König v. Hobza, 2015 ONSC 411

COURT FILE NO.: CV-08-7749-00CL

DATE: 20150121

SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Klaus-Peter König, Plaintiff

AND:

Antoin Hobza, John Douglas Laine, Kim H. Dobson, John Anthony Chisholm and also known as Jack Chisholm, TJK Enterprises Limited and 1669051 Nova Scotia Limited, Defendants

BEFORE: L.A. Pattillo J.

COUNSEL: R. Flom, Counsel, for the Plaintiff

S. E. Batner, Counsel, for the Defendants

HEARD: December 22, 2014

Further Costs ENDORSEMENT

[1] On May 10, 2013, I released reasons for judgment awarding the Plaintiff, Klaus-Peter König (“König”) damages of $250,000 in respect of his claim for oppression against the Defendants Antoin Hobza, John Douglas Laine, Kim H. Dobson and 1669051 Nova Scotia Limited (“East West”) (2013 ONSC 1060).

[2] On November 20, 2013, I released supplementary reasons awarding König prejudgment interest of $49,793.83 and substantial indemnity costs in the amount of $413,000 inclusive of disbursements and taxes (2013 ONSC 5531). Prior to trial, the Defendants served a Rule 49 offer to settle for $300,000 inclusive of interest plus partial indemnity costs and disbursements to be agreed or assessed (the “Offer”). Having regard to the damages, together with the prejudgment interest and the award of costs on a substantial indemnity scale, I concluded that the Judgment was more favourable than the Offer and the cost consequences of Rule 49 did not apply.

[3] The Defendants appealed the Judgment, including the costs, to the Court of Appeal. In reasons released October 9, 2014 (2014 ONCA 691), the Court of Appeal allowed the appeal in part and reduced the damages to $187,453.51 and prejudgment interest to $37,336.12. In the concluding paragraph of the reasons, Hoy ACJO, on behalf of the Court, stated in part: “I would not disturb the award of costs on a substantial indemnity scale, but would return the questions of the quantum of those costs, and the cost consequences of Rule 49.10 to the trial judge for reconsideration, in light of the reduced damages award.”

[4] The Defendants submit that the reduction of the damages and prejudgment interest by the Court of Appeal, together with König’s substantial indemnity costs to the date of the Offer result in a judgment less favourable than the Offer and accordingly Rule 49 is engaged such that, in accordance with Rule 49.10, König is only entitled to his costs on a partial indemnity basis to the date of the Offer and the Defendants are entitled to their costs thereafter on a partial indemnity basis.

[5] In that regard, the Defendants submit, utilizing the Bill of Costs originally submitted by König and adjusting the rates and hours as I directed in my initial costs reasons and using the Defendants’ counsel’s preparation time as a guide, König’s partial indemnity costs to the date of the Offer, including HST, were $131,950.10. Multiplied by 1.5 and adjusting HST, König’s substantial indemnity costs to the date of the Offer are $197,925.15. The Defendants further submit that their partial indemnity costs from the date of the Offer to the end of the trial are $127,616.56.

[6] König submits that my original costs order should remain in place. The Offer was not a valid Rule 49 offer because it was not served at least seven days before trial. König relies on the decision of Rosenberg JA in Elbakheit v. Palmer, 2014 ONCA 544 (C.A.) which dealt with the issue of when a trial commenced for the purposes of the timing of a Rule 49 offer. König does not take issue with the Defendants analysis of their substantial indemnity costs to the date of the Offer and the Defendants’ partial indemnity costs thereafter. In fact, König’s counsel refused to produce their dockets and filed no submissions concerning the calculation of costs to the date of the Offer.

[7] The issue of whether the Offer was a valid Rule 49 offer due to the timing of its service was raised by König during his initial costs submissions and rejected by me. The issue of costs was appealed to the Court of Appeal. The Court made no ruling concerning the validity of the Offer. In my view, the issue of whether the Offer was a valid Rule 49 offer was decided by me in my initial costs determination and cannot now be revisited. In accordance with the Court of Appeal’s direction, I am to only consider the quantum of costs having regard to the cost consequences of Rule 49.10.

[8] Further I do not consider that Elbakheit is of any assistance to König concerning the timing of the offer. The Court’s statement about there being no “near miss” policy concerned whether the offer was more or less favourable than the judgment, not timing of the offer.

[9] König obtained a Judgment for $224,789.63 ($187,453.51 in damages and $37,336.12 in prejudgment interest). In light of the fact that König has not provided a breakdown of his counsel’s hours to the date of the Offer and thereafter and takes no issue with the Defendants’ analysis, I accept the Defendants calculations concerning König’s partial and substantial indemnity costs to the date of the Offer. Further, the Defendants accept that König’s disbursements prior to the Offer were $73,000.

[10] As a result, if König had accepted the Offer, he would have received $300,000 plus partial indemnity costs of $131,950.10 for a total of $431,950.10. Instead he is entitled to receive in respect of the Judgment, as amended by the Court of Appeal, $224,789.63 plus substantial indemnity costs to the date of the Offer of $197,925.15 for a total of $422,714.78. In summary, König obtained a Judgment that was $9,235.32 less than the Offer. I have not included disbursements in the above analysis because they are the same amount either under the Offer or the Judgment.

[11] Because König obtained a judgment which was less favourable than the Offer, Rule 49.10(2) provides that he is entitled to “partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless the court orders otherwise.” (my emphasis) I originally awarded König substantial indemnity costs throughout based on my view of the Defendants conduct towards him. The Court of Appeal did not alter that determination. Accordingly, rather than partial indemnity costs to the date of the Offer, I order that König is entitled to his costs for that period on a substantial indemnity basis as opposed to partial indemnity. Accordingly, I fix König’s costs at $270,925.15 ($197,925.15 plus $73,000 in disbursements). As noted, the Defendants are entitled to their costs on a partial indemnity basis after the Offer which I fix at $127,616.56.

[12] Netting out the above costs orders, the Defendants shall pay to König $143,308.59 for costs.

[13] König submits that the issues before me on this re-consideration were novel and there should be no costs. I disagree. The hearing involved essentially a mathematical exercise comparing the Offer with the Judgment as amended by the Court of Appeal. The Defendants were successful on the rehearing and are entitled to their costs which I fix at $3,500 inclusive of disbursements and taxes. That amount shall be deducted from the above costs award.

L. A. Pattillo J.

Released: January 21, 2015