Court File and Parties

COURT FILE NO.: CV-15-0694-00 DATE: 2016 08 05 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 and Tatha Swann, Counsel for the Plaintiff Tim Duncan, Counsel for the Defendants

Costs Endorsement

[1] At the end of June, I issued a further interlocutory decision in this matter. The Defendants sought to interpret the Order of Ricchetti J. dated February 18th, 2015 in a manner that would impose additional and retroactive obligations on the Plaintiff and its expert. There were other interpretation issues that I was required to resolve, and I provided further directions to the parties in order to move this matter forward.

[2] The purpose of this decision is to fix the costs for the appearance before me to interpret Ricchetti J’s Order and provide these further directions.

Positions of the Parties

[3] The Plaintiff argues that it should be entitled to full indemnity costs in the sum of $108,050.24 on the basis that it was successful in this motion, that the issues were important and that the Defendant’s conduct was scandalous. In addition, the Plaintiff argues that the Defendants deliberately made allegations of fraud and dishonesty against the Plaintiff and its’ counsel that had no basis in fact.

[4] The Defendants argue that each side should bear its own costs. The Defendants advance the following reasons for this argument:

a. The reason for the motion was the overbroad searches that the Plaintiff’s experts had completed, and the Court accepted that assertion. b. The Plaintiff misconstrued the submissions of the Defendants as an attack on its integrity and the integrity of its lawyer. c. There was a lack of precedent for this motion, and the Defendants’ arguments were made in good faith. d. The Plaintiff’s motion for the immediate return of its property was unsuccessful.

[5] In the alternative, the Defendants argue that the Plaintiff should only be entitled to partial indemnity costs of no more than $15,000.00 inclusive of HST and disbursements. I note that the Defendants’ bill of costs discloses substantial indemnity fees in the amount of $54,312.95, inclusive of disbursements and HST.

[6] The Plaintiff asked for leave to reply to the Defendants’ costs submissions on the basis that there were inaccuracies in the Defendants’ costs submissions. I denied leave. As will be seen, I did not believe it was necessary to hear from the Plaintiff a second time as I have adopted the bulk of its submissions.

[7] I also acknowledge that there are clear errors in the Defendants’ costs submissions. For example, the Defendants’ costs submissions contain statements about the Orders I made about the Plaintiff’s devices that are in the possession of Deloitte. Specifically, the Defendants assert that I ordered that these devices either be imaged or excluded from the evidence pool, and that this was not the relief the Plaintiff was looking for. This is not what paragraphs 92 to 94 of my reasons say. Instead, paragraphs 92 and 93 provide my thoughts on this issue and paragraph 94 states “I am not making any Orders in this regard.” I do note that I expect that the parties will have resolved this matter by the next appearance later this month.

Analysis

[8] The analysis for assessing costs begins with Rule 57.01 of the Rules of Civil Procedure. For this case, the most relevant factors under this Rule are as follows:

a) The result of the proceeding or the step in the proceeding. In this case, the results of the proceeding clearly favour the Plaintiff, as it was successful in resisting the Defendants’ arguments on virtually all of the issues the Defendants raised. This factor favours a higher award of costs in the Plaintiff’s favour. b) The amount of costs an unsuccessful party could reasonably be expected to pay. I will address that issue below. c) The complexity of the proceeding and the importance of the issues. While the basic issue raised by this motion was simple, the arguments advanced by the Defendants were technical and complex, and required close consideration by the Plaintiff and the Court. This favours a higher award of costs for the Plaintiff. d) The conduct of any party that tended to shorten or lengthen the proceedings. I will address that issue below.

[9] I turn to the Defendants’ argument that there was no precedent for this motion. The Defendants are correct that there was no legal authority directly on point. However, in my view, that is because the proposition that this motion turned on was axiomatic.

[10] To succeed on the bulk of the motion, the Defendants would have had to convince the Court that it should impose the same obligations of fairness and full disclosure on the Plaintiff and its’ counsel on a contested motion that would have existed if the Plaintiff had brought its’ motion on an ex parte basis. In my view, motions brought in those two situations are obviously different for the reasons that I set out in my decision on the motion. It should have been self-evident that the Defendants’ position on this issue would fail.

[11] I make no comment on the Defendants motives for bringing this motion. However, the effect of the motion was to needlessly waste the Plaintiff’s time and resources. This factor supports a higher award of costs in favour of the Plaintiff.

[12] The Plaintiff argues that it should be entitled to either substantial indemnity or full indemnity costs on the basis that the Defendants have advanced unproven allegations of fraud or dishonesty. In support of this argument, counsel for the Plaintiff relies on 1623242 Ontario Inc. v. Great Lakes Copper Inc. (2016 ONSC 1002).

[13] The problem with the Plaintiff’s argument is that Great Lakes Copper and the other cases cited therein are all cases where allegations of fraud were made by unsuccessful parties as against the other party in the litigation. In this case, the allegations are not allegations of fraud. Instead, they are allegations of misconduct on the part of the Plaintiff’s counsel and the Plaintiff’s expert in the manner in which a Court order was obtained and administered.

[14] However, I agree with Plaintiff’s counsel that these allegations are serious. Lawyers are officers of the Court and they are expected to deal fairly with the Court and adhere to Court Orders. In this case, Defendants’ counsel expressed two concerns with the conduct of Plaintiff’s counsel:

a. Plaintiff’s counsel did not properly advise Ricchetti J. as to what terms should have been included in the Order at the time that they asked him to make the Order. b. Plaintiff’s counsel did not take any steps to carry out the terms of the Order for approximately six months after the Order was issued.

[15] The Defendants’ continued to advance these allegations throughout the motion. By advancing the first allegation, the Defendants took a position that I view as “fundamentally wrong” (see paragraph 44 of my reasons). In advancing this argument, the Defendants were also seeking to impose retroactive obligations on both the Plaintiff and its expert, Deloitte. In my view (see paragraph 63 of my reasons) these expectations were “unfair and unreasonable”.

[16] In terms of the second allegation, the Defendants continued to maintain that the Plaintiff had not taken any steps to carry out the terms of the Order for six months in spite of the fact that reasonable explanations for the delay were provided in the materials filed by the Plaintiff.

[17] In addition, the Defendants sought production of communications between the Plaintiff and its expert that would normally be privileged because the Defendants thought it was important for the Court to investigate their allegations. I rejected that assertion for the reasons set out in my decision. I note specifically that the Defendants’ could not demonstrate any prejudice as a result of the delay.

[18] It is clear to me that there was no reasonable basis for the Defendants’ positions respecting the conduct of the Plaintiff’s counsel and the Plaintiff’s expert. Again, this is a factor that supports a higher award of costs to the Plaintiff.

[19] I then turn to the Defendants’ argument that success was divided in this case. One of the key reasons that the Defendants argue that they were partially successful on this motion was because the Plaintiff sought the immediate return of its’ devices, and did not obtain this relief. I reject this assertion. Although this was one of the issues before me, it was a very minor issue, and the Plaintiff was not completely unsuccessful on it, as I have suggested an approach to ensure the return of these devices to the Plaintiff.

[20] The Defendants also argue that they were successful on other parts of the motion. I disagree. While I concluded that the search terms used by Deloitte were too broad, I also concluded that I was not prepared to Order Deloitte to do any further work at this time because of the allegations made by the Defendants about the Plaintiff, its expert and its counsel (see paragraph 78 of my reasons). I do not view this as a success for the Defendants.

[21] In short, the case before me can be summarized as follows:

a) The Defendants took a position that they should have known would have been unsuccessful. b) The effect of the Defendants position would have been to impose retroactive obligations on both the Plaintiff and Deloitte that were unfair and unreasonable. c) The Defendants’ positions were advanced in such a way as to call into question the ethics of Plaintiff’s counsel (in that he was telling his expert to ignore Court Orders) and the behaviour of the expert retained by the Plaintiffs.

[22] In my view, this is the type of conduct that should justify an award of substantial indemnity costs. Lawyers have an obligation to advance their clients cases even when they are hard, unpopular or difficult. However, this is a case where the positions taken by the Defendants were unreasonable and unfair. These positions unnecessarily consumed a great deal of both the Court’s time and of the Plaintiff’s time and in my view these positions were largely without merit.

[23] However, I agree with the Defendants about the Plaintiff’s bill of costs in two particulars. First, the research time that was recorded was excessive. Neither party pointed me to more than five cases that were relevant to the disposition of the motion. As a result, the Plaintiff’s claim that nearly 60 hours of research was required by a senior lawyer does not make sense to me. This amount of time is neither reasonable nor justified.

[24] Second, the invoice from Deloitte seems to me to be high for the work required. I reach this conclusion both because the amount claimed is objectively high at approximately $20,000.00, and because of the fact that the Defendants’ experts were able to provide the Court with their Affidavits at about half the costs.

[25] In terms of the reasonable expectations of an unsuccessful party, I note that the Defendants’ substantial indemnity costs were nearly $55,000.00, and their counsel is a much more recent call than Mr. Taylor. This suggests to me that the reasonable expectation of the losing party in this case would be to pay substantial indemnity costs in excess of $55,000.00, inclusive of HST and disbursements.

[26] As a result, when all of these matters are considered together, I am of the view that the Defendants should pay costs to the Plaintiff in the sum of $70,000.00 inclusive of HST and disbursements. Those costs are to be paid within fourteen (14) calendar days of the release of these reasons.

LeMay J. Date: August 5, 2016