Awad v. Dover Investments Limited, 2015 ONSC 1955

COURT FILE NO.: 03-CL-005217

DATE: 20150430

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: GHAREEB AWAD and TRANSPACIFIC PETROLEUM CORP., Applicants

AND:

DOVER INVESTMENTS LIMITED, DOVER PETROLEUM CORP and ROBERT SALNA, Respondents

BEFORE: Mr. Justice T. McEwen

COUNSEL: Ghareeb Awad, self-represented

L. Gold and H. Maltz, for the Respondents

HEARD: in writing

COSTS ENDORSEMENT

Introduction

[1] The trial of issues proceeded before me, without a jury, commencing on May 13, 2014. It lasted approximately four weeks and ended on August 27, 2014. I released my decision on January 6, 2015. The parties could not agree on the issue of costs. I have received and reviewed the written submissions of the parties.

[2] In conducting my review of the cost submissions I have taken into account the principles set out in Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA). As noted in that case, the overall objective of fixing costs to arrive at an amount that is fair and reasonable for an unsuccessful party to pay in the particular circumstances rather than a fixed amount by the actual costs incurred by the successful litigant. I do not propose to go through each and every item which would amount to an assessment of the bills of costs provided. Instead, I have fixed costs keeping in mind the principle of proportionality and the factors set out in Rule 49 and Rule 57.01.

Should Costs be Awarded?

[3] The applicants submit that costs should not be awarded based on Spence J.’s November 24, 2006 judgment, paragraph 10, which noted that costs of the reference should be paid by the respondents and shall be in the discretion of the Master. In my view, Spence J.’s judgment did not refer to the trial of the issues that I was to conduct; therefore, the discretion to award costs remains with me with respect to the trial of the issues.

To Whom Should Costs be Paid?

[4] For the reasons below I have awarded the respondents partial indemnity costs on a reduced scale.

The Scale at Which Costs Ought to be Awarded

[5] The respondents submit that the applicants ought to pay the respondents costs on a full indemnity basis primarily relying on what they described to be the Awad’s “egregious conduct” as well as the Offers to Settle delivered by the respondents.

[6] I will first deal with the issue of behavior. In this regard the respondents primarily rely upon the fact that Awad alleged throughout the trial that the respondents and their experts misled the Court (which I did not accept) and that Awad called Chapman who delivered a report that I rejected, based in part, on the fact that Awad authored significant portions of the report and also further instructed Chapman how to author the report.

[7] All this being said, the fact of the matter is that Awad’s case went in quickly (only he and Chapman testified on behalf of the applicants). In total, it took approximately four days. His cross-examinations of the respondents’ witnesses, notwithstanding the fact he made allegations of bias and dishonesty, were not excessive nor did they prolong the litigation. If anything, Awad’s conduct at trial was superior to that of the respondent Salna and I noted this in my Reasons for Judgment.

[8] On this basis there is no reason to award full indemnity costs or substantial indemnity costs.

Offers to Settle

[9] With respect to the Offers to Settle, there were two offers open for the applicants to accept being the offers of February 13, 2013 and May 4, 2014. In my view, the February 13, 2013 Offer to Settle really does not impact the three issues that I determined at the trial of the issues in any meaningful fashion.

[10] On the other hand, the May 4, 2014 Offer to Settle is of relevance. Having reviewed that Offer to Settle I agree with the respondents that they obtained a better result than that set out in the offer with respect to the issues surrounding the value of the REU oil field, the REU 12 oil production figure and the amount earned by the sale of that oil from the REU 12. Similarly, they obtained a better result with respect to the issue of the 5.71 percent investors. The difficulty with the May 4, 2014 Offer to Settle, however, is the fact that it was delivered to the applicants on the basis that all terms contained therein had to be accepted by the applicants. Some of those terms did not involve the issues involved in the trial of the three issues before me (see paragraph 1 and particularly 7 and 8 of the Offer to Settle) and dealt with other disputes between the parties.

[11] The applicants did not deliver any Offers to Settle but prior to trial delivered an offer to settle all litigation in the amount of $20 million dollars. This offer was nowhere close to the result at trial, and similarly sought to settle all the litigation between the parties.

Analysis

[12] Surprisingly, neither the applicants nor respondents delivered Offers to Settle dealing only with the three discrete issues that had to be determined at the trial. As noted, the applicants’ Offer to Settle need not be considered. With respect to the respondents’ Offer to Settle, as I have noted, it was delivered on the basis that all of the terms had to be accepted by the applicants and some of those terms involved issues outside the scope of the trial before me. In these circumstances, it is settled law, that it does not constitute a valid Offer to Settle since it cannot be determined whether, overall, the respondents enjoyed success.

[13] Offers to Settle, however, are designed to encourage settlement. Although the respondents did not technically beat their offer, the applicants could have responded to the offer with respect to the three issues that were in dispute in this trial. They did not and the matter went on to a lengthy trial.

[14] In my view, I should therefore exercise my discretion and award some costs to the respondents. They clearly obtained a result with respect to the three issues that was superior to that contained in the Offer to Settle. In these circumstances the respondents created a potential for settlement with respect to the three issues that the applicants did not respond to. If they had, there is reason to believe a settlement could have been achieved.

[15] In all of these circumstances, the respondents are entitled to some portion of their costs. I have reviewed the respondents’ bill of costs in order to determine what would be a fair award in the circumstances.

[16] On a full indemnity basis the respondents incurred legal fees in the amount of $462,697.00, exclusive of taxes, plus general disbursements in the amount of $15,021.51 inclusive of taxes.

[17] They also seek disbursement amounts for experts of $358,442.60, plus consulting fees for Amrine and Wood totaling $25,255.00, and other associated expenses involving travel and accommodation. Reimbursement for the experts is sought in US dollars (“USD”).

[18] Insofar as fees are concerned it is my view that the amount sought is too high. While the hourly rates of Messer’s Maltz and Gold are reasonable it is my view that two senior counsel were not required throughout the trial preparation and trial stage particularly when Mr. Gold did all of the counsel work at trial.

[19] In this case I would have thought that the respondents own legal costs for fees would be assessed in the approximate $400,000.00 range plus applicable taxes. Partial indemnity costs would therefore amount to approximately $240,000.00 plus applicable taxes. I would award the respondents the amount of $120,000.00 plus applicable taxes, which amounts to approximately 50 percent of the respondents’ partial indemnity costs, including pretrial motions.

[20] Insofar as disbursements and experts reports are concerned I do not have any difficulty with respect to the $15,021.51 in general disbursements. I do have difficulty, however, with the amounts paid to experts. First, I would not allow any amounts to the experts McKee or Weiner since I did not accept their opinions. I would further not award anything for the report of Earth Resources Exploration Petroleum Consultants since no expert was called at trial.

[21] With respect to the remaining experts; namely, Connor, Roesle and Carsted I have difficulty accepting the amounts that were paid for attendances at trial ($89,102.97 US for Connor and Roesle and $24,417.18 US for Carsted). I acknowledge that Connor and Roesle had to re-attend but the applicants should not bear the cost of this, since the re-attendance had nothing to do with them.

[22] I accept that the analyses that were performed by these three experts were comprehensive and technical. The amount paid for the experts’ reports (of approximately $115,000.00 for Connor and Roesle and approximately $96,000.00 for Carsted), however, is also high, given the short duration of their testimony at trial and the subject matter of the evidence.

[23] Further, I would not allow for any of the consulting fees sought for Amrine or Wood. They were fact witnesses. Amrine was also an ex-employee. There is no basis, in my view, to compel the applicants to pay these witnesses who were appearing at trial pursuant to a Summons to Witness. In any event, the amount sought is excessive.

[24] I would also not allow for any of the travel or accommodation expenses for McKee or Weiner for the reasons above, nor would I allow any for the respondent Salna who lives in Richmond Hill. I would also not allow any expenses for Salna’s travel to the courthouse in Toronto or to Vancouver to attend Awad’s examination for discovery, nor would I allow secretarial expense.

[25] In all of the circumstances, some amount should be paid to the experts but not on a partial indemnity basis given my comments with respect to the Offer to Settle and the amounts of the accounts rendered.

[26] I would allow disbursements in the amount of $110,000.00 USD inclusive for the experts fees of Carsted, Connor and Roesle. I would allow a further $15,000.00 inclusive for the remaining disbursements.

Disposition

[27] The respondents are therefore entitled to the costs outlined above as follows:

[28] Fees $120,000.00 plus applicable taxes.

[29] Disbursements $110,000.00 USD inclusive for the experts fees.

[30] Remaining disbursements of $15,000.00 inclusive.

[31] Costs are to be paid within 60 days.

Mr. Justice T. McEwen

Date: April 30, 2015