Court File and Parties

COURT FILE NO.: CV-15-0694-00 DATE: 2016-07-11 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: TSI International Inc., Plaintiff AND: John Formosa, Steffen Nielsen, iFarmLocal Inc., Richard Taylor, Great Life Group Inc. and John Masih, carrying on business as MSM Group, Defendants

BEFORE: LeMay J.

COUNSEL: Robert Taylor, Counsel for the Plaintiff Tim Duncan, Counsel for the Defendants

COSTS ENDORSEMENT

[1] The parties in this case have been engaged in ongoing litigation for over sixteen months at this point. Pleadings in this action have not yet closed. This is a costs endorsement flowing from my reasons on a pleadings motion reported at 2016 ONSC 3750.

[2] In its original motion, the Plaintiff sought to strike significant portions of the Defendants’ pleadings under Rule 25. In the course of arguing that motion last December, I observed to both counsel that I thought it unlikely that the motion would succeed under Rule 25 because of the “clean hands” and “abuse of process” claims being advanced in the Defendants’ statement of claim.

[3] However, I also observed to counsel that one possible outcome was that, if the Plaintiff lost its Rule 25 motion, it might very well bring a Rule 21 motion. As a result, after some discussion with counsel, I set up a process whereby both issues would be before the Court at the same time. This resulted in a hearing on both December 21st, 2015 and March 21st, 2016. The March 21st, 2016 hearing was a full-day argument.

[4] It is now time to fix the costs for this motion.

Positions of the Parties

[5] The Plaintiff seeks its substantial indemnity costs, in the sum of $107,192.69, inclusive of disbursements but not of HST. In total, the Plaintiff’s substantial indemnity costs would be approximately $122,000.00. The Plaintiff seeks these costs for the following reasons:

a) The Plaintiff was overwhelmingly successful in its position on the motion. b) The Plaintiff’s Rule 25 motion was not dismissed, but instead, the Court decided the issue under Rule 21. c) The Plaintiff attempted to resolve the issues relating to these pleadings in advance of the motion.

[6] The Defendants oppose the Plaintiff’s position on costs, and asserts that each side should bear its own costs. The Defendants advance the following reasons in support of their position:

a) The outcome of the motion was mixed. b) There was leave to amend on a lot of the paragraphs that were struck. c) The Plaintiff’s disorganization meant that there was extra Court time while the Rule 25 and 21 motions were heard together. d) The claim for costs advanced by the Plaintiff is wholly disproportionate to the nature of the motion.

Analysis

[7] The factors that the Court will take into consideration in deciding costs are set out in Rule 57.01 of the Rules of Civil Procedure. In reviewing those principles, I am of the view that the following are the most relevant:

a) The complexity of the proceeding. b) The conduct of the party that tended to shorten or lengthen unnecessarily the duration of the proceeding. c) The outcome of the proceeding. d) The amount of costs that the unsuccessful party could reasonably be expected to pay.

[8] I start with the complexity of the proceeding. Although I agree with Mr. Duncan that this was a particulars motion, I also note that it was a fairly complex motion, involving some significant legal principles. As a result, it was more complex than the average particulars motion, and would have required more time to prepare for. In support of that observation, I would note that counsel argued on these matters for a day and a half between them, which supports the view that there was some complexity to the matter. As a result, this factor supports an award of costs on the higher end of the scale.

[9] This brings me to the question of whether either party engaged in conduct that tended to lengthen (or shorten) this motion. I am of the view that both parties engaged in conduct that lengthened this proceeding. I start with the Plaintiff, who is responsible for more of the problems on this issue. I am of the view that this motion should have been brought, at the outset, under both Rules 25 and 21. Had that been done, the argument would have been completed in a day. Bringing these motions separately, even on the invitation of the Court, resulted in additional and unnecessary time and effort being expended.

[10] However, the Defendants’ conduct also tended to lengthen the hearing of the motion. In particular, I am of the view that the Defendants could have worked to resolve these issues by agreeing to amend their pleading. In his submissions, Mr. Duncan states “At no time prior to or in the midst of the Plaintiff’s motion under Rule 21 did the Plaintiff present to the Defendants any suggested revisions that might satisfy the Plaintiff’s demands under Rule 21.” I reject this assertion for two reasons. First, it is not the Plaintiff’s responsibility to draft the Defendants’ pleadings. Second, on the materials that I reviewed for the motion, the Plaintiff did set out its concerns about the Defendants’ pleadings. The Defendants should have considered those concerns more fully than they did.

[11] This brings me to the outcome of the proceeding. Defendants counsel argues that, since the motion under Rule 25 was dismissed, success was divided. Again, I reject this assertion. The end result of the motion was that the impugned paragraphs were, by and large, struck from the pleading. The Plaintiff got what it asked for in the motion, making it the successful party. The fact that the Plaintiff moved under two separate rules to obtain its desired outcome and only won under one Rule is a reason to reduce the costs payable to the Plaintiff, but is not a reason to eliminate those costs completely, or to order costs payable to the Defendants.

[12] Similarly, the fact that leave has been granted to amend the pleading does not support the Defendants’ claim that they had partial success on the motion. The Defendants have been permitted to change their pleading and/or add additional parties to the action. The result of the motion, however, is the same. Significant portions of the Defendants’ pleading were struck. The Plaintiff was successful, and should be entitled to recover at least some costs.

[13] This brings me to the reasonable expectation of the parties with respect to costs. I agree with the Defendant that the approximately $120,000.00 in costs being sought, on a substantial indemnity basis, by the Plaintiff is unreasonable in the circumstances for three reasons. First, this was a motion for particulars over two days. The costs sought appear to me to be disproportionate to the nature of the issues. Second, the Plaintiff was partly responsible for the increased costs, as discussed above. Finally, the Plaintiff moved under two Rules, and only succeeded under one Rule.

[14] However, I also reject the Defendants’ assertion that costs should be limited to no more than $5,000.00 for this motion. I note that, between the Rule 25 and Rule 21 motions, the Defendants’ bill of costs envisions substantial indemnity fees of approximately $50,000.00 plus HST and disbursements. The Defendants’ partial indemnity fees would have been approximately $36,000.00 plus HST and disbursements, which would total approximately $42,000.00.

[15] The amount that an unsuccessful party would claim in partial indemnity fees is a very reasonable measure of what that party might expect to pay in fees. However, in this case, the amount should be reduced to take account of the lengthening of the process and the fact that the Plaintiff moved under two Rules but was successful under only one.

[16] Having considered all of these factors, I am of the view that the Defendants should pay costs to the Plaintiff in the sum of $30,000.00 inclusive of HST and disbursements and I so order.

LeMay J. Date: July 11, 2016