ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-14-118317

DATE: 2015-10-27

BETWEEN:

ALAN GORDON

Plaintiff

– and –

ALTUS GROUP LIMITED & GARY YEOMAN

Defendants

K. MacDonald & J. M. Sanderson, for the Plaintiff

H. A. Levitt & S. Chaudhri, for the Defendant Altus Group Limited

J. Cherniak, for the Defendant Gary Yeoman

HEARD: Written Submissions Filed October 2, 16 & 26/ 2015

Justice B. Glass

Reasons for Costs

[1] When the trial for wrongful dismissal commenced in May 2015, I was advised by the parties that Gary Yeoman was no longer participating in the proceeding. A handwritten document stated that the issue of costs owing to Mr. Yeoman would be handled by the trial later.

[2] Following the trial, I found in favour of Mr. Gordon. No Rule 49 settlement offer had been advanced by Altus Group Limited.

Cost Awards to be Considered

(i) Gordon and Altus for the action;

(ii) What scale of costs for Gordon and Altus;

(iii) Costs between Gordon and Yeoman;

(iv) Whether there should be a Bullock or Sanderson Order for the Gordon and Yeoman costs;

(v) Whether motion costs granted previously should be enhanced to substantial indemnity scale.

Analysis

[3] This analysis involves fixing costs after the conclusion of the trial. This is not an assessment of costs to be completed on a line by line basis.

[4] Costs will be awarded to Alan Gordon. There is an issue of the scale of costs as far as the action with Altus is concerned.

[5] As between Gordon and Altus, there is a dispute about any Rule 49 offer to settle, and if one exists, then when is the operative date.

[6] The potential for dispute about when a settlement offer was created by Mr. Gordon has the added feature of there being an offer that coupled the arbitration hearing and this wrongful dismissal trial. On February 6, 2015, the Gordon offer allowed for a gross settlement of $1.3 million plus partial indemnity cost as agreed or by assessment. That was turned down by Altus.

[7] The arbitration award has been released whereby Mr. Gordon was successful for about $970,428.39. The judgment in this trial in favour of Mr. Gordon was for about $268,000 total inclusive of punitive damages. These two figures total $1,239,273.39 which is $93,726.61 short of the total of $1.3 million offer. The Plaintiff argues that this is a near-miss and that I should exercise the court’s discretion for a higher scale of costs.

[8] The Plaintiff made another offer on May 21, 2015 for $200,000 for the wrongful dismissal action alone together with costs. That offer was turned down; however, Altus argues that this was an offer made at a pre-trial and should not be considered because of the limitations outlined in Rule 50.09 of the Rules of Civil Procedure.

[9] Altus argues that I should not accept the arbitration and damage award as a combined Rule 49 settlement offer. They are separate events. Further, the May 21st offer was less than 7 days before the commencement of the triaI.

[10] I accept the Altus position that there have been two proceedings which ought to be kept separate when considering whether or not there are Rule 49 offers coupled with costs being fixed at substantial indemnity scale calculations.

[11] In his costs submissions, Mr. Gordon seeks $500,000 for substantial indemnity costs and $350,000 for partial indemnity. Altus is critical of both claims because they are excessive. The time set out in the bill of costs for Mr. Gordon is considerable.

[12] I am not surprised that much time is at stake here. I conclude that a reasonable client would expect that costs would be very considerable because of the contentious nature of this litigation as exhibited by both sides. There is no likelihood that costs of a few dollars would be expected by either client. When I looked at the materials filed in this action, I could not help but conclude that this litigation was an all-out battle until the last person was the only one standing. The costs outline by Plaintiff’s counsel is very detailed and is criticized by Defence counsel as being excessive. Interestingly, Defence counsel did not provide an outline of their costs for their client but acknowledges that they too are very high. Refusing to divulge their own bill of costs while criticizing the other side appears to be the pot calling the kettle discoloured. I am convinced that both clients were prepared to go to the wall in these proceedings and expected to have significant legal costs in doing so.

[13] There is not a proper Rule 49 offer to settle from the Plaintiff. There is no foundation for substantial indemnity scale costs here.

[14] Costs on a partial indemnity scale ought to be 55-60% of reasonable actual figures for the successful party. The Court of Appeal in Inter-Leasing Inc. v. Ontario (Minister of Revenue), 2014 ONCA 683, as expressed by Weiller J.A., advanced the position that such a scale of costs should be in this percentage.

[15] In this case, there will be an award on a partial indemnity scale but on a figure much less that the Plaintiff advances. One might have clients who are prepared to go to the wall. Those clients must expect to absorb many of such costs. A sum of $225,000 plus HST and disbursements of $37,722.29 will be allowed on a partial indemnity scale for the Plaintiff’s success in the action.

[16] Partial indemnity scale without allowing for an offer to settle when the Plaintiff offered a sum of money based on two separate actions, i.e. an arbitration being conducted separately and this action going forward to a trial will apply. This approach is consistent with Serra v. Paniccia, 1999 CarswellOnt 4049 from the Court of Appeal as well as Sommerard v. I.B.M. Canada Ltd., 2005 CarswellOnt 5310 and Tuffhide v. Rhino Systems of Canada, 2006 CarswellOnt 3517 with both of the last two decisions being confirmed by the Court of Appeal. Very succinctly described, these cases did not approve two distinct claims being offered to settle globally. A problem that arises when doing so is that if there is no parsing of the offer for 2 defendants to consider, one cannot determine what offer was made for each. In effect, the global offer becomes ineffective.

Costs between Gordon and Yeoman

[17] With respect to costs allegedly owing from Mr. Gordon to Mr. Yeoman, there is a dispute about the amount claimed as well as the scale of costs. Further, Mr. Gordon submits that I should make an order whereby Altus pays the costs that might be owing from Mr. Gordon to Mr. Yeoman on the basis of a Bullock or Sanderson Order.

[18] Mr. Yeoman argues that he was put to considerable expense in this action. He was sued personally for conduct as a director and officer of Altus Group Limited. Mr. Yeoman was the former CEO of Altus. He argues that there is no foundation for such a claim; however, I do not agree that the law prohibits such a claim being made by a person in Mr. Gordon’s position provided that he pleaded specifically a tort claim. Canadian case law does allow for such actions. A prime example of judicial reasoning is found in Montreal Trust Co. v. ScotiaMcLeod Inc., 1995 1301 (ON CA), 1995 CarswellOnt 1203, ADGA Systems International Ltd. v. Valcom Ltd., 1999 1527 (ON CA), 1999 CarswellOnt 29 and Meditrust Healthcare Inc. v. Shoppers Drug Mart, 1999 2316 (ON CA), 1999 CarswellOnt 2762 all from the Ontario Court of Appeal. Claims against employees and officers of corporations personally may be advanced and they can be found to be liable personally in cases in which the facts support personal liability and have been pleaded specifically. It appears to me that there is at least such a foundation here with Mr. Yeoman.

[19] Prior to the trial progressing, the claims against Mr. Yeoman were discontinued. A handwritten document to that effect was filed. The discontinuation provided for costs of Mr. Yeoman being determined later.

[20] During these costs submissions, Mr. Gordon maintains that Mr. Yeoman and Altus were closely allied and in many ways locked in each other’s arms with this litigation. During the pre-trial proceedings, Mr. Yeoman was difficult to serve and there was as much conflict in the discovery process and exchange of pleadings as there appears to have been between Mr. Gordon and Altus. One might wonder if a scorched earth course of action were practiced by everyone.

[21] Mr. MacDonald, on behalf of Mr. Gordon, advances the submission that Mr. Yeoman and Altus were so closely aligned that any costs awarded to Mr. Yeoman against Mr. Gordon should be passed through to Altus after determining whether it is reasonable to join the Defendants together and whether the court should exercise its discretion to do so.

[22] One might think that Mr. Yeoman would not be concerned about who pays his costs so long as he is compensated; however, there is an added feature regarding this issue. That is that Mr. Yeoman refuses to advise the Plaintiff whether he has had his costs covered pursuant to section 136 of the Ontario Business Corporations Act or through an insurance policy. Mr. MacDonald urges that the court take a negative inference to this conduct by Mr. Yeoman. The suggestion falls hand in hand with the concern by the Plaintiff that Mr. Yeoman and Altus have been joined at the shoulder throughout this litigation.

[23] I am persuaded that a negative inference may be drawn with this refusal by Mr. Yeoman to the extent that I do make a negative inference such that Mr. Yeoman has no costs to claim. There will be no award of costs in favour of Mr. Yeoman.

Should the Costs Awarded for Motions During the Litigation be Enlarged to Figures on a Substantial Indemnity Scale?

[24] An additional request by the Plaintiff is that I enlarge interlocutory cost awards should I grant costs on a substantial indemnity basis. I am not prepared to do so because the interlocutory orders were not made with a contemplation of a higher scale of costs being used. They were not made within a time frame of settlement offers being made. The costs awards were made with many of the motions as the parties attempted to beat each other into submission during this litigation. There is no foundation to increase those awards.

Interest Before and After Judgment

[25] Prejudgment interest will be .8% per year from the third quarter of 2010 when the action commenced. The judgment was released September 11, 2015.

[26] Postjudgment interest will be 2% per year.

Conclusion

[27] Costs are awarded to Alan Gordon payable by Altus Group Limited in the sum of $225,000 plus HST and disbursements of $37,722.29. These costs are fixed on a partial indemnity scale.

[28] No costs are awarded to Gary Yeoman. There is no need for a Bullock or Sanderson Order for payment of costs.

[29] Costs awarded for interlocutory motions during the litigation will not be changed to a higher scale. They were fixed at a partial indemnity scale and remain at that scale.

[30] Prejudgment interest is fixed at .8% per year from the third quarter of 2010 when this action was commenced.

[31] Postjudgment interest is fixed at 2% per year.

Justice B. Glass

Released: October 27, 2015