ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
PIETRO, PASQUALE-ANTONIO SGROMO (PETER, ANTHONY SGROMO); WIDE EYES MARKETING LTD.,
Unrepresented
Plaintiffs (Responding Party)
- and -
LEONARD GREGORY SCOTT(AN INDIVIDUAL), EUREKA INVENTIONS LLC, BESTWAY (USA), INC., BESTWAY (HONGKONG) INTERNATIONAL LTD., BESTWAY INFLATABLES & MATERIAL CORP. (SHANGHAI), and PATRIZZIO FUMAGALLI (AN INDIVIDUAL),
A. Fletcher and A. Challis, counsel for the Defendants LEONARD GREGORY SCOTT and EUREKA INVENTIONS LLC
P. Heinen and K. Byers, counsel for the Defendants BESTWAY (USA), INC., BESTWAY (HONGKONG) INTERNATIONAL LTD., BESTWAY INFLATABLES & MATERIAL CORP. (SHANGHAI), and PATRIZZIO FUMAGALLI (AN INDIVIDUAL)
Defendants (Moving Party)
HEARD: Via Written Submissions
Mr. Justice D. C. Shaw
Decision On Costs
Background
1This is a decision on the costs of two motions brought by the defendants to dismiss this action for want of jurisdiction. One motion was brought by the defendants, Leonard Gregory Scott and Eureka Inventions LLE (hereinafter “Eureka”). The other motion to dismiss this action for want of jurisdiction was brought by the defendants, Bestway (Hong Kong International, Bestway Inflatables and Material Corp (Shanghai) and Patrizzio Fumagalli (hereinafter “Bestway”).
2I granted the motions and dismissed the action. Costs of the motions were reserved, pending receipt of written submissions. Those submissions have been received and reviewed.
3My reasons on this costs decision are similar to those released this date in actions CV-16-0566-SR and CV-16-0565-SR. Mr. Sgromo was also a plaintiff in those actions and those actions were also dismissed for want of jurisdiction. Mr. Sgromo’s costs submissions were the same in all three actions.
4The facts surrounding the motion to dismiss are complex and are set out in my decision reported at 2017 ONSC 2524.
5I will not repeat the facts here.
6Eureka seeks its actual costs of $39,499 for fees, plus disbursements and HST.
7Bestway seeks costs on a substantial indemnity scale, of $58,498.75 for fees, plus disbursements and HST. In the alternative, Bestway seeks partial indemnity costs of $40,666.10 for fees, plus disbursements and HST.
8The plaintiffs’ position is that there should be no order of costs against them.
9The plaintiffs submit, first, that the costs claimed by the defendants are excessive. Second, the plaintiffs submit that they are impecunious and that they will be denied access to justice if costs are awarded to the defendants. The bulk of the plaintiffs’ submissions do not deal with the question of costs. Rather, they are a reiteration of their arguments on the merits of the motions to dismiss. I will not address these latter submissions.
Discussion
10I will deal with first with the defendants’ entitlement to costs. In my view, there is no basis to depart from the normal rule that a successful party on a motion is entitled to costs.
11The cases referred to by the plaintiffs in their submissions on impecuniosity deal with the issue of security for costs. It is in that context that the courts in those cases considered whether an order for costs could impair the ability of a plaintiff to proceed with his action.
12In the present case, I expressly determined that the plaintiffs should not be allowed to proceed with their action because of a want of jurisdiction. The plaintiffs cannot now maintain that their ability to proceed with that action will be impaired by a costs order. The action has been dismissed.
13Although in the exercise of the courts discretion on costs, a court may properly take into consideration a party’s financial situation, that is not a factor that carries much weight in this case where the plaintiffs compelled the defendants to incur costs to respond to an action that should not have been brought. To hold otherwise, would give license to impecunious parties to bring baseless actions with impunity.
14The second issue is the scale of costs to which the defendants are entitled.
15Eureka acknowledges that generally costs are awarded on a partial indemnity scale. However, Eureka seeks its actual or full indemnity costs on the grounds that its actual costs are less than that to which it would be entitled if it were awarded the maximum partial indemnity hourly rates set out in the 2005 “Information to the Profession” issued by the Costs Subcommittee of the Court Rules Committee.
16Eureka’s counsel with primary conduct of the file was Mr. Anthony Fletcher. He was called in 1989. His actual billing rate is $300 an hour. The junior counsel on the file was Mr. Aaron Challis. He was called in 2013. His actual billing rate is $140 per hour. The maximum partial indemnity rates set out in the “Information to the Profession” are $350 and $225, respectively, for lawyers with the experience of Mr. Fletcher and Mr. Challis.
17I do not accept Eureka’s submission that it should receive full indemnity costs simply on the basis that the actual hourly rates of its counsel are lower than the maximum hourly rates in the “Information to the Profession”. In order to receive actual costs, Eureka must meet the threshold test that justifies a remedy for costs on a full indemnity scale.
18In Serra v. Serra (2009), 2009 ONCA 395, 66 R. F. L. 6th 40 (Ont. C.A.), at p. 42, the Court of Appeal reiterated the fundamental purpose for which modern costs rules are designed to foster, as set out in Fong v. Chan (1999), 1999 2052 (ON CA), 46 O. R. (3d) 330 (Ont. C.A.), at para. 22:
(1) To partially indemnify successful litigants for the costs of litigation;
(2) To encourage settlement; and
(3) To discourage inappropriate behaviour.
19Both substantial indemnity costs and full indemnity costs are extraordinary remedies. As noted by Annis J. in Envoy Relocation Services Inc. v. Canada (Attorney General), 2013 ONSC 2622, at para. 58, these two scales of costs share the same constituent elements, in the sense that full indemnity costs can be awarded only if the circumstances warrant an order for substantial indemnity costs.
20There are generally only two circumstances where costs on the elevated scale of substantial indemnity are warranted. The first pertains to an offer to settle under rule 49.10, where substantial indemnity costs are explicitly authorized. The second is reserved for the rare and exceptional case where the losing party has engaged in reprehensible conduct or there are other special circumstances that justify costs on the higher scale.
21In Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3, McLachlin J. described the circumstances when elevated costs are warranted as:
…only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties.
22In Bond v. Brookfield Asset Management Inc., [2011] O. J. No. 2760 (S.C.J.), the defendants submitted that substantial indemnity costs should be awarded because there was no basis on which the plaintiffs could reasonably assert that Ontario had jurisdiction simpliciter and no basis for the plaintiff to refute that Ontario was a forum non conveniens. Perell J. held at para. 6:
In my opinion, it would not be a proper exercise of the court’s discretion to order costs on a substantial indemnity basis simply because a party has a weak case or even a very weak case.
23In my view, the plaintiffs’ conduct does not rise to the high threshold set out in Young v. Young to warrant the sanction of substantial indemnity costs. It follows that the conduct would not meet the even higher test required for full indemnity costs. That does not mean, however, that I cannot take the plaintiffs’ conduct into account in fixing partial indemnity costs. A party’s conduct is expressly referred to in Rule 57.01(e) (f) and (g) as a factor that a court may consider.
24With respect to Eureka’s submission that it should receive full indemnity costs because its costs are less than the maximum partial indemnity costs set out in the “Notice to the Profession”, I observe that the rates in the notice are not mandatory, they are merely guides as to maximum rates available under the now disbanded costs grid, after giving consideration to the factors set out in Rule 57.01(1). The true character of the costs that Eureka is requesting remains full indemnity costs, notwithstanding that its actual costs compare favourably to partial indemnity rates that the Costs Subcommittee suggested as a maximum in 2005.
25I have determined that the costs of both Eureka and Bestway should be awarded on a partial indemnity basis.
26An award of costs is a matter in the discretion of the judge by virtue of s.131(1) of the Courts of Justice Act, which provides:
Subject to the provisions of an Act or rules of the court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by when and to what extent costs shall be paid.
27In Finn Way General Contractors Inc. v. S. Ward Construction Inc., 2014 ONSC 4071, I set out the principles and factors that should guide a decision on costs:
20In Anderson v. St. Jude Medical Inc., 2006 85158 (ON SCDC), [2006] O. J. No. 508 (Ont. Div. Ct.), at para. 22, the Divisional Court set out the principles to be applied by the court in exercising its discretion (citations omitted):
The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in Rule 57.01(1).
A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant.
The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: Rule 57.01(1)(O.b).
The court should seek to avoid inconsistency with comparable awards in other cases. “Like cases [if they can be found], should conclude with like substantive results.”
The court should seek to balance the indemnity principle with the fundamental objective of access to justice.
21The Court of Appeal has made it clear that in assessing costs the overriding principle is one of reasonableness and that the failure to follow that principle can produce a result that is contrary to the fundamental objective of access to justice (Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.), at p. 302.
22In Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), [2002] O.J. No. 4495 (Ont. C.A.), at para. 4 the Court of Appeal did not make a specific finding with respect to the amount of time spent or the rates charged by counsel, and stated:
“In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant.”
23Rule 57.01(1) of the Rules of Civil Procedure provides:
57.01 (1) Factors in discretion - In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(a) the amount claimed and the amount recovered in the proceeding;
(b) the apportionment of liability;
(c) the complexity of the proceeding;
(d) the importance of the issues;
(e) the conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(g) a party’s denial of or refusal to admit anything that should have been admitted;
(h) whether it is appropriate to award any costs or more than one set of costs where a party,
(i) commenced separate proceedings for claims that should have been made in one proceeding; or
(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different solicitor; and
(i) any other matter relevant to the question of costs.
24Rule 1.04 (1.1) of the Rules of Civil Procedure provides:
1.04 (1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.
28The Rules define substantial indemnity costs as an amount 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A. Partial indemnity costs are defined as costs awarded in accordance with Part I in Tariff A. A substantial indemnity rate would approach 90% of the actual solicitor – client rate. See Riddell v. Conservative Party of Canada, [2007] O.J. No. 2577 (S.C.J.). A partial indemnity rate would be, by definition, approximately ⅔ of substantial indemnity costs.
29I will deal first with Eureka’s costs. The hourly rate charged by Mr. Fletcher to his client of $300.00 is most reasonable for counsel of his experience. That would constitute full indemnity. A substantial indemnity rate would be approximately $270 per hour. A partial indemnity rate in this case would in the area of $180 per hour. Mr. Challis’ actual rate of $140 is also most reasonable for his experience. His partial indemnity rate would approach $84. Mr. Fletcher docketed 104 hours. Mr. Challis docketed 54.8 hours. There were also 6.6 hours docketed by a student-at-law. However, as noted by the Court of Appeal, a mechanical approach to hours spent multiplied by hourly rates is not the appropriate approach. Hours spent and hourly rates are but two of the factors in the process of arriving at a costs award that is fair and reasonable.
30Eureka has disbursements of $2,050.65, inclusive of HST, which appear reasonable.
31Having regard to the factors discussed above, I am of the opinion that it is fair and reasonable to award Eureka partial indemnity costs of $25,000.00 for fees, plus HST, and $2,050.05, inclusive of HST, for disbursements, and an order shall go accordingly.
32I will deal next with the costs of Bestway.
33Mr. Peter Heinen was the lead counsel for Bestway. He was called to the bar in 2004. His actual hourly rate is $510. His substantial indemnity rate is shown at 90% of this actual rate, at $459 per hour. His partial indemnity rate is shown at $306 per hour, which is 2/3 of his substantial indemnity rate. I find his rate to be reasonable.
34Mr. Heinen is a partner in a large Toronto law firm. Although his hourly rate is greater than counsel of similar experience in Northwestern Ontario, it is within what could reasonably be expected for senior counsel in a large Toronto law firm. The plaintiffs chose to bring their ill advised action against foreign defendants. They could reasonably have expected that foreign defendants might retain Toronto counsel at Toronto law firm rates.
35Mr. Heinen was assisted by Ms. Kate Byers, who was called to the bar in 2015. Her actual, substantial and partial indemnity rates, respectively, are shown in Bestway’s Bill of Costs as $300, $270 and $180 per hour.
36There were three motions to dismiss for want of jurisdiction that were before me on February 9, 2017- one by each of Eureka and Bestway in this action, and one by the defendant in file CV-16-566-SR. Mr. Heinen took the lead role in arguing the law which was applicable to all three motions. His submissions on the law were adopted by counsel for the other defendants.
37The plaintiff claimed over $11,000,000.00, in damages, but also made reference in the body of the statement of claim to other damages totalling as much as $70,000,000.00.
38The statement of claim was 128 pages, 354 paragraphs. It raised many and varied causes of action. As I observed in my decision on the motions, the statement of claim contained extensive, improper pleadings of argument, law and evidence and was far from a concise statement of material facts as contemplated by Rule 25.06.
39The plaintiffs’ lengthy motion material was equally problematic. It was difficult for the defendants to properly respond. I regard the motion as complex.
40The conduct of the plaintiffs in not abandoning a motion for injunctive relief until shortly before the hearing of the motion on jurisdiction, unnecessarily lengthened and complicated the proceedings, as did the volume and the nature of the materials that the plaintiffs filed.
41The action itself was improper, vexatious and unnecessary, as were certain allegations in the plaintiffs materials that dealt with matters of sex and violence.
42Bestway seeks partial indemnity fees of $40,666.10, based on the partial indemnity rates referred to above, and including a flat fee of $5,000 for correspondence. The correspondence would alternatively be $7,844 if billed at partial indemnity hourly rates.
43There appears to be some overlap in the time docketed by Mr. Heinen and Ms. Byers. Ms. Byers’ docketed time includes $4,536 for travel to Thunder Bay and attendance on the motion. Ms. Byers did not argue the motion. It also appears that Mr. Heinen and Ms. Byers docketed their travel time at their regular hourly rates.
44Included in the Bill of Costs is $3,011.40 for post motion correspondence from and to Mr. Sgromo.
45The disbursements claimed by Bestway, of $721.14, appear reasonable.
46In my opinion, it is fair and reasonable to award Bestway partial indemnity costs of $35,000 for fees, plus HST thereon, plus disbursements of $721.14, plus HST thereon, and an order shall go accordingly.
_“original signed by”
The Honourable Justice D. C. Shaw
Released: September 12, 2017
CITATION: Sgromo v. Scott et al., 2017 ONSC 5323
COURT FILE NO.: CV-16-0529-FW
DATE: 2017-09-12
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
PIETRO, PASQUALE-ANTONIO SGROMO (PETER, ANTHONY SGROMO); WIDE EYES MARKETING LTD.,
Plaintiffs (Responding Party)
- and -
LEONARD GREGORY SCOTT(AN INDIVIDUAL), EUREKA INVENTIONS LLC, BESTWAY (USA), INC., BESTWAY (HONGKONG) INTERNATIONAL LTD., BESTWAY INFLATABLES & MATERIAL CORP. (SHANGHAI), and PATRIZZIO FUMAGALLI (AN INDIVIDUAL),
Defendants (Moving Party)
DECISION ON COSTS
Shaw J.
Released: September 12, 2017
/lvp