CITATION: Prim8 Group Inc. v. Tisi, 2016 ONSC 7700
COURT FILE NO.: 53498/12 (St. Catharines)
DATE: 20161212
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: THE PRIM8 GROUP INC. (Plaintiff) v. RICHARD JAMES TISi and ian macarthur (Defendants)
RICHARD JAMES TISi (Plaintiff by Counterclaim) v. THE PRIM8 GROUP INC., philip KIrwin and dianne wright (Defendants by Counterclaim)
BEFORE: The Honourable Mr. Justice R.A. Lococo
COUNSEL: William J. Hayter, for the Plaintiff/Defendants by Counterclaim
Richard James Tisi, Defendant/Plaintiff by Counterclaim (not represented)
HEARD: By written submissions dated September 26 to October 20, 2016
E N D O R S E M E N T – C O S T S
[1] As set out in Reasons for Judgment dated September 13, 2016,[^1] after a ten day trial and written closing submissions, The Prim8 Group Inc. was awarded damages of $40,000 against Richard Tisi and Ian MacArthur for conspiracy and breach of duty of good faith and loyalty in connection with the defendants’ departure from Prim8. Prim8 was also awarded damages of $51,167 against Mr. Tisi for breach of fiduciary duty, conversion and inducing breach of contract. Prim8’s request for an order requiring Mr. Tisi to relinquish his one-third shareholding in Prim8 at a price to be determined by the court was dismissed. Mr. Tisi’s counterclaim against Prim8 and its principals was dismissed except for an award of $2,500 plus interest to repay the balance of a shareholder loan to Mr. Tisi, as conceded by Prim8 at trial. Costs were left to be determined following written submissions.
[2] Prim8 provided written costs submissions through its trial counsel. Mr. Tisi, who was not represented at trial, provided costs submissions through a law firm acting as his agent. Mr. MacArthur did not provide any costs submissions.
[3] As part of its costs submissions, Prim8 provided a copy of an Offer to Settle dated July 28, 2015, offering to settle Prim8’s action and Mr. Tisi’s counterclaim on the following basis:
(a) The defendants would pay Prim8 the sum of $12,500 plus prejudgment interest;
(b) Mr. Tisi would transfer his Prim8 shares to Prim8 and relinquish any claim or interest in Prim8; and
(c) The defendants would pay Prim8’s costs in an amount agreed by the parties or as assessed.
[4] In its costs submissions, Prim8 seeks an award of costs against both defendants, citing its substantial success in its claim against them and in its defence of Mr. Tisi’s counterclaim. In its bill of costs, Prim8 calculated the amount of its costs at $123,245, inclusive of disbursements and tax, plus an additional $1,695 (including HST) for the preparation of its costs submissions.
[5] Mr. Tisi did not dispute that there should be costs award in Prim8’s favour, but argued that the amount Prim8 claims is excessive. In his submission, a fair and reasonable costs award would be $60,000, including disbursements and tax.
[6] As set out in its bill of costs, Prim8’s claim for costs consists of fees (including tax) of over $104,000 and disbursements of $18,711. The amount claimed for fees was calculated on a partial indemnity basis to the date of the offer to settle, and on a substantial indemnity basis thereafter, relying on rule 49.10 of the Rules of Civil Procedure.[^2] Prim8’s claim for disbursements includes $13,740 for a valuation report by Deloitte LLP relating to Prim8’s shares. Prim8 claims the latter amount against Mr. Tisi only, since the valuation report supported Prim8’s claim for an order requiring Mr. Tisi to relinquish his Prim8 shares, which did not involve Mr. MacArthur.
[7] With respect to Prim8’s claim for substantial indemnity costs from the date of the offer to settle, Prim8 argued that Mr. Tisi’s cost for accepting the offer to settle was $32,500, consisting of a payment of $12,500 plus surrendering his Prim8 shares, valued at $20,000 as determined in my Reasons for Judgment. Under the trial judgment, Prim8 was awarded $51,167 against Mr. Tisi, in addition to $40,000 against both defendants jointly and severally. In Prim8’s submission, the judgment was clearly more favourable than the terms of the offer to settle, with the result that Prim8 should be awarded substantial indemnity costs from the date of the offer to settle, as provided for in rule 49.10(1).
[8] Mr. Tisi disputed Prim8’s analysis, arguing that costs should be calculated on a partial indemnity basis throughout. Among other things, Mr. Tisi argued that there was insufficient evidence at trial to establish the value of his one-third shareholding in Prim8 at either the date of the offer to settle or the date of trial. On that narrow point, I disagree with Mr. Tisi. In my Reasons for Judgment, I declined to order Mr. Tisi to relinquish his shareholding in Prim8, but expressly found that the value of Mr. Tisi’s shares was $20,000, relying on the expert report of Deloitte LLP and the testimony of Ryan Conte, the Deloitte partner who prepared the report. No other credible evidence was provided at trial with respect to the value of Prim8 shares. To be clear, I made that finding to avoid the need for further consideration of the issue at the trial level, should a higher court disagree with my conclusion about the absence of a legal basis for ordering the repurchase of Mr. Tisi’s Prim8 shares.
[9] Nevertheless, I am not satisfied that Prim8 has met its burden of proving that the judgment is as favourable as or more favourable than the terms of the offer to settle, as required by rule 49.10 (1) and (3). If the defendants had accepted Prim8’s offer to settle, the immediate cost to the defendants would have been $12,500 in cash plus surrender of Mr. Tisi’s Prim8 shares valued at $20,000. Therefore, Prim8’s immediate entitlement (and the defendants’ corresponding obligation to Prim8) under the judgment appears to be more favourable in monetary terms than the offer to purchase. However, under the offer to settle (but not the judgment), Prim8 would have rid itself of an unwanted shareholder at no addition cost to Prim8. Under the judgment by contrast, Mr. Tisi remains a one-third shareholder of Prim8, with continuing rights as an equity owner. Taking a broader view, I am not satisfied in these the circumstances that the judgment is as favourable as or more favourable than the terms of the offer to settle.
[10] Mr. Tisi also argued that Prim8’s disbursement of $13,740 for the Deloitte valuation report should be disallowed, since Prim8 did not succeed in obtaining the order it requested requiring Mr. Tisi to relinquish his Prim8 shares. In that regard, I agree with Prim8’s counsel that the court has the discretion to permit reimbursement for an expert’s report, even if not ultimately needed at trial (see Baskarin v. Doshi[^3]). However, in this case, the Deloitte report was intended to provide the evidentiary basis for obtaining an order requiring Mr. Tisi to relinquish his Prim8 shares. In substance, there was no other reason for obtaining that report. Prim8 did not succeed in obtaining the requested order. In these circumstances, I agree with Mr. Tisi that it would not be appropriate to include this disbursement in the costs award to Prim8.
[11] In his costs submissions, Mr. Tisi also argued that a costs award of $60,000 as he suggested would be consistent with the overriding principle of reasonableness, taking into account the amount the court awarded as damages as compared to the greater amount Prim8 claimed for costs. He also argued that a costs award of $60,000 appropriately reflected the factors set out in rule 57.01(1), including the amount of costs that an unsuccessful party could reasonably expect to pay, the experience and time spent by counsel and the complexity of the proceedings. However, I agree with Prim8’s counsel that Mr. Tisi should have been aware of the costs consequences of proceeding with a trial that was anticipated to last eight to ten days, involving a challenging factual matrix. In these circumstances, I do not consider the costs award suggested by Mr. Tisi to give appropriate weight to the principle of indemnity, given Prim8’s substantial success against Mr. Tisi on both the claim and counterclaim.
[12] As a countervailing consideration, in fixing costs, the court is not strictly bound by the calculation of hours and time rates, as indicated by the Ontario Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario.[^4]
[13] In all the circumstances, I fix Prim8’s costs at $80,000, including disbursements and tax, payable by Mr. Tisi within 30 days. As well, Mr. MacArthur shall be liable to Prim8 for $35,000 of that amount jointly and severally with Mr. Tisi, also payable within 30 days. The latter amount is intended to reflect Prim8’s degree of success against Mr. MacArthur in the action as well as the fact that he was not a party to Mr. Tisi’s unsuccessful counterclaim against Prim8.
The Honourable Mr. Justice R.A. Lococo
Released: December 12, 2016
CITATION: Prim8 Group Inc. v. Tisi, 2016 ONSC 7700
COURT FILE NO.: 53498/12 (St. Catharines)
DATE: 20161212
SUPERIOR COURT OF JUSTICE - ONTARIO
BETWEEN:
the prim8 group inc.
Plaintiff
- and -
RICHARD JAMES TISi and ian macarthur
Defendants
AND BETWEEN:
RICHARD JAMES TISI
Plaintiff by Counterclaim
- and -
THE PRIM8 GROUP INC., philip KIrwin and dianne wright
Defendants by Counterclaim
BEFORE: The Honourable Mr. Justice R.A. Lococo
COUNSEL: William J. Hayter, for the Plaintiff/ Defendants by Counterclaim
Richard James Tisi, Defendant/
Plaintiff by Counterclaim
ENDORSEMENT – COSTS
R.A. Lococo J.
Released: December 12, 2016
[^1]: Prim8 Group Inc. v. Tisi, 2016 ONSC 5662, [2016] O.J. No. 4727.
[^2]: R.R.O. 1990, Reg. 194.
[^3]: 2015 ONSC 4512, [2015] O.J. No. 3706.
[^4]: 2004 CanLII 14579 (ON CA), [2004] O.J. No. 2634, 71 O.R. (3d) 291 (C.A.) at para. 26.