CITATION: Kerzner v. American Iron & Metal Company Inc. 2017 ONSC 7174

OTTAWA COURT FILE NO.: 15-66851

DATE: 20171130

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: STEVEN KERZNER, Plaintiff

AND:

AMERICAN IRON & METAL COMPANY INC., Defendant

BEFORE: Mr. Justice Graeme Mew

COUNSEL: Alan Riddell, for the Plaintiff

Peter MacTavish, for the Defendant

HEARD: in writing

COSTS ENDORSEMENT

[1] This action involves a claim for substantial damages for wrongful dismissal by the former general manager of the defendant and a counterclaim by the employer alleging breach of restrictive covenants contained in the subject employment agreement.

[2] The litigation was important to both parties. It was resolved, subject (I am advised) to pending appeals by both parties, following a summary judgment motion in which I awarded the plaintiff the sum of $92,500.00, being the compensation provided for in his employment agreement upon termination of employment plus the value of associated employee benefits. The employer’s counterclaim was dismissed. See the reasons for decision reported at 2017 ONSC 4352.

[3] The plaintiff now seeks a partial indemnity award of costs in the amount of $168,646.51.

[4] The defendant says that there should be no order as to costs because the amount awarded to the plaintiff reflected the exact amount offered to him upon termination of his employment.

[5] The defendant also asserts that the amount claimed by the plaintiff is excessive and that the value of the time spent by the plaintiff’s lawyers, valued on a full indemnity basis, exceeded that spent by the defendant’s lawyers by over $100,000.00.

Applicable Principles

[6] In reviewing the submissions of counsel and the bills of costs that have been submitted, I have borne in mind the following general principles:

a. Costs are in the discretion of the court (s. 131, Courts of Justice Act, R.S.O. 1990, c. C. 43 and rule 57.01 of the Rules of Civil Procedure);

b. The normal approach is that costs follow the event and that such costs are awarded on a partial indemnity basis;

c. Fixing of costs is not merely a mechanical exercise in reviewing the succeeding party’s costs outline: Agius v. Home Depot Holdings Inc., 2011 ONSC 5272 at para. 11. The amount of costs should reflect an amount that the court considers to be fair and reasonable, rather than an exact measure of the actual costs of the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 19 A.C.W.S. (3d) 341 (Ont. C.A.) at para. 4;

d. The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining the amount that is fair and reasonable: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291; rule 57.01(1)(b);

e. The general principle that the court shall make orders that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding (rule 1.04(1.1)) is applicable to the court’s exercise of its discretion to award costs. However, proportionality should not override other considerations when determining costs. Nor should proportionality be used as a sword to undercompensate a litigant for costs legitimately incurred: Aacurate General Contracting Ltd. v. Tarasco, 2015 ONSC 5980, at paras. 13-17; Dang v. Anderson, 2017 ONSC 2150, paras. 12-15.

Discussion

[7] As already mentioned, the amount ultimately recovered by the plaintiff was the same amount as the defendant offered to pay him when his employment was terminated. However, that does not tell the whole story. The defendant’s offer was coupled with a requirement that the plaintiff acknowledge and comply with the restrictive covenants contained in the employment contract. Those restrictive covenants included a non-competition clause which purported to preclude Mr. Kerzner from being employed in any business related to the acquisition, processing and marketing of superior recyclable products from all types of ferrous and non-ferrous metal in Ontario, Quebec and the Atlantic provinces for eighteen months following the termination of his employment. In addition, a non-solicitation provision related to the same territory applied for a two year term.

[8] In my decision, I found that these restrictive covenants were unenforceable.

[9] As I noted in my decision, at para. 93, the employer wanted to have it both ways. On the one hand, the employer was insisting on a two year, fixed term contract, albeit a renewal one, with specific provisions relating to entitlement upon early termination. On the other hand, the employer wanted to restrain Mr. Kerzner from working elsewhere in the only business he had been involved in for virtually his entire working life.

[10] In my view, Mr. Kerzner was substantially successful. He obtained financial compensation (albeit considerably less than the $345,000.00 which he was seeking at the outset of the summary judgment motion). And he succeeded in having the restrictive covenants declared unenforceable.

[11] Although the plaintiff made offers to settle, those offers were for amounts greater than the eventual award of damages on the plaintiff’s claim. The defendant made no offers.

[12] The amount of costs sought by the plaintiff, on a partial indemnity scale, exceeds the amount of damages awarded. The defendant, pointing out that the plaintiff was originally seeking as much as $728,000.00 in damages, compares the amount ultimately recovered to the claim for costs and submits that the costs sought are disproportionate to the amount awarded.

[13] The defendant’s legal fees, including disbursements and applicable taxes, totalled $140,879.65. This stands in contrast to the $255,525.02 expended by the plaintiff.

[14] I am not surprised by the costs incurred by either side. The plaintiff was seeking summary judgment; the defendant was not. The plaintiff therefore had the onus of establishing his claim and of persuading the court that the defendant’s counterclaim should be dismissed.

[15] Furthermore, as pointed out by the plaintiff in his costs submissions:

The hearing of the Motion was preceded by 2 days of cross-examinations. At the subsequent hearing of the Motion, there were 7 independent legal issues, and 26 disputed legal sub-issues which counsel had to address in oral argument. The number and complexity of these issues was such that oral argument took three full days of court time. That 3-day hearing was later supplemented by 7 rounds of subsequent written submissions. The Motion Records, Facta and Authorities filed on this Motion took the better part of 3 banker’s boxes to store.

[16] This litigation has been hard-fought and although both sides assert that the conduct of the other was unreasonable in various respects, I am not persuaded that one side behaved significantly better or worse than the other. There were no doubt things that could have been done to reduce costs but, overall, my impression was that the litigation has been conducted with a great deal of professionalism and skill by both sides.

[17] The fact that a claim for costs exceeds the value of the damages payable by the defendant is not in and of itself a reason to deny the plaintiff his reasonable costs: A & A Steelseal Waterproofing Inc. v. Kalovski, 2010 ONSC 2652 at para. 21.

[18] Having in mind the encouragement of greater efficiency, but also acknowledging, for the reasons I have already given, the success of the plaintiff, the importance of the issues to the parties, the complexity of the proceeding and the other circumstances of these proceedings, I have concluded that the plaintiff should recover costs in the all-inclusive amount of $150,000.00 from the defendant.

Graeme Mew J.

Released: 30 November 2017