COURT FILE AND PARTIES

COURT FILE NO.: COURT FILE NO.: CV-12-00967000CL

DATE: 20141119

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ROBERT WILSON, Plaintiff

AND:

LEGACY PRIVATE TRUST, BASEL CANADACORP LIMITED AND JAMES LOVE, Defendants

BEFORE: Thorburn J.

COUNSEL:
Jonathan Lisus and Shannon Beddoe, for the Plaintiff

Edward Babin, Paul Wearing and Cynthia Spry for the Defendants

HEARD: By written submissions

COSTS ENDORSEMENT

1Reasons for Judgment were rendered in this four week trial and costs of preparation for and attendance at trial must now be decided.

A. Background Facts

Background Facts

2Until January 2012, Robert Wilson was the President of Legacy Private Trust. As President of Legacy, Wilson held senior administrative and management functions regarding estates, trusts, agencies and foundations for which fiduciary fees were paid.

3In January 2012, Wilson was called to a meeting with Legacy representatives wherein they claimed that:

a) he spent time managing and overseeing the operations of another company called RecordXpress. He referred to himself as President, shareholder and member of the Board of Directors of RecordXpress although he held none of these titles. He was offered remuneration of $10,000 per month from RecordXpress; and

b) he was reimbursed by Legacy for a trip to New York during which he did work for both Legacy and RecordXpress. He was also reimbursed by Legacy for a lunch meeting at the National Club during which he did work for RecordXpress only.

4Shortly thereafter, Wilson was dismissed from Legacy.

B. Allegations Made by the Parties at Trial

Allegations Made by the Parties at Trial

5In March 2012, Wilson commenced this action against Legacy, James Love, and Basel CanadaCorp Limited. He claimed his employment was terminated without cause and that, as an officer of Legacy and minority shareholder, he was the subject of oppressive conduct. Wilson claimed damages in excess of $1 million.

6The Defendants denied Wilson’s claims and asserted that Wilson resigned; in the alternative, if his employment was terminated, Legacy had just cause because: (i) Wilson breached his fiduciary duty by performing work for RecordXpress; (ii) Wilson used Legacy’s resources to conduct RecordXpress business; (iii) Wilson submitted to Legacy and was reimbursed for two receipts for work done for RecordXpress; and (iv) Wilson claimed on his income tax returns, business expenses which had previously been reimbursed by Legacy.

7The Defendants sought damages in the amount of $2 million, claiming Wilson breached his fiduciary duty and duty of confidence by approaching two RCA clients without Legacy’s knowledge. They also claimed reimbursement of the two expenses paid by Legacy where some or all of the work performed was on behalf of RecordXpress.

8The issues at trial were:

(a) whether Wilson resigned or his employment was terminated;

(b) if Wilson’s employment was terminated, whether it terminated for just cause,

i. on the basis of Wilson’s work with another commercial enterprise, RecordXpress; and/or

ii. for failure to reimburse two expenses submitted to Legacy when some or all of those expenses were incurred for RecordXpress; and/or

iii. on the basis of Wilson claiming on his income tax returns, business expenses which had previously been reimbursed by Legacy;

(c) whether the Defendants engaged in oppressive conduct toward Wilson;

(d) whether Wilson wrongfully appropriated confidential information belonging to Legacy; and

(e) whether Legacy was entitled to reimbursement for RecordXpress expenses, and Legacy expenses for which Wilson obtained tax deductions.

C. The Outcome at Trial

The Outcome at Trial

9In my reasons for judgment, I determined that Wilson did not resign; his employment was terminated. However, as President of Legacy, Wilson had fiduciary duties to Legacy. Wilson could not continue to play a senior role within Legacy once Legacy discovered that Wilson

a) misrepresented to others that he held senior positions with another company by the name of RecordXpress and spent time and effort working on behalf of RecordXpress;

b) sought reimbursement from Legacy for expenses incurred on behalf of RecordXpress; and

c) demonstrated an inability to manage significant sums of money by engaging in a pattern of receiving reimbursements of expenses from Legacy and then claiming deductions for those same expenses on his income tax returns.

10Wilson’s claim for compensatory damages for oppressive conduct was dismissed as the value of his shares was not diluted, and, although the conditions of Wilson’s employment may have been less than ideal, they were not oppressive.

11Wilson’s claim for damages was therefore dismissed.

12The counterclaim for damages against Wilson in the amount of $2 million was dismissed as Wilson was not found to have appropriated any confidential information belonging to Legacy. Furthermore, there was no evidence to support the claim that Legacy’s reputation was damaged as a result of any actions by Wilson.

13Wilson was ordered to reimburse Legacy for the National Club meeting expense which was for RecordXpress work, and for half of the cost of the New York trip as work was done for both Legacy and RecordXpress. These expenses taken together, amount to approximately $300.

14Legacy’s claim for reimbursement of expenses in the amount of $104,255.37 was dismissed as Wilson’s wrongdoing was not in seeking reimbursement from Legacy, but in seeking to deduct those expenses from his income tax returns thereafter.

15Finally, Wilson was to be paid $385,000 in exchange for his Basel CanadaCorp shares as per the Agreement reached between the parties, and this was communicated to the court during the trial.

D. The Law

The Law

16Section 131(1) of the Courts of Justice Act R.SO 1990, c.C.43, sets out the court’s general discretion to award costs as between parties to litigation. It provides that:

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.

17Generally, a successful party is entitled to costs. (Blue Range Resource Corp. (Re) (2001), 2001 ABCA 177, 202 D.L.R. (4th) 523 (Alta. C.A.), Ryan v. McGregor (1925), 1925 460 (ON CA), 58 O.L.R. 213 (App. Div.).). Success of a party seeking costs is to be considered on the basis of the result, not the issues raised. (Skye v. WTH Canada Inc., 1996 1198 (ONCA).)

18Rule 57.01 of the Rules of Civil Procedure provides a non-exhaustive list of factors that the court may consider including:

(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;

(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;

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

19Costs are generally awarded on a partial indemnity scale. Substantial indemnity costs are reserved for cases where either (a) a party’s behaviour is reprehensible and justifies the unusual sanction of substantial indemnity costs or (b) where a Rule 49 Offer to Settle was made and the Order granted was more favourable than the Offer to Settle. (Hunt v. T.D. Securities Inc. (2003), 2003 3649 (ON CA), 66 O.R. (3d) 481(C.A.) and Drouillard v. Cogeco Cable Inc., 2007, O.J. No. 2531.)

20Fixing costs is not a mechanical exercise. The overall objective is to fix an amount that is fair and reasonable for the unsuccessful party in the circumstances and takes into account the expectations of the parties. (Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 at para. 26 (C.A.), and Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), [2002] O.J. No. 4495, 118 A.C.W.S. (3d) 341 (C.A.), at para. 4.)

21A court need not undertake a line by line analysis of the hours claimed by counsel. (Fazio v. Cusumano, 2005 33782 (ON SC), 2005 Carswell Ont 4518 (Sup. Ct.) (WL), at para. 8.)

22Reasonable expectations of the parties concerning the quantum of costs are also considered. (Zesta Engineering Ltd. v. Cloutier, 2002 25577 (C.A.) at para. 4; Boucher, supra, at para. 38.).

E. Analysis of The Parties’ Position Regarding the Payment of Costs and Conclusion

Analysis of The Parties’ Position Regarding the Payment of Costs and Conclusion

23Wilson claims that given the divided success at trial, each party should bear its own costs. In the alternative, if this Court elects to award costs against Wilson, $50,000 is an amount that is reasonable and is the most that could have reasonably been expected by Wilson in these circumstances. Wilson points out that his own firm’s partial indemnity fees were $109,000.

24The Defendants assert that they are entitled to an award of between $492,012.46 (partial indemnity costs of which $365,463 represents fees) and $767,328.60 (total indemnity costs).

25The general rule is that costs follow the event (Skye v. WTH Canada Inc., 1996 1187 (OCA). Success in this case was divided:

(a) Wilson’s claim for damages in excess of $1 million for wrongful dismissal was unsuccessful but he was successful in establishing that he did not resign.

(b) The Defendants’ $2 million counterclaim for breach of confidential information, damage to reputation and return of the expense monies also submitted to Revenue Canada was unsuccessful. The Defendants’ claim for return of approximately $300 for expenses incurred on behalf of RecordXpress instead of Legacy was successful. (Wilson states that he offered to repay the $300 in January 2012 during his termination meeting. However, no payment was delivered to Legacy.)

26More time at trial was taken up with the claim than the counterclaim although some of that time was spent dealing with the issue of whether Wilson resigned or his employment was terminated. Contrary to Wilson’s assertion, the time spent dealing with Wilson’s relationship with RecordXpress was necessary, as it formed one of the factors upon which his termination of employment was justified.

27Both parties took steps that increased costs without justification:

28Wilson incurred more costs than necessary as the Defendants refused to withdraw their claim for breach of confidential information and instead, amended the pleading in February 2013 to add more than 30 paragraphs. This necessitated additional rounds of discovery. Wilson also had to respond to allegations pleaded that,

i. he was not key to Legacy’s foundation, but merely an “administrative” hire who had “no input whatsoever” into the business plan;

ii. there was “no agreement that Robert Wilson would succeed James Love”;

iii. Wilson “lacked management skills” and his deficiencies caused “significant turnover” in Legacy’s trust department;

iv. Love was “unaware of any occasion when Michael … treated Wilson or any other employee of Legacy in an unprofessional manner”.

At trial, the Defendants’ witness refuted these allegations.

29The Defendants suggest Wilson chose to name both Basel CanadaCorp Limited and Love as party defendants to the oppression claim and the claims against them were dismissed. However, no significant additional time or expense was incurred since all of the Defendants were represented by the same counsel and Love had to be called in respect of the counterclaim in any event.

30The Defendants did however, incur more costs than necessary as they were compelled to bring a motion to obtain production of Wilson’s tax returns and documents, obtain Wilson’s answers to refusals and undertakings and amend the Statement of Defence and Counterclaim.

31No Rule 49 Offer was made. The Defendants made an Offer to Settle on September 18, 2013, five days before trial. (Rule 49 of the Rules of Civil Procedure provides that an Offer to Settle must be made at least seven days before the commencement of a proceeding.) The Offer was to purchase Wilson’s shares in Basel for $385,000 and to pay Wilson $50,000 in exchange for a full and final mutual release.

32Although the Defendants offered Wilson $385,000 for his shares upon his departure from the Legacy Private Trust in January 2012, he chose instead to commence these legal proceedings. (The $385,000 was therefore not paid to Wilson.)

33Partial indemnity costs are appropriate as the conduct of the parties in this case was neither improper nor egregious.

34For these reasons, an award of partial indemnity costs is made in favour of the Defendants.

35The Defendants’ costs are unduly high as they retained senior counsel from two separate law firms to represent them. In addition, two associates worked on the file and one attended at trial along with both senior counsel. The basis for retaining two law firms is not clear as counsel advised at the outset of trial that both firms were on the record for all of the Defendants on all issues.

36The costs incurred by the Defendants were therefore more than could have been reasonably expected by Wilson.

37The Defendants are therefore entitled to an award of partial indemnity costs. The amount is reduced in view of the divided success at trial, some unnecessary steps taken by Defence counsel resulting in increased costs, and the fact that the Defendants’ costs were more than could reasonably have been expected by Wilson because two firms acted on behalf of the Defendants on all issues throughout.

38For these reasons, I find that Wilson should pay costs inclusive of fees, disbursements and interest to the Defendants in the amount of $80,000.00, plus post judgment interest in accordance with the Courts of Justice Act.

Thorburn J.