SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

CV-13-10373-00CL

RE: Blind Spot Holdings Ltd. (formerly J & M Munro Investments Ltd.), John Munro, Sheri Munro and The Munro Group, Applicants

AND:

Decast Holdings Inc., Silvio DeGasperis, Carlo DeGasperis, Michael DeGasperis, The TACC Group and Carlo Vitali, Respondents

CV-13-10359-00CL

RE: Munro Ltd. and Decast Holdings Inc., Applicants

AND:

Blind Spot Holdings Ltd. and John Munro, Respondents

BEFORE: D. M. Brown J.

COUNSEL:
P. Healey and V. Simkic, for Blind Spot Holdings Ltd. (formerly J & M Munro Investments Ltd.), John Munro, Sheri Munro and The Munro Group

C. Stevenson and D. McConville, for the Decast Holdings Inc., Munro Ltd., Silvio DeGasperis, Carlo DeGasperis, Michael DeGasperis, The TACC Group and Carlo Vitali

HEARD: February 25, 2014; written cost submissions dated April 4 and 22, 2014.

supplementary REASONS FOR DECISION - costs

Motion and application under the Arbitration Act, 1991 to stay a proceeding

[1] By Reasons dated March 20, 2014 (2014 ONSC 1760), I stayed the Blind Spot Application pursuant to section 7(1) of the Arbitration Act, 1991, save to permit Sheri Munro to deliver a Statement of Claim in respect of her wrongful dismissal claim, and I appointed The Honourable Colin Campbell as arbitrator pursuant to section 13.13 of the Shareholders’ Agreement.

[2] The Decast Applicants sought partial indemnity costs in the amount of $169,530.66, consisting of fees of $143,435.96 and disbursements of $10,750.92, plus HST. The Munro Group acknowledged that the Decast Applicants were entitled to some costs, but submitted costs should be fixed at $7,500.00.

[3] As noted in the March Reasons, the hearing involved issues raised by competing applications. The record put forward by both parties was a very extensive one, including transcripts of the examinations of eight witnesses.

[4] The Munro Group opposed the amount of costs sought by the Decast Applicants for three main reasons. First, it submitted that that much of the pre-hearing work undertaken by the parties ultimately did not play a large role in deciding the issues determined by the hearing. Since that work would play some role in the arbitration, the Munro Group argued that the costs of such work should be left to the arbitrator to determine. The Decast Applicants submitted that while some of the work will be used on the arbitration, this Court should fix costs without regard to the later arbitration, and it will be open to the parties to ask the arbitrator to adjust his cost award to take into account any costs awarded by this Court.

[5] I accept the submission of the Decast Applicants on this point. The amount of pre-hearing work performed by the parties resulted from their inability to agree on the scope of the hearing. Initially, the Court directed both applications to proceed to a common hearing date. Then, by order made January 31, 2014, McEwen J. directed that the following issues were to be dealt with at the February 25, 2014 hearing, “subject to judge’s direction”: (i) the arbitration clause; (ii) whether John Munro could attend board meetings; (iii) interim compensation for John Munro; and, (iv) documentary production.

[6] It was always open to the parties to agree to limit the scope of any initial hearing and to tailor the amount of pre-hearing work undertaken to a discrete set of issues. They could not agree on such an approach. Against that background, I have little sympathy for an unsuccessful party contending, after the fact, that more work was done than had been necessary. The reasonable expectations of a party with respect to costs is a function, in part, of the party’s willingness to narrow the scope of the hearing and the associated amount of the pre-hearing work, including requests for pre-hearing documentary production of which many were made by the Munro Group.

[7] Second, the Munro Group submitted that much of the pre-hearing work concerned injunctive relief sought by the Decast Group, a request which it abandoned on the eve of the hearing. While I would be prepared to give some weight to this argument, the Munro Group did not offer any specific analysis of the Bill of Costs filed by the Decast Group to identify those amounts which should be carved out or reduced. That was not helpful. The absence of such detailed submissions prevents the Court from making a meaningful reduction dealing specifically with this point.

[8] Third, the Munro Group also submitted that the issues determined by the Court did not flow from the work done, but instead were based:

upon the Court’s application of a recent Court of Appeal decision, namely Ontario Medical Association v. Willis. This incidentally was a decision that was not referred to in argument. In any event, this determination could have been made based almost entirely upon the pleadings as drafted.

I do not understand this submission. Paragraph 20 of the March Reasons stated:

Although courts possess the jurisdiction to determine whether a dispute is subject to arbitration, Ontario courts apply an approach based on the competence-competence principle, which was described by the Court of Appeal in Ontario Medical Association v. Willis Canada Inc. as follows:

That principle gives precedence to the arbitration process and holds that “arbitrators should be allowed to exercise their power to rule first on their own jurisdiction”: Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801, at para. 70.[^1]

The decision of the Court of Appeal had been released well before the argument of these applications took place. That decision followed earlier reasons of the Supreme Court of Canada which the parties did include in their authorities. That counsel may not refer to a case in argument does not mean that a decision of the Court of Appeal is not binding on judges of the Superior Court of Justice. Binding law is binding law, whether or not counsel see fit to bring it to the Court’s attention. Also, one would expect parties to take into account binding authority to guide them in determining the scope of the record needed to decide the issues in dispute.

[9] The Munro Group did not submit its own Bill of Costs which would have enabled a comparison of the work its counsel performed on these applications with that performed by counsel for the Decast Applicants. As Winkler J., as he then was, observed in Risorto v. State Farm Mutual Automobile Insurance Co., an attack on the quantum of costs where the court did not have before it the bill of costs of the unsuccessful party “is no more than an attack in the air”.[^2] Moreover, the Munro Group did not undertake any specific critique of the hourly rates charged by counsel for the Decast Applicants or the number of hours worked.

[10] I have reviewed the Bill of Costs of the Decast Applicants. The partial indemnity rates claimed for counsel were reasonable given their experience. Both parties were represented by senior and junior counsel at the hearing. Appropriate delegation of drafting tasks was made by senior counsel to junior counsel for the Decast Applicants, but significant time was claimed for Mr. Najjar (1991 call) for factum drafting work when he did not perform any other work on the file. No explanation was provided for that departure from only using Messrs. Stevenson and McConville on all other work, so I disallow, for purposes of determining partial indemnity costs, the 63 hours of time claimed for Mr. Najjar, or $14,238.00, inclusive of HST.

[11] I have taken into account the factors enumerated under Rule 57, including the time spent, the result achieved, and the complexity of the matter, as well as the application of the principle of proportionality: Rule 1.04(1). In addition, I have considered the principles set forth by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3rd) 291 (C.A.) and Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.), specifically that the overall objective of fixing costs is to fix an amount that is fair and reasonable for an unsuccessful party to pay in the particular circumstances, rather than an amount fixed by actual costs incurred by the successful litigant.

[12] I conclude that an award of costs in the amount of $155,292.66, inclusive of disbursements and HST, would be a reasonable one in the circumstances, and I order the Munro Group to pay the Decast Applicants that amount within 30 days.

D. M. Brown J.

Date: July 3, 2014

[^1]: 2013 ONCA 745, para. 20.

[^2]: (2003), 2003 43566 (ON SC), 64 O.R. (3d) 135 (S.C.J.), para. 10, quoted with approval by the Divisional Court in United States of America v. Yemec, 2007 65619 (ON SCDC), [2007] O.J. No. 2066 (Div. Ct.), para. 54.