CITATION: Thomas Scullion et al. v. Paul Munro et al., 2016 ONSC 1298

COURT FILE NO.: 15-66562

DATE: 2016/02/24

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: THOMAS SCULLION and THOMAS SCULLION HOLDINGS INC., Applicants

AND

PAUL MUNRO, PAUL MUNRO HOLDINGS INC., et al., Respondents

BEFORE: Madam Justice S. Corthorn

COUNSEL: Thomas G. Conway and Benjamin Grant, Counsel for the Applicants

Dave Morin-Pelletier, Counsel for the Respondents

HEARD: In writing

RULING AS TO Costs

[1] In my endorsement dated January 4, and released on January 6, 2016, I granted the applicants’ motion for relief permitting Thomas Scullion (“Scullion”) to resume his day-to-day involvement in the businesses that he and the respondent Paul Munro (“Munro”) have been running for a number of years. The relief was granted in the context of applications commenced by each of Scullion and Munro. On the interim motions, Scullion wanted back into and Munro sought to keep Scullion out of the management and operation of the businesses. Scullion based his request for relief on statutory oppression remedy provisions. Munro sought an interlocutory injunction.

[2] I ruled that Munro was not entitled to the injunctive relief he requested. So as to level the playing field between the parties pending the hearing of the applications in March 2016, I ordered that Scullion be permitted to resume his role in the operation and management of the businesses. My order includes terms which govern the parties as they conduct business pending a decision on the applications.

[3] I invited the parties to make submissions with respect to costs in the event they were not able to reach an agreement as to the costs.

[4] The applicants submit that they are entitled to their costs of the interim proceedings on a substantial indemnity scale. They rely on an offer to settle made on their behalf at the outset of the proceeding. The offer was made in a letter dated November 20, 2015 from their counsel and addressed to counsel for the respondents. The notice of application was issued on November 19, 2015 and the applicants’ offer to settle was made the following day. The letter was included with the notice of application when the originating process was served.

[5] The respondents’ position is that:

a) I have discretion pursuant to r. 57.03(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to order something other than costs to the successful party payable within 30 days; and

b) In the circumstances, an order of costs payable in the cause is appropriate.

[6] In support of their position, the respondents rely on the decisions of Borins J. (as he then was) in Rogers Cable TV Ltd. v. 373041 Ontario Ltd., 1994 CarswellOnt 4729 (Gen. Div.) [Rogers Cable] and Perell J. in Quizno’s Canada Restaurant Corp v. 1450987 Ontario Corp., 2009 31599 (Ont. S.C.J.) [Quizno’s]. In both cases, even though the moving party was successful on a motion for an interlocutory injunction, the judge ordered that costs of the motion be in the cause.

[7] The factors considered, in one or both of the cases, which resulted in an order of costs in the cause include the following:

• Does the result of the motion put an effective end to the dispute or is the result merely a step on the way to a trial?

• The interim relief granted serves to protect the position of the successful party pending determination of the substantive issues. There has been no final determination of rights as between the parties.

• Where it is a virtual certainty, despite the outcome on the motion, that the matter will proceed to trial the potential alternative orders as to costs are:

➢ Costs to the successful party in any event of the cause;

➢ Costs to the successful party in the cause;

➢ Costs in the cause; or

➢ Costs reserved to the trial judge.

• In a case in which the merits are not clear as of the date of the motion for interim/interlocutory relief, the appropriate order is costs in the cause.

[8] At paragraph 10 of his decision in Quizno’s, Perell J. said:

Where a plaintiff succeeds in obtaining an interlocutory injunction it is the preferable (although not inevitable) course to reserve costs to the trial judge, which is to say to make costs in the cause. This is the preferable course because it allows the court to have benefit of hindsight and to avoid the possible injustice of awarding costs to a plaintiff for having succeeded in obtaining an order to protect his or her position pending trial when the outcome of the trial reveals that that plaintiff’s position was not worthy of having been protected.

[9] It remains to be determined whether Scullion’s position was worthy of the protection given by my order; the substantive issues have yet to be determined. At first glance, it appears that this matter is ‘on all fours’ with the two cases upon which the respondents rely and that the appropriate order is costs in the cause.

[10] However, my findings as to Munro’s conduct in unilaterally ousting Scullion without any colour of right are relevant to the matter of costs. Even if Munro’s concerns about and loss of trust in Scullion turn out to be well-founded, those concerns do not justify the ‘self-help’ approach taken by Munro. Had Munro addressed his concerns in a different manner, the interim motions might not have been required.

[11] Taking into consideration Munro’s conduct, as addressed in my January 2016 endorsement, and the authorities discussed herein, I find that the most fair and just order as to costs is that the applicants are entitled to their costs of the interim motions in any event of the cause.

[12] It is therefore necessary to fix the costs that the respondents Paul Munro and Paul Munro Holdings Inc. are to pay to the applicants following the determination of and in any event of the outcome on the applications.

Scale of Costs

[13] In support of their request for costs on a substantial indemnity basis, the applicants rely on the following:

• The findings made as to the conduct of the respondents (i.e. that Munro acted without colour of right; egregiously; and comes to Court with unclean hands);

• That the results achieved are as good as or better than the terms of the applicants’ offer to settle made at the outset of the matter (i.e. when the notice of application was served on the respondents); and

• Mr. Munro’s expectations that if he had been successful on the interim motions he would have been entitled to costs on a substantial indemnity basis.

[14] Mr. Munro’s conduct is the basis for awarding costs in any event of as opposed to in the cause. As noted above, serious issues remain to be determined with respect to Scullion’s conduct in the businesses. The interim motions have not put an effective end to the dispute. I therefore do not consider Munro’s conduct to be a factor in determining the scale of costs.

[15] Pursuant to r. 57.01(1) of the Rules of Civil Procedure, I have the discretion to consider any offer to settle made in writing and the result in the proceeding. The offer to settle made on behalf of the applicants in November 2015, at the outset of these matters, was not specific in all of its terms. The applicants have, in a general way, achieved a result as good as their offer to settle.

[16] The ‘rules of engagement’ which comprise what is now Schedule ‘A’ of the order were not addressed in correspondence prior to the date of the motion. There is no offer to settle against which to consider the specific terms of Schedule ‘A’.

[17] I am not, in these circumstances, swayed by Mr. Munro’s expectations that he would be awarded costs on a substantial indemnity basis if he had been successful on an interim basis.

[18] For the reasons set out above, I exercise my discretion by awarding costs on a partial indemnity basis.

Fixing Costs

[19] With costs payable in any event of the cause, it is appropriate that I fix costs at this time rather than leave it to the judge hearing the applications to determine the costs of the interim motions. From my review of the costs outlines of the parties and the bill of costs submitted on behalf of the applicants I note the following:

• The applicants and the respondents each had senior counsel and junior counsel working on the matter.

• The number of hours spent by senior counsel for the applicants (Mr. Conway) is approximately the same as the number of hours spent by senior counsel for the respondents (Mr. Morin-Pelletier).

• The number of hours spent by junior counsel for the applicants (Mr. Grant) is significantly less than the number of hours spent by junior counsel for the respondents (Mr. Desforges).

• The actual hourly rates charged by each of Mr. Conway ($500 – 1989 call), Mr. Grant ($205 – 2013 call), and Ms. Leindecker (clerk - $140 – 21 years’ experience) are reasonable given their respective years of experience.

• I have discounted the time of lawyer Ms. Baru at the office of counsel for the applicants, as there is no explanation as to why a third lawyer was required on the file.

• I have not allowed the time of counsel for the applicants incurred when the matter was re-scheduled due to a lack of judicial resources. It is reasonable in those circumstances for the parties to each bear their costs of that event.

[20] On behalf of the applicants it is submitted that the differences between the partial indemnity costs and the actual costs set out in the parties’ respective costs outlines, differences of $5,054 and $6,799 respectively, are explained by:

a) The experience of senior counsel and the concomitant higher hourly rate claimed;

b) The preparation by senior counsel for the applicants for the urgent motion before Justice Roger on November 27, 2015;

c) The additional effort and work usually required and normally incurred by a moving party who has the burden of proof on an injunction motion;

d) The preparation for cross-examination of two deponents (Munro and Ms. Watson), as opposed to one deponent (Scullion); and

e) The importance to Scullion of establishing his rights as an equal shareholder and partner in the businesses and of reinstating those rights, including his only source of income.

[21] Taking those factors into consideration, I find that the costs claimed by the applicants fall within the reasonable expectations of the respondents.

[22] Point (e) above is relevant with respect to r. 57.01(1)(a) of the Rules - the amount claimed and the amount recovered. I take Munro’s conduct into consideration with respect to rr. 57.01(1)(e) and (f) of the Rules - conduct which tended to unnecessarily lengthen the proceeding and improper conduct, respectively.

[23] The exercise of fixing costs does not require an item-by-item assessment. The partial indemnity costs claimed by the applicants total $22,338.69. For the reasons set out above, I fix the partial indemnity fees at $19,800 with HST thereon in the amount of $2,574.

[24] The disbursements claimed total $1,665.47 (with HST included where applicable). Of the disbursements claimed, I disallow the following:

Court fees ($283) - This amount appears to include the cost of issuing the notice of application. The court fees associated with the interim proceeding are not clear. This item is a disbursement with respect to the applications.

LPIC Levy ($100) - This levy relates to the file generally and is a disbursement item with respect to the applications.

Taxi ($9.87) - No explanation is provided as to why a taxi fare was incurred.

[25] Of the disbursement items disallowed, the only item which is subject to HST is the taxi fare of $9.87. The HST applicable to the taxi fare is $1.28. The disbursements allowed total $1,271.32 ($1,665.47 - $283.00 - $100.00 - $9.87 - $1.28). The HST on the amount allowed for disbursements is $165.27.

[26] In summary, the Munro respondents are to pay the applicants, following a determination of the applications and in any event of the cause, costs as follow:

Fees $ 19,800.00

HST on fees $ 2,574.00

Disbursements $ 1,271.32

HST on disbursements $ 165.27

Total $ 23,810.59

[27] Interest is payable on the costs awarded:

a) At the rate prescribed by the Court of Justice Act, R.S.O. 1990, c. C.43; and

b) From the date of determination of the applications.

Date: February 24, 2016

Justice S. Corthorn

CITATION: Thomas Scullion et al. v. Paul Munro et al., 2016 ONSC 1298

COURT FILE NO.: 15-66562

DATE: 2016/02/24

ONTARIO

SUPERIOR COURT OF JUSTICE

RE: THOMAS SCULLION and THOMAS SCULLION HOLDINGS INC.,

AND

PAUL MUNRO, PAUL MUNRO HOLDINGS INC., et al.,

BEFORE: Madam Justice S. Corthorn

COUNSEL: Thomas G. Conway and Benjamin Grant, Counsel for the Applicants

Dave Morin-Pelletier, Counsel for the Respondents

RULING AS TO COSTS

Justice S. Corthorn

Released: February 24, 2016