Court File and Parties

COURT FILE NO.: CV-10-411470 DATE: 2016-06-20 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 2249659 Ontario Ltd. and Rohwedder Canada Inc., Plaintiffs AND: Sparkasse Siegen and Thomas Magnete GmbH, Defendants

BEFORE: S. F. Dunphy, J.

COUNSEL: James Renihan and Christine Muir, for the Plaintiffs Evan L. Tingley, for the Defendant Sparkasse Siegen P.A. Neena Gupta and Katherine Metcalfe, for the Defendant Thomas Magnete GmbH

HEARD: April 29, 2016

Endorsement

[1] On April 29, 2016, I released my reasons for judgment in this matter, dismissing the claim of the plaintiffs: 2249659 Ontario Ltd. v Sparkasse Siegen, 2016 ONSC 2066. I took the matter of costs under reserve pending receipt of written submissions from the parties. I have now had an opportunity to review those submissions.

[2] The plaintiffs have not challenged the reasonableness of the partial indemnity outlines of costs provided by the two defendants Thomas Magnete GmbH and Sparkasse Siegen.

Issues to be decided

[3] The two issues the parties were unable to resolve in discussions between them were these:

a. Should the successful defendant Thomas Magnete receive a higher scale of costs in light of settlement offers made? b. Is there any basis to award costs against Mr. Mellema personally?

Analysis and discussion

(i) Offers to settle and scale of costs

[4] The plaintiffs received two settlement offers from the defendant Thomas Magnete and none from Sparkasse Siegen. The first offer, dated August 30, 2013 was in the amount of $25,000. This was an admittedly small offer relative to the amount claimed and amounted to little more than a contribution towards costs incurred to that point. Of course, given the fact that the defendants were successful, the offer was certainly more advantageous than incurring further costs of proceeding to trial unsuccessfully.

[5] The second offer was made on February 9, 2016. This was less than seven days prior to trial but was for a more substantial amount: $125,000 all inclusive. Again, having regard to the costs incurred by the parties to that point in the litigation, it is likely that this offer did not greatly exceed the incurred partial indemnity costs of the plaintiffs to that point.

[6] Rule 49.10 of the Rules of Civil Procedure does not impose costs consequences upon an unsuccessful plaintiff who fails to accept a settlement offer that might have avoided the needless costs of an ultimately unsuccessful trial. The theory is that the successful defendant is already compensated by an award of costs. The rule addresses the potential unfairness of imposing costs on the defendant who, while unsuccessful at trial, had nonetheless offered the plaintiff the opportunity of avoiding the expense of trial to obtain no more than was offered in any event.

[7] It is clear the court’s discretion under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. 43 or under Rule 57.01(1)(i) and Rule 57.04 of the Rules of Civil Procedure to consider a defendant’s offer to settle as a relevant factor in the assessment of costs is not precluded by the mere fact that Rule 49.10 of the Rules of Civil Procedure is not applicable in the circumstances: Richardson (Re) (at para. 20 et seq.). Rule 49 of the Rules of Civil Procedure is not a “complete code” on the matter of offers to settle. On the other hand, it is surely a strong guideline the departure from which ought normally to require cogent reasons.

[8] Do either of the offers to settle by the plaintiffs warrant the application of a higher than normal standard of costs? I am of the view that they do not.

[9] There is no hard and fast rule to be applied to the application of discretion in cases such as this. Certainly either or both offers would have avoided expensive trial preparation, particularly in the context of two defendants having been brought into the jurisdiction from Germany with the added expense entailed by that. Against this factor must be considered the fact that the claim was certainly not frivolous or vexatious. It was unsuccessful in the end, but I cannot characterize this claim as one that was so obviously weak that a plaintiff should be sanctioned for having failed to take the opportunity to avoid the expense of litigation by abandoning the claim outright. The $25,000 offer may have covered the plaintiffs’ costs to that point in the proceeding, but likely little more than that. The $125,000 offer coming as late as it did would likely have covered only a little more than partial indemnity costs to that point in the proceeding given the outlines of costs received by me. I cannot find that the plaintiffs acted unreasonably in declining to capitulate but choosing instead to bring a reasonable if ultimately unsuccessful claim to trial.

[10] There was no other conduct of the plaintiffs in the context of this action that might have given rise to the exercise of my discretion to impose costs on a higher scale. Thomas Magnete suggests that the offer to settle made by the plaintiff was not a genuine offer to compromise and was made too late in the proceeding to have had a material impact. While Thomas Magnete may have found the plaintiffs’ approach to be somewhat “hard line”, I cannot find anything in the conduct of the plaintiffs to have crossed the line. Parties are not obliged to make settlement offers. Reasonable offers may be rewarded, but that does not imply lack of offers will be sanctioned.

[11] I find that the successful defendants are entitled to their costs fixed on a partial indemnity scale.

[12] The defendant Thomas Magnete submitted an outline of costs detailing partial indemnity costs and disbursements totaling $150,302.98. The plaintiffs have accepted this as a reasonable quantification of such costs and I have found it reasonable after reviewing it. I accordingly fix the partial indemnity costs of Thomas Magnete at $150,302.98 and the plaintiffs shall be ordered to pay that amount plus interest from the date of my judgment.

[13] Sparkasse Siegen submitted a costs outline totaling $62,776.57. The plaintiffs have accepted this outline and having reviewed it, I also find it to be reasonable. I accordingly fix the partial indemnity costs of Sparkasse Siegen at $62,776.57 and the plaintiffs shall be ordered to pay that amount plus interest from the date of my judgment.

(ii) Costs against a non-party?

[14] In my reasons for judgment, I invited the parties to make submissions on the matter of Mr. Mellema’s responsibility for costs if such a claim were being advanced. I did so without any knowledge of what discussions, if any, had been held on the matter of costs or the state of offers to settle or prior orders as to security for costs.

[15] The evidence led at trial indicated that Mr. Mellema has acquired the plaintiff company for nominal consideration in a transaction whose dominant if not sole purpose was to convey to Mr. Mellema the benefit of this action should he choose to fund it. This was done in the context of insolvency proceedings afflicting the plaintiff’s former parent company in Germany under an agreement that provided the vendor with the option of funding this litigation in part and receiving an interest in its fruits, if any (the option was apparently not exercised).

[16] Having considered the matter further and in light of the submissions made, I am not persuaded that I should make any order affecting Mr. Mellema personally.

[17] The defendants were aware of the arrangements by which Mr. Mellema acquired effective control of this claim at all material times. They had every opportunity to take steps either to put Mr. Mellema on notice that costs would be sought against him personally or to have sought increased security for costs. Indeed, the defendants sought and obtained an increase in the amount of security for costs posted only a month prior to trial. It would be unfair at this late juncture to visit costs consequences upon him personally after the conclusion of trial and long past the time where he could take any steps to address the issue.

[18] I decline to order costs against Mr. Mellema personally.

Disposition

[19] I therefore order the plaintiffs to pay $150,302.98 in costs to the defendant Thomas Magnete GmbH and $62,776.57 in costs to the defendant Sparkasse Siegen together with post-judgment interest from the date of my judgment herein (April 29, 2016).

[20] I am advised that a total of $112,500 has been paid into court by the plaintiffs as security for costs of the defendants. The defendants are also entitled to an order for payment out of court of the security for costs posted pro rata to the awards of costs I have made herein. This provision only of my order shall be stayed for a period of five days only to permit either defendant to make written submissions to me if there is any reason to vary my order to make a different allocation of the funds posted as security for costs.

S.F. Dunphy J. Date: June 20, 2016