an aerobic challenge as it was an intellectual experience.
[^2]: With a whiff of singed reputation.
[^3]: Including one which I was unaware even existed: the tort of “intrusion on seclusion” (which sounds like something devised by J.D. Salinger).
[^4]: The issues raised in the amended statement of claim would occupy a third-year law class for an entire semester.
[^5]: The statement of defence of Richard has 69 paragraphs and the reply of the plaintiffs runs to 34 paragraphs. Knowledge of the nuts and bolts of these pleadings (and those of the other defendants) is unnecessary to an understanding of the costs issues now before the court.
[^6]: The practice in St. Catharines is that long motions are returnable “the week of” and, as that date approaches, the trial co-ordinator advises counsel of the actual hearing date (which, in this instance, was January 22, 2013).
[^7]: E-mails and text messages have become a joyous source of evidence for judges. Sometimes they supply a minute-by-minute account of communications without the meddlesome interference of reflection and sober second thought that could not be avoided in the pre-cyberspace era.
[^8]: Counsel for the defendants complain that they were not consulted in the selection of this date. I do not see the inflexible need to do so. Consulting multiple counsel is time-consuming and frequently unfulfilling; which is why we have adjournments. One of the counsel said, in a letter, “I expect you to comply with Rule 37.10 and consult with me as to the . . . timing [of] your motion.” Rule 37.10 does not require a moving party to consult with a responding party in respect of the return date for a motion. It deals with the obligation to confer or attempt to confer on whether a motion, already on a list, will be proceeding, in which case a Confirmation of Motion (Form 37B) must be filed.
[^9]: For the very few who may not recollect the distinction between an interim injunction and an interlocutory injunction, the latter is in force until trial (when the rights of the parties are finally determined) and the former is usually granted for a brief period of time pending the interlocutory injunction.
[^10]: Later, it will be seen that, on February 4, 2013, Ramsay J. added a sentence to paragraph 6.
[^11]: This is a preposterous demand and ignores the exigencies of running a law practice.
[^12]: On behalf of the plaintiffs it was submitted that “without a signed, issued and entered order, Justice Ramsay’s endorsement is without legal effect.” Not so. The operative part of the endorsement is the order. The formal order is merely packaging.
[^13]: I checked. They are the same.
[^14]: Is this sarcasm? A threat? A mea culpa?
[^15]: Up to this point, counsel for the plaintiffs had been referring to these documents as “the New Productions.”
[^16]: The decisions in Stellarbridge Management Inc. and Zesta Engineering Ltd. were in the context of the costs grid which was revoked as of July 1, 2005.
[^17]: I assume that the court means it is the injunction issue (and not other issues in the action) for which “a trial is a virtual certainty.”
[^18]: Effective January 1, 2002, “solicitor-and-client costs” were replaced by “substantial-indemnity costs.”
[^19]: Only death or bankruptcy will prevent these parties from going to trial about something.
[^20]: The five clients are: R.A.G. Rentals Limited; Euro Motors Limited; Mold-Spec Inc.; ICT Power Company Inc.; and, Multiurethanes.
[^21]: However, from its distinctive wording, I expect that the letter from Multiurethanes was created by the client.
[^22]: Approximately 42% of the customers of the plaintiffs are in the St. Catharines area, 10% are in and around Stoney Creek, 40% are in other parts of the Niagara Peninsula and 8% exist elsewhere in Ontario.
[^23]: Only if the New Productions were provided as part of an undertaking given by Richard during his initial cross-examination, would he be required to respond to this Notice of Examination (although, rather than ignore the notice, it would have been necessary for him to move to set it aside).
[^24]: The New Productions came from Richard not Daniel. Therefore, in my opinion, Daniel was not obliged to respond to the Notice of Examination (although, again, rather than ignore the notice, the proper course is to move to set it aside).
[^25]: But, it was not until one year later, on April 1, 2013, that Richard relinquished his licence to sell insurance in Ontario.
[^26]: Readers will have noticed the term “producer” elsewhere in these Reasons. Apparently, “salesperson” is too plebeian or, perhaps, pejorative, for the insurance industry. Yet, the “dog & pony show” reference is evidence that “producer” makes a lot of sense, as selling insurance seems to be a theatrical performance. Is there any business, anywhere, that does not disparagingly view the buying public as dimwits?
[^27]: Doug Homeniuk, when cross-examined on his affidavit on March 7, 2013, in answer to Qs. 13-18 said this about BOR forms: “Well, a broker of record form allows the insured to choose his insurance broker . . . they can sign a broker of record form to transfer the authority for that account to the new broker . . . In anticipation of a broker leaving an office, they can go to all their customers and have them pre-signed, ready to go, after the fact . . . ‘sign her, I’m going to a new broker. Sign this form and I can deal with you at my new office,’ transcends the rule of the non-compete clause.”
[^28]: I made the decision, in the beginning, not to refer to any of the counsel in this case by name so as to reduce the number of names already in use and to lessen the likelihood of inadvertent transpositions. Bad decision. It has yielded a tedious result.
[^29]: Although this amount comes under the rubric de minimis non curat lex, I must not be cavalier with the money of others.
[^30]: More de minimis.
[^31]: Those two counsel had 24-year and four-year pedigrees, respectively; a nice, sensible balance of experience for co-counsel.
[^32]: Not only is it reasonable for the plaintiffs to have co-counsel, I should have a co-judge.
[^33]: The bill of costs of the plaintiffs shows this total as $276,934.47. But, my addition of the various subtotals produces $270,974.47.
[^34]: As a matter of interest, the substantial-indemnity fees for the injunction motion are 72% of the actual fees.
[^35]: A bird that Christie Blatchford insists exists in mythology: see National Post, December 14, 2013, at p. A8.