Citation: Bernstein v. Poon, 2015 ONSC 2125
COURT FILE NO.: 08-CV-361934
DATE: 20150409
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: DR. STANLEY K. BERNSTEIN AND POST ROAD HEALTH & DIET INC., Plaintiffs
AND:
DR. PAT POON, Defendant
BEFORE: Mr. Justice Graeme Mew
COUNSEL: Neil M. Abramson and Lindsay Kantor, for the plaintiffs
Gil Zvulony, for the defendant
HEARD: In Writing
costs ENDORSEMENT
[1] After nearly six years of litigation, culminating in a seven and a half day trial, the defendant was ordered to pay $10,000 in general damages for defaming one of the plaintiffs.
[2] The amounts spent in this litigation are truly breathtaking. They graphically illustrate how the expense of civil litigation can lie far beyond the means of ordinary citizens. The plaintiffs incurred legal fees, including disbursements and taxes, of $545,272.58. The defendant spent $247,194.33.
[3] Quite apart from how these figures impact on the issue of the costs, if any, to be awarded in this action, it seems appropriate to reflect on what this sort of legal spend says about our system of civil justice.
[4] The costs summaries provided by the parties disclose that there was a significant level of motion activity relating to the pleadings (striking out and amending), production, examinations for discovery (including undertakings and refusals) and even the pursuit of costs thrown away in respect of interlocutory steps.
[5] The challenges are in part systemic. As Karakatsanis J. noted in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 1:
Most Canadians cannot afford to sue when they are wronged or defend themselves when they are sued, and cannot afford to go to trial. Without an effective and accessible means of enforcing rights, the rule of law is threatened. Without public adjudication of civil cases, the development of the common law is stunted.
[6] The parties in this case were able to afford to go to trial. But the cost of doing so was exorbitant.
[7] Karakatsanis J. continued, Hryniak at para. 2:
Increasingly there is recognition that a culture shift is required in order to create an environment promoting timely and affordable access to the civil justice system. This shift entails simplifying pre-trial proceedings and moving the emphasis away from the conventional trial in favour of proportional procedures tailored to the needs of the particular case. The balance between procedure and access struck by our justice system must come to reflect modern reality and recognize that new models of adjudication can be fair and just.
[8] Defamation cases present a particular challenge when it comes to finding a proportionate means to resolve disputes.
[9] It is not unusual in defamation cases for the costs incurred to exceed the damages awarded. In England and Wales, a jurisdiction in which the law of defamation and its related procedures bears many similarities to Ontario’s, an analysis of 47 libel and privacy cases which were not subject to conditional fee agreements, after excluding cases where the defendant’s costs were shown as nil (presumably because the defendant accepted liability at an early stage and dealt with the matter in house), found that plaintiffs’ costs were on average 184% of damages and defendants’ costs on average 124% of damages: Lord Justice Jackson Review of Civil Litigation Costs: Final Report (HMSO, December 2009) at page 23 and table 35.
[10] Even appreciating that in defamation cases, it may be appropriate to consider the principle of proportionality by reference to different metrics than in other civil litigation, the legal spend in the present case is illustrative of the observations on access to justice made by Karakatsanis J. in Hryniak. It is worth noting that the Jackson Report made specific recommendations aimed at more cost effective methods of resolving defamation disputes, and referred to a proposal for an “early resolution” procedure in order (i) to determine meaning and (ii) to give the parties an early opportunity to test a “fair comment” defence. It seems to me possible that, with suitable adaptations, the enhanced procedures for summary judgment could perhaps be deployed to do something similar in Ontario.
General Principles Applicable to the Fixing of Costs
[11] The usual rule in Ontario is that costs follow the event. This is subject, however, to the overarching discretion of the court to determine by whom and to what extent costs shall be paid: Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1).
[12] The principle of proportionality is one of general application to the interpretation of the Rules of Civil Procedure: Rule 1.04(1.1). Rule 57.01 provides specific guidance to the exercise of discretion under s. 131 of the Courts of Justice Act to award costs and provides that 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 proceedings;
(d) The importance of the issues;
(e) The conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceedings;
(f) Whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(g) The parties denial or refusal to admit anything that should have been admitted;
(h) Where it is appropriate to award any costs or more than one set of costs where a party,
(i) commence 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.
[13] There are also specific provisions dealing with costs where an action should have been brought in the Small Claims Court or under the simplified procedure (Rule 76) for matters involving claims for less than $100,000.
a. Rule 57.05(1) provides that if a plaintiff recovers an amount within the monetary jurisdiction of the Small Claims Court (currently $25,000), the court may order that the plaintiff shall not recover any costs.
b. Rule 76.13 provides that the plaintiff shall not recover any costs unless the court is satisfied that it was reasonable for the plaintiff to have commenced or continued the action under the ordinary procedure.
Overview of the Action
[14] Dr. Bernstein and his company, Post Road Health & Diet Clinics Inc., started their action on 5 September 2008. The relief sought in the amended statement of claim included:
(a) an interim, interlocutory and permanent injunction restraining and enjoining the publication of Dr. Poon’s Metabolic Diet;
(b) an interim, interlocutory and permanent injunction requiring the retraction of defamatory and libel statements posted on the website www.poondiet.com;
(c) an interim, interlocutory and permanent injunction requiring the defendant to post a public apology to the plaintiffs on www.poondiet.com for libelous and defamatory statements made by the defendant;
(d) damages, including general and special damages, in the amount of $5,000,000 for libel, slander and intentional interference with economic relations; and
(e) punitive and/or exemplary damages in the amount of $5,000,000.
[15] By the time of the trial, the plaintiffs had restricted their claims to non-pecuniary general damages as well as aggravated and/or punitive damages.
[16] In my reasons for judgment, I grouped together the impugned statements under eight headings. Of the eight groups of allegations which I identified, I found that Dr. Bernstein’s allegations should be upheld with respect to two of the groups and dismissed with respect to the other six.
[17] Seven of the eight groups of allegations were contained in one or both of the second and third editions of the defendant’s book. One group of allegations arose from a Chinese language video which could be accessed through the defendant’s website. Of the two groups of allegations which I upheld, one arose from the books and the other was from the website.
[18] At the time the action was commenced, Dr. Poon’s book was in its second edition. A third edition was subsequently published which either repeated or restated many of the words which the plaintiffs had taken exception to in the second edition. The statement of claim was amended to include allegations relating to the third edition of the defendant’s book.
[19] At trial, I awarded the plaintiff Dr. Stanley Bernstein general damages of $10,000 which I described as “more than nominal, but not greatly more”. I declined to award damages to the corporate plaintiff. I also declined to award aggravated or punitive damages.
Offers to Settle
[20] There were no offers to settle made in compliance with Rule 49 of the Rules of Civil Procedure. During the course of written submissions, reference was made to a pre-action written offer to resolve the dispute and to an oral offer being by the defendant at or following a mediation session. As discussed below, these events do not affect the costs decision I have made in this case.
The Plaintiffs’ Position
[21] The plaintiffs seek substantial indemnity costs in the amount of $417,643.24. Although at trial I concluded that this case was more about ego than actual harm caused, the plaintiffs maintain that their action was a genuine and legitimate attempt at ending the tarnishing of Dr. Bernstein’s name and reputation. They argue that it should not have been necessary for the plaintiffs to have gone all the way to trial to stop this. They say that substantial indemnity costs can be justified because:
(a) the plaintiffs were successful;
(b) the defendant’s conduct left the plaintiffs with no option but to proceed to trial;
(c) the defendant’s conduct unnecessarily lengthened the duration of the proceeding;
(d) the proceeding was complex; and
(e) the defendant never made any attempt to settle the action.
[22] With respect to the outcome, the plaintiffs submit that most, if not all, of the more controversial, highly contested and time consuming issues, were resolved in favour of the plaintiffs (such as whether expert evidence was necessary for the defendant to meet the burden of establishing the truth of his statements, whether the impugned statements were about the plaintiffs and whether the content of the defendant’s website had in fact been “published”).
[23] The plaintiffs submit that they were left with no option but to proceed to trial in light of the publication, after the litigation had been commenced, of a third edition of the defendant’s book and the posting on the defendant’s website of a Chinese language television broadcast in which the defendant made defamatory remarks about the plaintiff.
[24] With respect to the unnecessary lengthening of the duration of the proceedings, the plaintiffs argue that every issue brought forward by the plaintiffs in the proceeding was contested.
[25] The proceeding was of sufficient complexity, particularly in light of the medical and legal issues involved, that it justified the presence of two counsel for each side.
[26] No costs of any significance were incurred as a result of the plaintiffs having initially asserted a claim for special damages and then having abandoned it before trial. No documents were ever produced by the plaintiffs in support of that claim.
[27] The plaintiffs argue that the principle that costs should be proportional to the damages awarded in a proceeding is only one element in the consideration of costs. The overarching principle of proportionality should not prevent a costs award from (sometimes significantly) exceeding the associated damages award: Doolittle v. Overbeek, 2015 ONSC 719 (a jury assessed the plaintiff’s total damages arising from a motor vehicle accident at $120,700, which was reduced after application of the statutory deductibles and a further adjustment in relation to collateral income replacement benefits, to a net recovery of $31,300; costs on a partial indemnity scale were fixed in the all-inclusive amount of $110,000); Volchuk Estate (R.E.), 2007 52973 (ON SC), 36 E.T.R. (3d) 239 (executrix of an estate awarded $40,487 on a contested passing of accounts; the award for fees and G.S.T. thereon was $68,900, some of which was awarded on a substantial indemnity scale and a further $33,755.80 was awarded for disbursements producing a total of $102,655.80).
[28] The plaintiffs’ calculation of costs on a partial indemnity scale is $289,110.69 of which $41,736.34 (including taxes) relates to disbursements.
The Defendant’s Position
[29] The defendant seeks its partial indemnity costs of $165,056.38.
[30] The defendant argues that:
(a) the plaintiffs chose the wrong court;
(b) the defendant made reasonable attempts to settle the action;
(c) the plaintiffs abandoned their claims for intentional interference with economic relations and special damages;
(d) the plaintiffs took untenable maximalist positions; and
(e) the defendant was the successful party.
[31] The defendant argues that if Dr. Bernstein wished to have a judicial pronouncement vindicating his reputation, he should have sought one in the Small Claims Court. Making reference to my findings that the plaintiffs’ claim was “more about ego rather than injury” and “irritant at most” to Dr. Bernstein, the defendant describes the pursuit of a claim which cost both parties combined close to three quarters of a million dollars in legal fees, and diverted significant resources from an over-burdened court system, as an “egotistical misadventure”.
[32] Because the amount recovered fell within the jurisdictional competence of the Small Claims Court ($25,000), rule 57.05(1) should be invoked to deny the recovery of any costs by the plaintiffs.
[33] The defendant also makes reference to rule 76.13 which provides that the plaintiff “shall not recover any costs” in a matter that should have been brought under the simplified procedure, unless the court is satisfied that it was reasonable for the plaintiff “to have commenced and continued the action under the ordinary procedure”.
[34] Having argued that it was unreasonable for the plaintiffs to have sued using the ordinary procedure, the defendant takes the position that he should be compensated with an award of costs in his favour. Reference is made to the observation in my reasons for judgment that “the possibility of [a small damage award] would have been known and understood by the parties”.
[35] Although the defendant acknowledges that no Rule 49 offer was made, prior to litigation commencing, Dr. Poon says that he offered to retract his statements, to publish an apology and to refrain from criticising the Bernstein diet in the future. The defendant submits that his offer should be considered under Rule 49.13 (which permits the court to take into account any written offer, even if it does not comply with the formalities required by Rules 49.03; 49.10 and 49.11).
[36] In contrast to the plaintiffs, the defendant says that the plaintiffs’ unilateral abandonment of their claims for intentional interference with economic relations and for special damages, including loss of profits only occurred after costly examinations for discovery, and, hence, did have an impact on costs. The concomitant reduction in the amount claimed by the plaintiffs was $3,000,000. Furthermore, these claims for economic losses were only abandoned on the eve of a motion for refusals given at Dr. Bernstein’s discovery for disclosure of financial documents. The defendant asserts that considerable time and expense was devoted at the discovery stage (both oral and documentary) in respect of the defence of the plaintiffs’ claims to have suffered provable damages including “loss of profits”.
[37] The defendant offers as an example of the “untenable maximalist positions” taken by the plaintiffs throughout the litigation, the plaintiffs’ request for a costs award of more than 40 times the amount recovered (including disbursements of more than three times the award).
[38] By the time of trial, the defendant says that plaintiffs’ claim had been reduced to $2.5 million dollars. Yet Dr. Bernstein was awarded just $10,000. The corporate plaintiff was not awarded anything. Dr. Bernstein’s recovery was less than 0.5% of the total monetary amount claimed at trial. The claims for injunctive relief were not pursued and those for punitive and exemplary damages were unsuccessful.
[39] The defendant argues that any costs associated with the impugned video were minimal (there were no factual or evidentiary disputes with respect to the video at trial – only legal questions).
[40] Of the seven categories of allegations identified in respect of the books, the defendant was successful in its defence of six of those seven categories and, with respect to the category of allegations in which it did not succeed, those allegations referred to words used in the third rather than the second edition of the book.
[41] In Eastern Power Limited v. Ontario Electricity Financial Corporation, 2012 ONCA 366, 2012 ON CA 366, the plaintiff sued the defendant claiming numerous breaches of a power purchase agreement and sought damages of $121,000,000. After a 23 day trial, all but one of the plaintiff’s claims were dismissed. However, the trial judge declined to award any damages for that breach because she concluded that there was no reliable and credible evidence from which to calculate damages. The defendant was awarded its costs of the action in an amount of over $1 million dollars for fees and disbursements. The plaintiffs successfully appealed on one ground, namely, that the trial judge should have awarded damages. The Court of Appeal remitted the matter for new trial on damages. Noting that the maximum amount which the plaintiff would be able to recover at the new trial would be $8.5 million dollars, the Court of Appeal, in addressing the trial costs, found that the defendant was still the overwhelmingly successful party at trial:
“[The plaintiff] advanced six claims worth a total of $121 million. Five of those claims were dismissed, and its successful claim is worth, at most, $8.5 million. Despite [the plaintiffs] argument to the contrary [the defendant] was the overwhelmingly successful party at trial.”
The Court of Appeal adjusted the award of costs made to the defendant to $753,076.37 inclusive of fees and disbursements but exclusive of taxes.
[42] The defendant argues that Eastern Power stands for the proposition that, viewed in the context of what was claimed at the outset, it is open to the court in the exercise of its discretion to award costs to a defendant who successfully repels most but not all of the claims advanced by a plaintiff.
Analysis
[43] I have already indicated that defamation litigation is different from many other types of civil dispute. Such cases are often less about compensation than they are about vindication. In many cases, a judicial determination that a party has been defamed is as important as any award of damages that is made.
[44] This case does not involve what Lord Justice Jackson referred to as “the paradigm libel case” where the claimant is an individual of modest means and the defendant is a well-resourced media organisation (Review of Civil Litigation Costs: Final Report at page 325). Rather, as I indicated in my reasons, this case, involving two competitors, “is more about turf warfare in the competitive world of diet medicine than about reputation”.
[45] I agree that the defendant was substantially successful (on six out of eight categories of complaint which I identified). That success is, however, somewhat tarnished by the fact that one of the sets of allegations that I found to be defamatory arose in part at least from the third edition of the defendant’s book, published sometime after the commencement of this action, and the other arose from a video, which was not linked to the defendant’s website until after he had been sued by Dr. Bernstein. It is not hard to understand why Dr. Bernstein did not abandon his claim at that juncture.
[46] In the written costs submissions, the defendant claims that a verbal offer was made, following a mediation, in which the defendant offered to retract and apologise to the plaintiffs and to pay them $40,000. Counsel for the plaintiff has a different recollection.
[47] Be that as may, if the defendant was, in fact, prepared to make a monetary offer to the plaintiffs, he should have done so in writing. I am not prepared to make a determination on costs based on the differing recollections of counsel about an oral offer made at or following mediation. The whole purpose of the Rule 49 regime is to encourage the making of clear and unequivocal offers which can then be measured against the ultimate outcome of a case in the event that settlement does not occur.
[48] I was also asked to consider correspondence before the action commenced, in which the defendant offered to post a retraction and apology on the defendant’s website for a period of six months and to remove any explicit reference to the Bernstein Diet in any future publications of the defendant’s book. As noted in the reasons for judgment, however, although the defendant in fact removed explicit reference to Dr. Bernstein in the narrative portion of the third edition of his book, it was quite clear from looking at the footnotes that his references to “Doctor Supervised Very Low Calorie Diet” would still lead a reader to Dr. Bernstein: see para. 79 of the reasons for judgment.
[49] Turning to the plaintiffs’ choice of court, I am left in no doubt that the plaintiffs wanted their litigation to have the maximum possible impact on the defendant. Bringing this action in the Small Claims Court would not have met that objective. The impact of a Small Claims Court action on the defendant would have been far less onerous. The plaintiffs tried to use their financial muscle to wrestle against a competitor.
[50] The competitor, however, stubbornly refused to back down. Even worse for the plaintiffs, the defendant went on the attack, obtaining an order that eliminated the claims initially made by the plaintiffs in respect of the first edition of Dr. Poon’s book on the basis that such claims were statute barred. Then the defendant sought disclosure of financial information which it seems the plaintiff was reluctant to produce. As the defendant suggests, it was likely not a coincidence that the plaintiffs withdrew their claims based on economic losses shortly before a motion for disclosure of financial information was due to be heard.
[51] A pivotal question is whether it was reasonable for the plaintiffs to commence, or continue, their action under the ordinary procedure in this court.
[52] In Hill v. Church of Scientology of Toronto, 1995 59 (SCC), [1995] 2 S.C.R. 1130, the Supreme Court of Canada noted, at page 1198, that from 1987 to 1991 there were only 27 reported libel judgments in Canada with an average award of $30,000 and that subsequent to the trial decision in Hill, from 1992 to 1995, there had been 24 reported libel judgments with an average award of less than $20,000. Even adjusting these numbers for inflation, factoring in the result in Hill (where the general damages award was $300,000 with aggravated damages of $500,000 and punitive damages of $800,000) and allowing for the reality that libel awards “are varied and fact driven” (defendant’s submissions) and “all over the map” (plaintiffs’ submissions) the prospects of the plaintiffs, and in particular, Dr. Bernstein, recovering damages of more than $100,000 were slim at best.
[53] The mandatory application of the simplified procedure under Rule 76 is only engaged where the plaintiffs’ claim is exclusively for money, real property or personal property in the amount (or value) of $100,000 or less. Where, as in the present case, the original relief sought extended to injunctive relief, the mandatory application of the simplified procedure would not have been engaged from the outset.
[54] However, once the claims for economic losses had been stripped away and the claims for injunctive relief abandoned (although there was no formal abandonment of those claims – the relief was simply not pursued at the argument stage of the trial), the plaintiffs should have reappraised their position. It would have been appropriate at that juncture to move the matter into the simplified procedure.
[55] In Awan v. Lavant, 2014 ONSC 6890, 2014 ON SC 6890, a simplified rules matter tried over eight days, the plaintiff was awarded damages of $80,000 and the defendant was ordered to remove the defamatory words from his website within 15 days. The plaintiff’s claim for substantial indemnity costs in that case was for $121,000. Matheson J., taking into account the purpose of Rule 76 (which is to provide a cost effective method of resolving disputes where the damages claim is $100,000 or less) and having regard to offers of settlement (none of which triggered the costs consequences of Rule 49.10), fixed the fees element of the costs awarded to the plaintiff at $65,000: see the costs endorsement of Matheson J. at 2015 ONSC 2209.
[56] A key difference between the Awan action and the present case is that the former was (despite the length of the trial) a simplified procedure case. As the defendant submitted, there are consequences under Rule 76.13 for plaintiffs who commence an action using the ordinary procedure only to obtain a judgment which exclusively awards money in an amount of $100,000 or less. The purpose of the rule is described in Archibald, Killeen and Morton’s Ontario Superior Court Practice (Toronto: LexisNexis, 2015) at page 1839 in these terms:
The purpose of what is now r. 76.13 is to impose a continuing obligation on a party commencing an action under the ordinary procedure to make a realistic appraisal from time to time of the outcome of the action and to amend pursuant to r. 76.03(1), if at any time prior to the commencement of trial it appears unreasonable to continue the action under the ordinary procedure. The rule is designed to be a powerful deterrent against the use of the ordinary procedure in cases that realistically involve the threshold amount or less.
The important purpose of the simplified procedure regime to reduce legal costs and to enhance access to justice would be undermined if the costs sanctions built into the simplified procedure regime are not enforced. On the other hand, r. 76.13 has a built-in safety valve and provides that the costs may be awarded even when a plaintiff recovers less than $100,000, if it was “reasonable” for the plaintiff to have commenced or continued the action under the ordinary procedure.
[57] Although the claims for injunctive relief had not been formally abandoned, such relief was not argued for the conclusion of the trial, and it would, accordingly, be appropriate in such circumstances for the court to consider rule 76.13.
[58] Ultimately, I would not go as far as to say that it was unreasonable for the plaintiffs to engage the ordinary procedure, rather than bring their claim in the Small Claims Court or, once the plaintiffs had abandoned their claims for economic losses, to have continued under the simplified procedure. Although a modest award should have been within the parties’ contemplation, defamation litigation can be somewhat of a forensic lottery, and I am therefore satisfied that it was reasonable to engage the ordinary procedure. But the modest amount recovered and the absence of any indication that the simplified procedure was considered after the claim for economic losses was abandoned, are significant factors to be considered in the exercise of my discretion to award costs.
[59] In summary, the plaintiff enjoyed modest success and could have moved, but did not move, his action into the simplified procedure once the claim was essentially reduced to one for non-pecuniary, exemplary and punitive damages only.
[60] The defendant defeated the majority of the individual plaintiffs’ claims. But some of the comments on which his liability was grounded were made after the litigation began. Thus, instead of heading the action off by making an offer containing even a modest monetary element, he effectively fanned the flames.
[61] As the Court of Appeal noted in Eastern Power (at para. 19):
…the general principles that govern costs decisions require us to consider the peculiar features of a given case.
[62] Taking all of the features of this case, peculiar and otherwise, into account, I have concluded that there should be no award of costs to either the plaintiffs or the defendant.
[63]
Defamation litigation is a high stakes business, in large measure because the costs incurred by the parties will often exceed the monetary recovery. This case involved two egos, not just one. The plaintiff ruthlessly pursued the defendant. The defendant stubbornly refused to yield. Dr. Bernstein and Dr. Poon each enjoyed a measure of success but I would characterise the overall outcome as close to a draw. The exercise has cost them both a lot of money and, as noted in the reasons for judgment, has used a scarce public resource in doing so. The parties should each bear their own costs.
Graeme Mew J.
Date: 9 April 2015
Correction made: 16 April 2015
Para 47 – 4th line – the word the has been added as follows:
The whole purpose of the Rule 49 regime….