Court File and Parties

COURT FILE NO.: CV-09-385319 DATE: 2018-03-09 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: HAMPTON SECURITIES LIMITED, Plaintiff AND: CHRISTINA NICOLE DEAN, Defendant

BEFORE: KOEHNEN J.

COUNSEL: Sara J. Erskine, David Barbaree, for the Plaintiff Christopher J. Somerville, for the Defendant

HEARD: In Writing

ENDORSEMENT on Costs

[1] In reasons dated January 8, 2018, (reported at 2018 ONSC 101) I dismissed the claim of Hampton Securities Limited (“Hampton”) and awarded Ms. Dean judgment in the amount of $113,000 on her counterclaim for wrongful dismissal, defamation and punitive damages. In addition, I ordered Hampton to correct the Notice of Termination (“NOT”) that it had filed on the National Research Database of the Investment Industry Regulatory Organization of Canada (“IIROC’).

[2] Ms. Dean seeks full indemnity costs in the amount of $309,026.50 inclusive of fees, disbursements and HST. She submits the case warrants full indemnity costs because of findings that I made about Hampton’s conduct in my reasons for judgment. Ms. Dean’s counsel disclosed candidly that their bill of costs is based on docketed, not billed time. They have not yet billed any of their time and will be charging Ms. Dean only what this court awards in costs.

[3] Hampton argues the amount of an appropriate award lies between $50,000 and $70,000 for two reasons: First, Hampton submits that cost awards must be fair and fall within the reasonable expectations of the parties, regardless of the basis on which the cost award is made. Hampton points to its own actual costs which it says are $95,466 as a proxy for a party’s reasonable expectation about full indemnity costs.

[4] Second, Hampton submits that since Ms. Dean’s bill of costs is based on recorded, not billed time, it has not benefitted from the discipline that counsel would ordinarily impose upon themselves before billing a client.

[5] For the reasons that follow, in my view the principle of full indemnity should apply here but I nevertheless reduce the amount claimed and fix costs at $248,144.94 inclusive of fees, disbursements and HST.

A. The Appropriate Scale of Costs

[6] From the outset, the nub of this case from Ms. Dean’s perspective concerned the allegation of unauthorized trading in the NOT. As noted in my reasons for judgment, the NOT created a barrier for Ms. Dean’s career advancement. Hampton knew or ought to have known that it would have that effect. Hampton also knew or ought to have known that the allegations of unauthorized trading in the NOT were false. Hampton had accepted her trading without complaint. It was only the day before Ms. Dean resigned that Mr. Deeb demanded that she deposit an additional $50,000 into her reserve account to keep trading. To that point, her trading had been authorized. It was future trading that was unauthorized. Ms. Dean did not engage in any trading after Mr. Deeb made that demand.

[7] Hampton tries to reduce the importance of the NOT in the action by noting that Ms. Dean did not ask Hampton to correct the NOT until May 2016, when she included that request in a settlement offer. Hampton adds that Ms. Dean did not seek a mandatory order to this effect until October 2016, when she amended her claim on the eve of trial.

[8] I do not believe this fairly reflects the record. It was clear from the outset that Ms. Dean wanted a clean record of employment. Before the litigation even began, she offered to move forward by surrendering the outstanding balance in her reserve account, having Hampton acknowledge that she resigned and having Hampton provide a favourable letter of reference.

[9] In her original statement of defence and counterclaim filed in September 2009, Ms. Dean stated that she “vehemently denies that she engaged in inappropriate trading activities” and that the allegation of unauthorized trading in the NOT “was untrue, defamatory of Dean, and motivated by malice.”

[10] While it is true that Ms. Dean did not specifically ask that the NOT be corrected until 2016, there can be no doubt that its defamatory content was an issue from the outset. Courts should be reluctant to hold innocent parties to a standard of perfection as a prerequisite to a cost award in their favour. It is all too easy to criticize after the fact. The critic enjoys the benefit of hindsight. Ms. Dean and her counsel did not.

[11] In May 2016, after it had been driven home to Ms. Dean that the NOT created a barrier for her career advancement, she offered to pay Hampton up to $4,000 if Hampton filed a letter of correction. Hampton refused.

[12] Hampton responded with an offer to settle pursuant to which Ms. Dean would pay Hampton $40,000 in exchange for which Hampton would, within 90 days of acceptance of the offer, use its “best efforts” to file an updated termination notice with IIROC removing any allegation that Ms. Dean was dismissed for cause, that she failed to follow trading desk policies and procedures or that she engaged in unauthorized trading. Hampton later verbally reduced the payment demand to $30,000.

[13] Hampton’s willingness to file a NOT in exchange for $40,000 or $30,000 demonstrates that it knew or ought to have known that the NOT was false. A responsible market participant knows or should know that it has a duty to report unauthorized trading to its regulator because of the dangers such activity poses to the public markets. Hampton cannot avoid that duty in exchange for a cash payment from the alleged offender. Hampton’s willingness to do so only underscores Hampton’s knowledge that the NOT was false.

[14] Hampton was using the defamatory content of the NOT as a means of extracting cash from Ms. Dean.

[15] Such conduct falls into the category of reprehensible, oppressive and contumelious conduct that has justified higher cost awards (see Apotex Inc. v. Egis Pharmaceuticals, 1991 CanLII 2729 (ON SC), [1991] O.J. No. 1232 at para. 12, including awards for full indemnity: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 at para 29; Wigle v. Vanderkruk, [2005] O.J. No. 3676; Straus v. Decaire, 2011 ONSC 3059 at para 20.

[16] Cost awards usually do not provide full indemnity because courts are reluctant to inhibit parties from bringing legal claims. That reluctance is grounded in the social utility of having courts deal with real legal issues and concerns about access to justice.

[17] There was, however, never any real issue about the defamatory nature of the NOT. Indeed, my finding about its defamatory nature was based in part upon Mr. Deeb’s own evidence to the effect that he terminated Ms. Deeb’s employment because of her unwillingness to contribute a further $50,000 to her reserve account, not because she had exceeded her authority when trading for Hampton’s own account.

[18] Concerns about access to justice favour the imposition of a full indemnity cost award in this case.

[19] It would shock most people to hear that a more powerful employer could make knowingly defamatory statements about a less powerful employee, which statements significantly impair the employee’s career, refuse to correct those defamatory statements unless the employee paid the employer a significant amount of money, force the employee to litigate to correct the defamatory statement and then have the employee bear the lion’s share of the legal costs associated with the litigation.

[20] Hampton’s position on costs makes the injustice of the situation clear. Hampton’s costs come to $95,000. It advances that figure as a reasonable proxy for full indemnity costs. It submits that the cost award in favour of Ms. Dean should range between $50,000 and $70,000. That leaves Ms. Dean to pay for the $25,000-$45,000 difference between what Hampton says is a reasonable cost award and what Hampton says are reasonable actual costs. In other words, Ms. Dean would have to use all of the $25,000 defamation award and most of the $25,000 punitive damage award (depending on whether costs are fixed at $50,000 or $70,000) to pay the difference between what Hampton submits is a reasonable cost award and what it submits are reasonable actual costs.

[21] The defamation award and the punitive damage award were grounded in the fact that Hampton’s conduct was inexcusable and outrageous. A result of the sort Hampton advocates would Ms. Dean any benefit of the defamation or punitive damage awards and runs the serious risk of limiting access to justice. It would inhibit financially weaker, wronged parties from accessing the courts not out of fear of adverse cost awards, but because the cost of litigation outweighs its financial benefit, even if successful. Ms. Dean’s position only worsens when one looks at the time her counsel actually devoted to the matter rather than at what Hampton asserts is a reasonable amount of time to have devoted.

[22] A result like that would only encourage oppressive conduct against financially weaker parties because the weaker party would not have the means to litigate, no matter how meritorious their claim.

[23] I appreciate that Ms. Dean has not actually paid the legal costs she now seeks. That, however, does not change the analysis. Ms. Dean’s counsel has acted in the finest traditions of the bar by agreeing to take on a case without compensation for a client who had been wronged and who did not have the means to right that wrong without counsel’s willingness to work for nothing for 8 ½ years and to risk receiving no payment at all. The failure to award full indemnity costs in circumstances such as these would discourage counsel from taking on cases like those of Ms. Dean and render even more powerful those parties who behave oppressively.

[24] A full indemnity cost award is not punitive as Hampton submits. A legitimate public purpose of cost orders is to discourage inappropriate conduct. A cost award based on the principle of full indemnity does that. A cost award of the sort Hampton urges encourages inappropriate conduct because it inhibits the Ms. Deans of the world from coming to court.

B. Reasonable Expectations of the Parties

[25] Hampton submits that:

(i) Even a cost award on a full indemnity basis must be fair, reasonable and consistent with the reasonable expectations of the parties.

(ii) A cost award must reflect with proportionality, the actual issues argued rather than an uncritical reliance on billable hours: Haufler v. Hotel Riu Palace Cabo San Lucas, 2014 ONSC 2686 at para. 11.

(iii) This was a simplified procedure action which warrants particular adherence to principles of proportionality when assessing costs. Counsel who charge top rates may find that those rates are not reflected in cost awards because they are higher than modest cases can reasonably bear: Glazman v. Toronto (City), 2002 CarswellONT 2280 at paras. 8 and 11. Put another way, Hampton asks whether a client would think it was reasonable to incur over $300,000 in time on a trial that awarded the client $113,000?

[26] In principle, there is merit to Hampton’s submissions. I agree that the factors referred to in paragraph 26 above are relevant to consider when fashioning a cost award.

[27] However, just as a cost award based on an uncritical addition of recorded time is unfair, so is an award based on a predetermined ratio between the monetary value of a claim and costs.

[28] The suggestion that a cost award should not exceed a certain proportion of the monetary claim unfairly prejudices parties like Ms. Dean who have smaller monetary claims but important non-monetary claims. It is clear from both the evidence at trial and Ms. Dean’s settlement offers that the main issue for her was the NOT. Ms. Dean was not pursuing an overreaching damage claim, but vindicating her reputation.

[29] The personal and economic value to Ms. Dean of correcting the NOT are also relevant factors to take into account when assessing the proportionality of a cost award. Proportionality cannot be assessed only against monetary damages when one principal goal of the action was non-monetary relief.

[30] False statements in regulatory filings create an insurmountable barrier to Ms. Dean obtaining a position of responsibility in the investment industry. Being denied the opportunity to succeed in one’s chosen career because of a deliberate falsehood that the declarant will not correct has a profound impact not only on one’s earning capacity but on one’s reputation, self- esteem and enjoyment of life. If courts cannot remedy situations as egregious as this without imposing substantial costs on the innocent party, we risk seriously undermining public confidence in justice system.

[31] While Hampton’s fees may be relevant to consider, they are not determinative. Different law firms have different economic structures and charge different rates. Ms. Dean’s lead counsel, Mr. Somerville recorded his time at $395 and $425 at different stages. He is a 2011 call. Ms. Dean’s junior counsel, Ms. Hooper recorded her time at $315 and $325 per hour. She is a 2016 call. While the rates charged by Ms. Dean’s counsel may be higher than those charged by Hampton’s counsel, they are well within the range charged by Bay Street law firms so could not fairly exceed Hampton’s objectively reasonable expectations.

[32] Hampton criticizes Ms. Dean’s counsel for the time spent on the matter. While the matter was expensive to litigate, Hampton bears a good deal of responsibility for that. Hampton advocated an interpretation of the employment contract that was contrary to its own conduct during the employment relationship and that contradicted the evidence of two of its own witnesses. The interpretation of the contract turned on a mathematical analysis of Hampton’s internal documents and the translation of verbal concepts contained in the employment contract into mathematical concepts in Hampton’s records. That is a time-consuming exercise for counsel to learn, understand and communicate to a court through a question and answer format.

[33] In addition, Hampton raised every possible defence to the defamation claim. It argued that the NOT was not defamatory. It argued that the NOT was truthful. It argued that the NOT was subject to qualified privilege. That required Ms. Dean’s counsel to research those issues and make submissions on them.

[34] All of that said, in the ordinary course of billing, law firms often write off time before it is invoiced. They do so for a variety of reasons. On occasion, the time docketed does not reflect fair value. In other instances, the transition of the file from one lawyer to another may cause unnecessary duplication. There are no doubt many other reasons for which counsel write off time when billing.

[35] In my view, some of the time incurred by Ms. Dean’s counsel would ordinarily have been written off before billing. For example, Ms. Dean’s lead counsel at trial was the third lead lawyer on the file. In most cases, a law firm would write off a portion of a successor lawyer’s time because it was devoted to learning the background that the earlier lawyer had already billed for. A client would not expect to be billed for that duplicative time. Hampton would also have a reasonable expectation that it would not be charged for such duplication in a cost award.

[36] Hampton raises to specific issues about time entries.

[37] First, it notes that Mr. Somerville recorded $28,710 in time for a second pre-trial conference while the time recorded for the first pretrial conference was approximately $2,500. It appears that the second pretrial conference was the first major task Mr. Somerville undertook on the file. A review of the dockets discloses that he devoted a fair bit of time to reviewing discovery transcripts. While his use of time was necessary and not excessive, it was time that probably would not have been necessary had the earlier lead counsel remained on the file.

[38] Second, Hampton objects to recorded time of $1,979 for preparing witness summonses when in fact, Ms. Dean was the only witness for her side at trial. I agree that it would not be fair, in the absence of a compelling explanation, to bill those costs to Hampton even in a full indemnity award.

[39] In addition, Hampton objects generally to the accrual of $266,000 in time during the two years before trial which Hampton describes as the period of delay arising while Ms. Dean amended her counterclaim. I do not believe that it is fair to characterize the time recorded during that period as time arising from delay. The time was spent on necessary litigation tasks such as trial preparation which had to be incurred in any event. That said, there is some merit to Hampton’s submission that some of the trial preparation time was in respect of two trial dates that Ms. Dean asked to adjourn. I agree that it would not be within the reasonable expectation of an opposing party to pay for preparation time that was rendered unnecessary by Ms. Dean’s request to adjourn, however meritorious that request may be. Hampton has not quantified that time. My quick review of the time entries suggests that it was not material.

[40] With respect to disbursements, Hampton objects to charges for Quicklaw, faxes and photocopies at $0.25 per page. I agree that those charges would exceed the reasonable expectations of an opponent given that most corporate clients to whom Bay Street firms provide services view computer research and fax costs as overhead and limit photocopy charges to $0.10 or $0.15 per page.

C. Quantum

[41] That leaves me with the question of how much time to award Ms. Dean’s counsel.

[42] While fees should be proportionate to the work required on a file, at the same time, Ms. Dean’s counsel should not be punished for working hard to achieve a goal of utmost importance to their client. As noted earlier, it is all too easy to criticize counsel after the fact for allegedly inappropriate allocation of time.

[43] Hampton has objected to time entries in respect of the second pre-trial and the witness summonses and has made more general allegations of excess time. In the absence of any additional specific objections by Hampton, I do not propose to review eight years of time entries and embark on a forensic audit of my own.

[44] I have, however, tried to assess both parties’ submissions about the amount of time devoted to the file against a variety of benchmarks to determine what would be within the objective reasonable expectations of a party for a full indemnity cost amount for a matter of this sort.

[45] Ms. Dean’s bill of costs for time alone on a full indemnity basis came to $266,388 (excluding HST). If we deduct from that the time for the second pretrial conference and for preparing witness summonses to which Hampton specifically objects, we come to a fee of $235,699.

[46] Hampton also objected to charges for a variety of lawyers who ended up transferring the file to Ms. Dean’s current counsel. I have reviewed Ms. Dean’s bill of costs and totaled the time for those lawyers who left the firm and transferred the matter to Mr. Somerville. They are: Harry McMurtry, Michelle Booth, Matthew Gibson, Masiel Matus, and Brigid Wilkinson. Their total time comes to $37,003. If we assume that all of that time was later duplicated by Mr. Somerville and Ms. Hooper and deduct that entire amount from the bill of costs we arrive at a fee of $229,385 excluding HST.

[47] Other useful benchmarks of what a party to litigation might be expected to pay on account of fees (i.e. excluding disbursements) include: (i) Partial indemnity costs up to the date of Ms. Dean’s Rule 49 offer followed by substantial indemnity costs after the date of her rule 49 offer which Ms. Dean submits comes to $222,738; (ii) A straight partial indemnity award which Ms. Dean submits comes to $159,832; and (iii) A straight substantial indemnity award which Ms. Dean submits would come to $239,749.

[48] The purpose of using these various approaches was to determine whether any of them arrive at a cost award that corresponds to the numbers Hampton advocates. None do.

[49] In my view, the fairest approach to deal with the issue is to begin with Ms. Dean’s full bill of costs and reduce it by specific amounts that Hampton has challenged and which I have found to be reasonable. I would therefore give Hampton full credit for the second pretrial conference and the witness summonses. I have been added back to the credit of Ms. Dean the sum of $3,000 to reflect the fact that time would have been required for the second pretrial conference even if Ms. Dean’s original lawyers had remained on the file. That gives Hampton credit for $25,000 or 65 hours of Mr. Somerville’s time to educate himself about the file (at the rate of $395 which he was billing when he assumed the file).

[50] I have then applied a further discount of 10% to the fees on the theory that most Bay Street law firms are readily prepared to provide a 10% discount off of their posted rates for matters that are likely to generate larger fees. Given that commercial reality, it would reflect the objectively reasonable expectations of a party.

[51] I have not given Hampton credit for the allegedly duplicative trial preparation time associated with the adjournments Ms. Dean sought. Hampton has not quantified that time and, as noted above, my review of the docket sheets did not reveal material time in this regard.

[52] That translates into the following calculation:

Dean bill of costs (without HST): $266,388.00 Subtract second pretrial conference: $(28,710.00) Allowance for second pretrial: $ 3,000.00 Witness Summonses: $ (1,979.00) Subtotal: $238,699.00 10% Discount $ (23,869.90) Total Fee: $214,829.10 HST at 13%: $ 27,927.78 Grand Total: $242,756.78

[53] To reduce the fee by anything more than that would, in my view be unfair to Ms. Dean’s counsel, especially given the risk they assumed and the fact that they have not been paid for 8 ½ years.

[54] With respect to disbursements, after eliminating charges for faxes and Quicklaw and setting photocopy charges at $0.15 I fix disbursements at $5,388.16.[^1] As a result I order Hampton to pay Ms. Dean the sum of $248,144.94 on account of fees, disbursements and HST.

Koehnen J.

Date: March 9, 2018

[^1]: I have arrived at this figure as follows: I began with Ms. Dean's disbursement claim of $8,008.06. I then added up the contested disbursements namely $76.75 for fax charges and $1,180.35 for Quicklaw. I then took the photocopying charge of $2,656 which was charged at $0.25 per page. This translates into 10,624 pages of photocopying. I recalculated the photocopying charge by allowing a charge of $0.15 per page which comes to a charge of $1,593.60 for photocopying. The difference between that photocopying charge and the one Ms. Dean claims is $1,062.40. Adding the contested charges for fax, Quicklaw and the excess photocopying charge of $1,062.50 comes to $2,318.50 which I multiplied by 1.13 to take HST into account to arrive at a grand total of $2,619.90 in contested disbursements. When one subtracts $2,619.90 from the claimed disbursements of $8,008.06 one arrives at a disbursement amount of $5,388.16.