COURT FILE NO.: CV-14-00502020

DATE: 20151106

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 2261897 Ontario Inc. O/A Center Stage Audio Visuals, Plaintiff

AND:

Quest Audio Visual Inc. and Kevin Terry, Defendants

AND:

Kevin Terry, Plaintiff by Counterclaim

AND:

2261897 Ontario Inc. O/A Center Stage Audio Visuals, Defendant by Counterclaim

BEFORE: Sean F. Dunphy J.

COUNSEL: Kashif Sher, for the Defendants/Plaintiff by Counterclaim and Moving Party

Aaron Rousseau, for the Plaintiff/Responding Party

HEARD: April 9, 2015

COSTS ENDORSEMENT

[1] In Reasons for Judgment issued on April 16, 2015, I dismissed the claim of the plaintiff following a summary judgment motion brought by the defendants. I requested the parties to make submissions as to costs. I have reviewed their submissions and this is my determination of costs arising from my judgment (at 2015 ONSC 2428).

[2] The defendants were entirely successful on their motion for judgment. The plaintiff’s claim was dismissed. The defendant Mr. Terry’s counterclaim was successful subject only to the fact that I was unable to assess damages without a subsequent hearing. While the Mr. Terry has elected not to proceed with a further hearing to assess his damages, his decision does not detract from the fact that he succeeded in that aspect of his motion as well.

[3] The unsuccessful plaintiff suggests that partial indemnity costs should be awarded in this case and further submits that the hours claimed by the successful defendant were excessive and should be reduced by approximately one-third, applying a suggested with a rate of $200. The plaintiff suggests partial indemnity costs of $22,500 would be appropriate.

[4] The defendants suggest that full indemnity costs ought to be awarded. In such case, they have provided an outline of costs indicating that Mr. Sher expended 133.8 hours at a claimed full indemnity rate of $300/hr for the beginning stage of the litigation, rising to $375/hr later on. Mr. Sher notes that he worked at a discounted rate for this client.

[5] The defendants’ outline listed a disbursement claim that included only court filing fees, binding costs and transcripts but sought nothing for photocopies, printing or postage. Total claimed disbursements were $1,316.17. No specific issue has been taken with the amount of disbursements claimed nor does any objection appear appropriate to me upon reviewing these amounts. I would allow the claimed disbursements in full.

[6] The defendant’s counsel, Mr. Sher is a 2001 call. As noted, he billed his client at a discounted rate of $300 rising to $375 per hour. The “grid” of partial indemnity costs established by the Civil Procedure Rules Committee for counsel of his vintage would suggest a ceiling rate of $300 per hour, with some adjustment to account for inflation since 2005: First Capital (Canholdings) Corp. v North American Property Group, 2012 ONSC 1359. Taking judicial notice of the CPI tables from Statistics Canada for 2005 (106.9) compared to September 2015 (127.8) an increase of approximately 20% is an appropriate adjustment to the ceiling. This would suggest a ceiling rate of $360 for partial indemnity costs under the Rules Committee published grid of rates. Applying the rate of $360 to the 133.8 hours claimed by the defendants would produce a fee claim of $48,168 which almost precisely matches the $48,285 actually claimed before application of HST and disbursements.

[7] The defendants are of course requesting full indemnity costs. The grid rate for partial indemnity costs suggests that Mr. Sher’s full indemnity cost claim is very close to the ceiling of appropriate partial indemnity rates. As noted, his outline indicates that he worked at a discount to his normal rates in this case.

[8] Before leaving the “grid approach” to costs (which responds to the indemnity principle in Rule 57.01(1)(0.a) of the Rules of Civil Procedure and is but one of the factors I am to have regard to in exercising my discretion under s. 131 of the Courts of Justice Act), I must consider the hours expended.

[9] The defendants’ outline indicates 133.8 hours spent in defending this action and preparing and appearing on the successful motion for summary judgment. That total number of hours is very heavily weighted to responding to the tactics of the plaintiff who sought to examine nine non-party witnesses and ultimately examined six and raised a number of issues that were of the kitchen sink variety in its claim. The witnesses named included clients of Mr. Terry who were dragged into this ultimately baseless litigation in a manner not calculated to enhance their views of him. I find that the hours spent by the defendants counsel were entirely reasonable and indeed quite modest in the context of the “kitchen sink” of issues raised and tactics deployed by the plaintiff in this case.

[10] In so far as the principle of indemnity is concerned, the $55,878.22 in costs claimed (including HST and disbursements) on a full indemnity basis compares quite favourably to what might be awarded on a partial indemnity basis having regard to the grid rates, the reasonableness of the time expended, Mr. Sher’s skill and year of call (his evident experience in this area obviated the expenditure of greater amounts of time that others might have required to respond) and the fact that Mr. Sher agreed to work on a discounted basis in this case. The plaintiffs are not entitled to the benefit of discounts conceded by Mr. Sher to his own client providing the principle of indemnity is not otherwise violated.

[11] The amounts claimed and importance of the issues to the parties also warrant the exercise of discretion in the defendants’ favour in the assessment of costs. The amount claimed would have been financially crippling and the allegations made had the potential to seriously damage if not destroy the defendants’ business. A vigourous defence was called for and made.

[12] I find as well that the amount of costs an unsuccessful party might reasonably expect to pay upon the contested dismissal of an action raising this many issues and claiming damages of this order of magnitude also confirms that an “all in” award of costs very close to the claimed amount of $55,878.22 on a partial indemnity basis would be fair and reasonable.

[13] In short, I am prepared to accept the defendants’ claimed costs of $55,878.22 on a partial indemnity basis even before considering whether the claimed full indemnity recovery is warranted on the facts of this case. The amounts claimed are quite reasonable in these circumstances on a partial indemnity basis and I would allow them. The principle of indemnity precludes me from awarding more than the costs incurred but it does not preclude me from awarding actual costs incurred where, by reason of discounts agreed in a particular case, the successful litigant’s actual expenses happen to coincide with the level of partial indemnity costs otherwise determined.

[14] While the claim for full indemnity costs is thus moot given the indemnity principle and the amount of partial indemnity costs I have found reasonable, I would nevertheless allow the claim on a full indemnity basis. The conduct of the plaintiff in this case displayed significant aspects of tactical litigation designed to punish and hinder a competitor. The reprehensible conduct of the plaintiff and its principal as adverted to in my Reasons for Judgment cannot be entirely divorced from the matter of costs since litigation in this case was being used as a tool to punish and appeared to me to be lacking in good faith.

[15] Finally, I must assess the defendants’ request that any costs award be made against the principals of the plaintiff, Mr. Dasrath and Mr. Fillier. The defendants cite the recent case of The Hearing Clinic (Niagara Falls) v. 866073 Ontario Limited et al., 2015 ONSC 11177 for the proposition that I may order costs against the principals of a corporation.

[16] It is clear that the court has discretion to make a costs award against non-parties, including principals or shareholders of a party. However, such discretion should in my view be exercised very carefully and only with a reasonable evidentiary foundation. I would consider it appropriate to consider the matter as being very analogous to piercing the corporate veil and similar considerations ought to apply. In general, I would have reference to the decision of Pepall J. A. in Shoppers Drug Mart Inc. v. 6470360 Canada Inc. (Energyshop Consulting Inc./Powerhouse Energy Management Inc.), 2014 ONCA 85 for an outline of the applicable principles.

[17] While Quinn J. in The Hearing Clinic (supra) rather colourfully noted that “the corporate veil was never intended to serve as a bandit’s mask” (at para. 118), he had evidence before him suggesting that the corporation in that case was a mere shell used in an action designed to perpetrate a fraud upon the court. As displeased as I am with the conduct of Mr. Dasrath in particular, I have no evidence before me which would justify piercing the corporate veil in this case. I cannot find that the plaintiff was used as a shield. The plaintiff is – or at least was at the relevant time – a real entity and the actual employer of Mr. Terry. The plaintiff was the logical and proper party to act as plaintiff in this case, as meritless as the litigation may have been. While I have grave concerns about the litigation having been commenced with a collateral purpose (being retribution or harming Mr. Terry and his relationship with clients and his new employer), even that collateral purpose is one rationally attributable to the plaintiff corporation, even if carried into effect by its instrument, Mr. Dasrath.

[18] Absent some evidence sufficient to warrant the application of the doctrine of piercing the corporate veil at least by analogy, I should not lightly impose costs against non-parties as tempting as it is to do so in a case such as this. Mere speculation is not sufficient. That being said, I must reserve the right to alter or vary this order however should it appear that the principals of the plaintiff have taken steps since the hearing in April to “judgment proof” the plaintiff or otherwise frustrate the defendants’ ability to enforce the costs award made here

[19] In the circumstances, I have determined to fix the defendants costs in the amount of 58,878.22 (inclusive of HST and disbursements) payable by the plaintiff forthwith. This amount shall bear post-judgment interest at the post-judgment interest rate.

Sean F. Dunphy J.

Date: November 6, 2015

COURT FILE NO.: CV-14-00502020

DATE: 20150416

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

2261897 Ontario Inc. O/A Center Stage Audio Visuals, Plaintiff

AND:

Quest Audio Visual Inc. and Kevin Terry, Defendants

AND:

Kevin Terry, Plaintiff by Counterclaim

AND:

2261897 Ontario Inc. O/A Center Stage Audio Visuals, Defendant by Counterclaim

REASONS FOR JUDGMENT

Sean F. Dunphy, J.

Released: November 6, 2015