Leblond v. Standard-Modern Lathes Inc., 2017 ONSC 6042

COURT FILE NO.: CV-15-523627

DATE: 20171011

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: LEBLOND LTD, Plaintiff

AND:

STANDARD-MODERN LATHES INC., STANDARD MODERN LATHES LLC, RACER MACHINERY INTERNATIONAL INC., GURSEWAK DHILLON aka GEORGE DHILLON and DON ZORAN VOJINOVIC, Defendants

BEFORE: Mr. Justice P. Cavanagh

COUNSEL: Michael B. Miller, for the Plaintiff

Theodore C. Dueck, for the Defendants Standard-Modern Lathes Inc., Standard Modern Lathes LLC and Gursewak Dhillon aka George Dhillon

Irwin A. Duncan and Peter A. Hertz for the Defendants Racer Machinery International Inc. and Don Zoran Vojinovic

HEARD: Submissions in Writing

COSTS ENDORSEMENT

[1] This action was commenced by a statement of claim that was issued by the plaintiff on March 10, 2015. The plaintiff bought a motion for interim recovery of personal property and interim and interlocutory injunctive relief against the defendants by Notice of Motion dated July 13, 2015 that was initially returnable on August 7, 2015. The motion was adjourned on a number of occasions. Pursuant to the endorsement of McEwan J. dated November 21, 2016, the motion was adjourned on consent to be heard on June 13, 2017, peremptory to the plaintiff. On June 6, 2017, the plaintiff notified the defendants that it wishes to withdraw its injunction motion.

[2] The issues before me relate to the defendants’ claim for costs of the motion that was abandoned by the plaintiff. The defendants seek costs of the abandoned motion on a substantial indemnity scale, payable forthwith. The plaintiff submits that costs should be reserved to the trial judge and, alternatively, that costs should be awarded on a partial indemnity scale.

[3] The questions before me are:

a. Should costs be fixed and made payable forthwith, or should they be reserved to the trial judge?

b. If costs are made payable forthwith, should costs be awarded on a substantial indemnity scale or a partial indemnity scale?

c. If costs are made payable forthwith, in what amounts should costs be fixed in favour of the defendants.

Should costs be fixed and made payable forthwith, or should they be reserved to the trial judge?

[4] Rule 37.09(3) provides that where a motion is abandoned, a responding party is entitled to the costs of the motion forthwith, unless the court orders otherwise.

[5] The defendants submit that in the case of unsuccessful interlocutory injunction motions, costs should be payable forthwith absent extraordinary circumstances. In support of this submission they cite Cana International Distributing Inc. (c.o.b. as Sexy Living) v. Standard Innovation Corp., 2011 ONSC 752, [2011] O.J. No. 461. In Cana, C.D.A. McKinnon J. wrote at para. 7:

In my opinion, absent extraordinary circumstances, costs on an unsuccessful interlocutory injunction should be payable forthwith. An application for an injunction is a discrete legal remedy involving substantial costs. There is no reason the cost should not follow the event where the application is unsuccessful. There is never an assurance that there will be a trial, particularly in circumstances where an injunction is not in place. I agree with the submission of the Defendant that the general approach in the recent case law is that when a plaintiff seeking an injunction is unsuccessful, costs should be ordered to paid forthwith, in any event of the cause.

See also Longyear Canada v. 897173 Ontario Inc. (c.o.b. J.N. Precise), [2008] O.J. No. 374 at paras. 8, 10.

[6] The plaintiff submits that it was justified in bring the motion and that the motion was not frivolous, vexatious or brought for an improper purpose. The plaintiff submits that its motion was abandoned after it became evident through cross-examinations that the defendants no longer had the bulk of the assets in dispute in their possession. The plaintiff also submits that costs of the motion should be limited to costs thrown away, and that the defendants have not identified which of their costs have been thrown away and what preparation may be put towards a later use. The plaintiff submits that, accordingly, costs of this motion should be reserved to the trial judge.

[7] The defendants dispute the reason advanced for the plaintiff’s decision to abandon its motion. The defendants submit that there was no disposition of any assets and no new developments following the commencement of the plaintiff’s motion. They submit that, even if the plaintiff learned information from the cross-examinations, no explanation was given for why it took nearly two years for the plaintiff to finally abandon its motion.

[8] I do not agree that costs of the plaintiff’s abandoned motion should be limited to costs thrown away. The case cited by the plaintiff in support of its submission in this regard, Legacy Leather International Inc. v. Ward, 2007 CarswellOnt 527, was one in which the motion judge had awarded costs of a motion that did not proceed because of a stay of the action that was ordered on a separate motion, as costs thrown away. Submissions were then made by the parties with respect to the amount of such costs thrown away. In this context, the motion judge wrote that the onus was on the party seeking costs thrown away to identify which costs were thrown away. This case does not stand for the proposition that where a motion for an injunction is abandoned, costs under rule 37.09(3) should be limited to costs thrown away. The trial judge will undoubtedly take my order as to costs of the abandoned motion into account when he or she decides questions relating to costs of the action.

[9] In this case, I am unable to find on the evidence before me a sufficient reason for me to exercise my discretion not to award costs of the abandoned motion forthwith pursuant to rule 37.09(3). In my view, the principle expressed in Cana applies. The defendants are entitled to costs of the abandoned motion forthwith.

If costs are made payable forthwith, should costs be awarded on a substantial indemnity scale or a partial indemnity scale?

[10] The defendants Racer Machinery International Inc. and Don Zoran Vojinovic (the “Racer Defendants”) submit that costs of the abandoned motion should be fixed on a substantial indemnity scale. This submission is supported by the defendants Standard-Modern Lathes Inc., Standard Modern Lathes LLC and Gursewak Dhillon aka George Dhillon (the “Standard Defendants”).

[11] The Racer Defendants submit that the plaintiff’s motion had no reasonable chance of success, and that it was pursued to burden a smaller competitor with extensive costs and distraction. They also submit that false and misleading statements were made by a witness whose evidence was tendered in support of the plaintiff’s motion.

[12] The Racer Defendants also rely upon a joint offer to settle the plaintiff’s motion that was served by the defendants proposing settlement on the basis that the plaintiff’s motion would be dismissed on consent and the plaintiff would pay 50% of the defendants’ partial indemnity costs up to May 8, 2017 and partial indemnity costs thereafter, as agreed upon or assessed. The defendants submit that with the plaintiff having abandoned its motion, the outcome of the motion is less favourable to the plaintiff than the offer to settle.

[13] Elevated costs are warranted in only two circumstances. The first involves the operation of an offer to settle under rule 49.10, where substantial indemnity costs are explicitly authorized. The second is where the losing party has engaged in reprehensible, scandalous or outrageous conduct that is worthy of sanction: Davies v. Clarington (2009), 2009 ONCA 722, 100 O.R. (3d) 66 at paras. 28-31.

[14] The offer to settle the plaintiff’s motion does not trigger automatic costs consequences under rule 49.10 of the Rules of Civil Procedure. Although rule 49.13 gives the court discretion to take into account any offer to settle made in writing with respect to costs, I do not consider that this offer to settle, because it was not accepted, justifies an award of costs on a substantial indemnity scale. Apart from the operation of rule 49.10, elevated costs should only be awarded on a clear finding of reprehensible conduct on the part of the party against which the costs award is being made: Davies, at para. 40.

[15] I also do not agree with the submission of the Racer Defendants that an award of substantial indemnity costs should be made where a motion for injunctive relief is abandoned in order to discourage such motions from being brought on tenuous grounds or for an improper purpose. The cases upon which the Racer Defendants rely in support of this submission all predate the decision of the Court of Appeal in Davies which clarified the circumstances in which substantial indemnity costs are warranted.

[16] No findings have been made that the plaintiff’s evidence was false and misleading. I am unable to find on the record before me that the evidence tendered on behalf of the plaintiff is such as to justify costs on a substantial indemnity scale. This evidence would have to be considered in the context of the plaintiff’s motion heard in its entirety.

[17] In my view, the defendants have failed to show that the plaintiff engaged in reprehensible, scandalous or outrageous conduct by bringing this motion such as to warrant an award of costs on a substantial indemnity scale. The proper scale for an award of costs of the abandoned motion is the partial indemnity scale.

If costs are made payable forthwith, in what amounts should costs be fixed in favour of the defendants.

[18] The Racer Defendants submit that if costs are awarded on a partial indemnity scale, costs should be awarded in the amount of $65,908.61 comprised of fees of $53,946.20, disbursements of $9,962.41, counsel fee for appearance on June 13, 2017 and for exchange of costs submissions of $4,000, and less the amount of $2,000 awarded for costs thrown away in respect of the November 22, 2016 adjournment.

[19] The Standard Defendants submit that if costs are awarded on a partial indemnity scale, they should be awarded costs in the aggregate amount of $22,713.02 comprised of fees of $18,702, HST on fees of $2,431.26, disbursements of $1,398.07, and HST on disbursements of $181.75.

[20] The Racer Defendants and the Standard Defendants submit that the Racer Defendants undertook a greater share of the work needed to respond to the plaintiff’s motion, and that this division of work was reasonable and explains the lower amount of costs sought by the Standard Defendants.

[21] Rule 57.01(1) sets out the factors a court may consider in awarding costs. A critical controlling principle for the awarding of costs is that the sum awarded reflect the fair and reasonable expectations of the unsuccessful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) at para. 24.

[22] I accept the defendants’ submissions that the plaintiff’s motion involved issues that were very important to the parties and of above-average complexity. The Racer Defendants described the motion as a “life or death” motion, and they submit that the relief sought by the plaintiff, if granted, would likely have determined the outcome of the action. There was a substantial volume of materials filed for the motion, and three full days of cross-examinations were conducted. There were several Civil Practice Court attendances required, and the defendants delivered factums, a compendium and briefs of authorities.

[23] In my view, the amount of professional time expended by counsel for the Racer Defendants was reasonable. I accept that the hourly rates used by the Racer Defendants, which ranged from $300 and $260 for senior counsel to $220 (and lower rates before April 1, 2017 and before June 1, 2016) and $165 (and a lower rate before April 1, 2017) for other counsel are reasonable. The amount of costs requested by the Racer Defendants would be within a range of costs that the plaintiff could reasonably expect to pay if its motion was unsuccessful or abandoned.

[24] I also regard the time expended by counsel for the Standard Defendants to be reasonable having regard to the factors in rule 57.01(1). The Standard Defendants seek partial indemnity costs based upon hourly rates for senior counsel of $270 ($240 before January 1, 2017) and $120 for second counsel. These rates are reasonable. The partial indemnity costs sought by the Standard Defendants are within a range of costs that the plaintiff could reasonable expect to pay of its motion was unsuccessful or abandoned.

[25] For the foregoing reasons, I order that:

a. The plaintiff shall pay to the Racer Defendants costs of the abandoned motion on a partial indemnity scale fixed in the aggregate amount of $65,908.61, inclusive of fees, disbursements and HST, within 30 days of the date of this order.

b. The plaintiff shall pay to the Standard Defendants costs of the abandoned motion on a partial indemnity scale fixed in the amount of $$22,713.82, inclusive of fees, disbursements and HST, within 30 days of the date of this order.

Cavanagh J.

Date: October 11, 2017