720441 Ontario Inc. v. The Boiler et al., 2015 ONSC6681

COURT FILE NO.: 03-CV-254717

Heard: November 7, 2014; March 11, June 23, 2015 and October 7, 2015

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 720441 Ontario Inc. v. The Boiler et al

BEFORE: Master Joan Haberman

COUNSEL:
Salsberg, B. for the plaintiffs

Akazaki, R.L. for Boiler Inspection

REASONS: QUANTUM of SECURITY for BOILER INSPECTION

Master Haberman:

[1] These Reasons are the fourth and final instalment flowing from the motions for security for costs brought by 4 separate defendants in this proceeding. These Reasons pertain only to the quantum of security to be awarded to the defendant, Boiler Inspection, the defendant that spearheaded these motions.

PREVIOUS ORDERS

[2] In my previous Reasons, I dealt with the following issues:

• the plaintiffs’ attempt to file new materials late in the day, which I refused to permit;

• whether the plaintiffs had established to the satisfaction of the court that they were impecunious. I found that they had not;

• entitlement of each of the defendants to an order for security for costs. I found that each of them was so entitled; and

• the quantum to be posted with respect to the other three defendants.

[3] In these Reasons I deal only with the remaining issue, the quantum of security for costs to be posted by the plaintiffs to the credit of the action vis a vis Boiler and two small peripheral issues.

[4] When dealing with quantum as it pertained to the other defendants, I noted that the quantum awarded should reflect a number within the reasonable contemplation of the parties, as required when dealing with any order for costs.

[5] I also noted that the scale of the award is generally partial indemnity, unless there is a contractual arrangement that provides for more.

[6] I indicated that, in the normal course, a “pay as you go” order would be made, but that in view of the advanced stage of this litigation, it was not possible to carve off anything from this order except for trial costs. I therefore fixed quantum to include costs incurred to-date, along with anticipated costs for the scheduling, preparation and attendance at both mandatory mediation and the pre-trial. I am approaching this matter in the same way.

[7] Finally, in my last set of Reasons, I gave some context for why the quantum of costs sought by each defendant was as high as it was. Paragraphs 62 to 77 in my Reasons of July 30, 2015 set out the issues that were in play which caused costs incurred by each defendant to escalate to levels higher than what one normally expect in this type of action. The same rationale applies to Boiler.

[8] In the end, I ordered the plaintiffs to post security for costs as follows:

• to Carpenter, the landlord, $300,000 for costs incurred to-date and $20,000 for mediation and pre-trial (total: $320,000);

• to Dominion, the insurer, $150,000 for costs incurred to-date and $20,000 for mediation and pre-trial (total: $170,000) and

• to Dynes, $80,000 for costs incurred to-date and $12,000 for mediation and pre-trial (total: $92,000).

[9] In my Reasons of June 3, 2015, I found that Boiler had made out a prima facie case for security, as per the first prong of the Hallum test, under all subsections of Rule 56.01(1) under which they moved. This included Boiler’s position that there was good reason to believe that the action against them was frivolous and vexations (Rule 56.01(1)(e)).

[10] In view of my finding under that subrule, the result of my analysis when dealing with the second prong of the Hallum test was a foregone conclusion. I therefore found that the plaintiffs’ case as against Boiler did not stand a good chance of success. As a result, I formed the view that the order that was just, in this case, was an order that security for costs be posted. All that is left for me to do now is fix the quantum of costs to be posted as security vis a vis Boiler.

ADDITIONAL ISSUE

[11] In the midst of this motion and at the end of his submissions, counsel for Boiler asked that I order that the derivate action under the Family Law act, brought by Ella Conen, be stayed along with this one, pending payment of security for costs.

[12] I am not case managing this action, and was charged with hearing 4 motions in the one action, only. Those 4 motions mushroomed from what I was assured could be done in one day to 5 days or parts of days. No notice was given of this motion either to the plaintiff or to the court. I have therefor declined to do as requested, without prejudice to Boiler bringing this motion after having booked it with the court and after having given proper notice.

CONSIDERATIONS WHEN ASSESSING QUANTUM for BOILER

[13] The quantum of security for costs awarded to date with respect to the other defendants is significant, and in earlier Reasons, I explained why. At the end of the day, the costs that have been incurred overall were justifiable on these facts and are proportional to both the damages of $7 million being claimed and the various headings pursuant to which they are sought.

[14] Comatec, however, takes issue with this defendant having submitted a request for more than has been awarded to any of the others. Boiler’s counsel has indicated that he is seeking costs as follows:

Costs incurred: $400,000 for fees

$60,000 for disbursements

$43,700 for taxes

Anticipated costs: $20,000 for mediation and pre-trial

TOTAL $523,700

[15] Simply put, Comatec questions how and why Boiler incurred more costs than any of the others. As their counsel put it, the issue as against Boiler was pretty straightforward – a unique, singular issue of liability, involving privity of contract.

[16] Despite this, Comatec kept Boiler in the action through the pleadings and various iterations thereof; disclosure of documents; and oral discoveries. They remain a party to these proceedings. In the context of these motions Comatec put up a staunch defence vis a vis Boiler when dealing with the merits of their case against that defendant. At no time when dealing with the merits of this motion did Comatec ever suggest that Boiler had a straightforward defence or a winnable position, such that all their work here was truly a case of overkill. Instead, their counsel dealt with Boiler as though it was a perfectly appropriate defendant to have been included in the action and to remain there. He put forward a case for keeping Boiler in the action, notwithstanding the fact that, 12 years into this litigation, no policy of insurance between any of his clients and this insurer has been produced, due likely to the fact that Boiler is actually Dominion’s reinsurer for this loss.

[17] Comatec is only now prepared to say that it is obvious they have no case against Boiler. They do so now as a basis for questioning why Boiler counsel devoted what he considers to be an excess of resources to defending this action.

[18] This was Comatec’s strategic approach to handling the matter – they fought it tooth and nail until arriving at the issue of quantum and now they claim the case against Boiler was so obviously not going anywhere that Boiler shouldn’t have done all this work and seek costs at this level.

[19] It is easy, in hindsight, to ask why Boiler did not simply bring a motion for summary judgement years ago. One must bear in mind however that the test for that motion has changed over the life of this 12 year-old action. Counsel cannot be faulted for a strategic decision that turned out to be more costly as a result.

[20] Further, in view of the changing nature of this litigation over time, Comatec cannot now complain that the level of costs incurred was beyond their reasonable contemplation. Had anyone sat down and thought about this action as it unfolded, they would have appreciated how these shifts would impact on costs.

[21] Finally, Comatex raises the fact that there must have been some overlap among the defendants in terms of the work done, so that this is something I must consider. I have done so. Each defendant had to review the claim against them and consider its own position. Each had to draft their own statement of defence. Each had to review their own documents and prepare an affidavit of documents, as well as review what was produced by the plaintiffs. Most were involved in a myriad of motions to compel further productions and responses to undertakings, and to stop the sale of the machinery. All were involved at discoveries as the defendants do not have an identity of interest and each had to explore liability issues vis a vis their own position, while all had to deal with a damage claim that involved a plethora of subheadings, with little detail, and was vague in the extreme when it came to Broner’s health issues.

[22] The fact is that Comatec kept coming, in the face of compelling evidence that they had no claim to advance against Boiler. As a result, Boiler had to treat the claim seriously as it would any other, and explore it. This is a claim with an ever-expanding breadth, a true shape-shifter. Every conceivable head of damage has been dredged up and thrown at these defendants, all with minimal detail. I have already noted the length of the proof of loss; the duration of examinations for discovery; the types of claims that have been put forward without a scintilla of supporting evidence. It is not surprising that these defendants have devoted significant resources to whittling away at this $7 million action in an attempt to uncover what is really at stake.

[23] Boiler certainly took the lead on this motion – a full box of materials and a full day of submissions from their counsel, alone. Winning this motion was clearly extremely important to them – as it is to all of the defendants.

[24] I therefore reject Comatec’s position that their quantum should be lower than that of Carpenter, who they now say is the main defendant. Having brought Boiler into this action and kept them there all these years, though no one has cross-claimed against them, they had to have been aware of the risk they were taking.

[25] It is therefore ordered as follows:

1. the plaintiffs shall post security for costs to the credit of this action in favour of Boiler, in the amount of $503,700 representing costs incurred to-date, exclusive of the costs of various motions (which I am now told have been paid) within 45 days from the date of these Reasons;

2. This action is stayed, subject to each party’s right of appeal, until security has been posted as ordered;

3. If security has been posted as ordered, the parties shall schedule mandatory mediation. The deadline I imposed in my order dealing with the other defendants imposed a deadline for completion of mediation of the end of December 2016. I am advised these matters are now under appeal but I will leave that deadline in place and extend it to Boiler, as well. However, by this order I remove the deadline by which mediation must be scheduled, set out in my July 2015 order, as it is no longer practical in view of the appeal;

4. Further security for costs shall be posted to the credit of this action in favour of Boiler in the amount of $20,000 at least 60 days before the date scheduled for mediation. This represents the costs associated with scheduling, preparing for and attending mediation, to its conclusion, as well as for scheduling, preparing for and attending a pre-trial;

5. If the action has not settled and proceeds to trial, these defendants are at liberty to move for further security for costs.

[26] As noted in my July 30, 2015 Reasons, these Reasons do not include the costs for this motion, best left for written submissions, in my view, but only if the parties cannot agree. If my involvement is needed, I expect to be told within the next thirty days.

(original signed)_____

Master Joan M. Haberman

Released: October 28, 2015