COURT FILE NO.: CV-17-574939
DATE: March 13, 2018
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Swiss Tech Incorporated v. 2316543 Ontario Limited and 2504639 Ontario Inc.;
BEFORE: MASTER C. WIEBE
COUNSEL: Ahmad, S. for Swiss Tech Incorporated (“Swiss Tech”); Hine, Robert P. for 2504639 Ontario Inc. (“639”);
Tripodi, Stefano for 2316543 Ontario Limited (“231”).
HEARD: August 31, 2017;
DECISION: November 9, 2017.
COSTS DECISION
Introduction
[1] Swiss Tech brought this motion on May 30, 2017 originally for a return date of June 8, 2017, which was subsequently adjourned. The motion was for a certificate of pending litigation (“CPL”). The underlying proceeding was an application that Swiss Tech brought on May 10, 2017 inter alia seeking a declaration that it had an interest in property located at 2180 Lawrence Avenue East, Toronto (“the Property”). The motion originally also sought disclosure from the Respondents, 639 and 231, but this part of the motion was later withdrawn due to disclosure by the Respondents. The Respondents both opposed this motion.
[2] On July 11, 2017 639 brought a cross-motion for an order dismissing or permanently staying the application. The motion also sought an order that the costs of the Swiss Tech motion and the Respondents’ cross-motion be paid by Louis Jaar. The motion came before me for scheduling as a long motion on July 31, 2017. At that time, Mr. Jaar had retained his own counsel, Michael Hackl. After a discussion, I ordered that the issue of the costs to be paid by Mr. Jaar be adjourned to my list on October 30, 2017 to proceed only if there was otherwise an award of costs in favour of 639.
[3] Both motions were argued before me on August 31, 2017. At the end of the argument, counsel delivered costs outlines. The Swiss Tech costs outline showed the amounts of $22,814.86 in partial indemnity costs and $28,464.86 in substantial indemnity costs. 639’s costs outline showed the amounts of $91,753.42 in partial indemnity costs and $130,179.07 in substantial indemnity costs. Mr. Tripodi made no written or oral submissions, and filed no costs outline.
[4] During the argument on August 31, 2017, I learned that the application was returnable on September 14, 2017, namely just two weeks away. As a result, I deferred work on my decision until I heard from counsel as to the status of the application. On September 12, 2017, I received emails from counsel indicating that on that day Justice Firestone had adjourned the application to a chambers appointment on September 26, 2017 for rescheduling, including the scheduling of a possible hybrid trial. Mr. Hine in his email indicated that he now wished to make further submissions on account of the amendments made to the Notice of Application at the argument of the motions. I set a schedule for the further submissions. Then, on September 18, 2017, Mr. Hine withdrew his request. Justice Diamond on September 26, 2017 ordered a trial of issues.
[5] I issued my decision on November 9, 2017. I granted Swiss Tech leave to have a CPL issued and registered on certain terms involving postponement to construction financing. I dismissed the cross-motion in its entirety. The question of costs to be paid by Mr. Jaar was never brought back before me.
[6] As directed, counsel provided me with written submissions on costs of the two motions. On November 20, 2017 Ms. Ahmad provided her written submissions wherein she provided a Revised Costs Outline showing $40,002.06 in partial indemnity costs and $49,042.06 in substantial indemnity costs. In her submissions, Ms. Ahmad indicated that her client was claiming both sets of costs. On December 1, 2017, Mr. Hine delivered his written submissions wherein he argued that either there be no order as to costs or that Swiss Tech be awarded no more than $10,000 in partial indemnity costs to be paid jointly and severally by 639 and 231 “in the cause.” Mr. Tripodi delivered no submissions on costs.
[7] Concerning the underlying application, it was eventually heard by Justice E.M. Morgan on January 22 and 26, 2018. His Honour rendered his decision on February 5, 2018. He ruled that Swiss Tech is entitled to payment from 231 in the amount of $1,800,000, and that Swiss Tech be given a charge on the Property in that amount until the amount is paid, thereby dispensing with the need for the CPL I had ordered. His Honour also awarded Swiss Tech $49,000 in partial indemnity costs. This result rendered the issue of “cause” raised by Mr. Hine in his costs submissions moot, as Swiss Tech is clearly the successful party in the underlying application.
Result
[8] Swiss Tech was undoubtedly the successful party on both motions, and deserves to be awarded costs as a result. It obtained the requested CPL, and defeated the cross-motion to have the application stayed.
[9] Mr. Hine argued that there was divided success. He argued that the CPL was ordered to be postponed to construction financing and to be lifted from lots sold to third parties. I do not view that result as a defeat for Swiss Tech. In argument, Ms. Ahmad specified that I could fashion a remedy to insure that the construction project proceed, as it was in the interest of all parties that the project proceed. Indeed, she suggested that I use the postponement remedy.
[10] Mr. Hine argued that 639 succeeded in my finding that I had jurisdiction to grant a stay, which was a position he had urged on me. That was a small victory for 639, but not one that was central to the motions, particularly as I did not find sufficient grounds for exercising the stay jurisdiction. Little time was spent on this point in any event.
[11] Mr. Hine appeared to argue that 639 was successful in defeating Swiss Tech’s “emergency injunction motion” brought on June 8, 2017. Justice Diamond’s endorsement of June 2, 2017 indicates that the costs of the interim relief sought by Swiss Tech were to be determined by the “judge presiding on June 8, 2017.” Ms. Ahmad indicated in her submissions that there was no attendance on June 8, 2017 as the parties agreed to interim terms. I, therefore, do not find that 639 was successful on this point.
[12] Mr. Hine also appeared to argue that, as there was no result in the motion concerning Mr. Jaar, there should be no award of costs in that regard. Ms. Ahmad indicated in her submissions that Swiss Tech indemnified Mr. Jaar concerning his legal costs, which totaled $7,679.87. I do not agree with Mr. Hine. The 639 motion against Mr. Jaar forced him to retain separate counsel. I adjourned that motion on July 31, 2017 as it was entirely contingent on 639 succeeding on these motions and being awarded costs, neither of which occurred. The 639 motion against Mr. Jaar never happened as a result. I find that Swiss Tech was successful on this aspect of the motions, and deserves costs in that regard as well.
[13] Mr. Hine argued that 639’s cross-motion essentially forced Swiss Tech to amend its Notice of Application on the eve of the argument, and after completion of cross-examinations, to delete the alternative claim under SRA fee clause (b), the clause that I found violated the Real Estate and Business Brokers Act, 2002, S.O. 2002, c. 30, schedule C (“REBBA”). He went so far as to argue that, had Swiss Tech amended the notice of application before cross-examinations, 639 would not have proceeded with its cross-motion. Ms. Ahmad responded by pointing out that Swiss Tech was not aware of the particulars of the sale of the Property until the Respondents finally provided documentary disclosure on June 7, 2017, which is the reason Swiss Tech relied on both fee clauses in its original application. She then pointed out that, when Mr. Jaar swore his affidavit on June 15, 2017, he signaled Swiss Tech’s intention to amend by stating in paragraph 4(d) of his affidavit that the disclosure “conclusively shows the Property was not sold outright. With that information, Swisstech may amend the Notice of Application to amend or remove its claim for relief under clause (b) of the SRA’s fee provision.” This should have been enough of a signal to have the issue clarified by 639 in cross-examination.
[14] In any event, I do not accept the argument that this one issue caused 639 to decide to bring its cross-motion. I note that in argument Mr. Hine argued strongly that even SRA clause (a) ran afoul of REBBA and that the application should be stayed in any event by virtue of the Business Names Act, R.S.O. 1990, c. B.17 (“BNA”). I also note that Mr. Hine raised all of the REBBA and BNA points in response to the Swiss Tech CPL motion. These issues would have had to be argued whether there was a cross-motion or not.
Reasonable expectation of the unsuccessful party
[15] The Swiss Tech costs submissions raise an important issue concerning this factor. One of the factors to be considered in awarding costs under Rule 57.01(1) is what the unsuccessful party would reasonably expect to pay in costs. One of the key ways the courts have to determine the reasonable expectation of the unsuccessful party is the requirement in Rule 57.01(6) that both parties complete and “bring to the hearing” their costs outlines. Justice Beaudoin in Wallace v. Campbell, 2017 ONSC 2767 at paragraph 5 made the following important comment, with which I concur:
One of the purposes of the costs outline is to force a party to commit to an amount that they would be seeking [in] costs so that, in the event that they are unsuccessful on the motion, they cannot be heard to say that the motion was simple or unimportant in order to diminish the costs of which would be otherwise payable. A costs outline is an important tool in assessing the amount that an unsuccessful party could be expected to pay. A costs outline delivered after the fact is simply not as reliable as one delivered in accordance with the rule.
[16] In the motion before me, at the conclusion of the argument on August 31, 2017, Ms. Ahmad delivered a Costs Outline for Swiss Tech which shows the activity on this motion in the form of a block description plus a total of hours for Ms. Ahmad of 45. Ms. Ahmad then applied the partial indemnity hourly rate of $300 to these hours for the partial indemnity total. She applied the substantial indemnity hourly rate of $400 to these hours for the substantial indemnity total. There were no dockets. Ms. Ahmad was called as a lawyer in New York state in 2004 and in Ontario in 2009. The disbursements included in this document totaled $5,864.86. This Costs Outline showed a partial indemnity total of $22,814.86 (HST included) and a substantial indemnity total of $28,464.86 (HST included).
[17] In her written submissions delivered after I issued my ruling, Ms. Ahmad included a “Revised Costs Outline.” This document contains the same block description of activity, but now shows a total of 80 hours for Ms. Ahmad. The same rates are then applied. Attached are detailed dockets showing Ms. Ahmad’s activity starting on March 29, 2017 and ending November 17, 2017. The total hours shown in the dockets are 163.9. Of this total, 6.1 hours are shown for the period after the argument on August 31, 2017. The disbursements shown in this document total $12,882.06. Three disbursements in the first Costs Outline (concerning the issuance and service of the Notice of Application and the use of Terranet) are removed. However, there are three added disbursements for the costs incurred by Swiss Tech to reimburse Mr. Jaar for his legal costs on account of having to retain separate counsel to deal with the 639 motion for costs as against him. These three disbursements total $7,679.87. The total claimed in the Revised Costs Outline are $40,002.06 in partial indemnity costs and $49,042.06 in substantial indemnity costs.
[18] Ms. Ahmad purported to explain this disparity between the two Costs Outlines as follows. She stated that the initial claim of 45 hours was “conservative (and remains conservative) about the hours claimed because it appeared all materials would be used at the hearing of the application.” She then went on to say the following: “now that there will be a trial, which may or may not make use of the affidavits, it is appropriate to increase the hours claimed from 45 to 80 hours, and to reserve the remaining 83.9 hours to the application.” She pointed out correctly that the higher total was still substantially less than the 299 hours claimed by 639 in its Costs Outline.
[19] I do not accept these submissions for two reasons. First, in the end it now appears that the matter was argued before Justice Morgan for two days as a pure application with no more than affidavits, facta and books of authorities. It was an issue before His Honour as to whether “a paper record” was sufficient, and he determined that it was. There was no viva voce trial hearing. His Honour also went on to award Swiss Tech $49,000 in costs as against 639 and 231 jointly and severally. It is not clear to me as to whether and, if so, to what extent additional affidavit evidence was generated in the application. Therefore, given all these facts, I find that the “conservative” approach taken by Ms. Ahmad in her first Costs Outline must be followed.
[20] Second, I find also that it would undermine the integrity of the Costs Outline process to follow the Swiss Tech Revised Costs Outline. Ms. Ahmad did not amend her Costs Outline immediately after the matter was scheduled for a trial of issues by Justice Diamond on September 26, 2017. In fact, she waited for 55 days after Justice Diamond’s order and until after her client received my ruling to make the revision substantially increasing Swiss Tech’s costs claims. I have considerable doubt that Ms. Ahmad would have made the same revision had Swiss Tech been unsuccessful on the motions. Therefore, to protect the integrity of the process, the court must treat the Revised Costs Outline as not being “reliable,” to use the words of Justice Beaudoin in Wallace.
[21] I will, therefore, rely on the initial Swiss Tech Costs Outline.
Conduct
[22] Ms. Ahmad argued that there should be a substantial indemnity award of costs against 639 and 231. She argued that 639 acted unreasonably in bringing its cross-motion, as it had no reasonable prospect of success. I do not agree. 639 succeeded on some points in its cross-motion, in particular the finding that the SRA fee clause (b) ran afoul of the REBBA.
[23] Ms. Ahmad argued that Mr. Hine “implied a purpose to delay, to wear down the Applicant, and to gain a tactical advantage.” I do not agree. There is no doubt that the motions were vigorously disputed by both sides. But I do not recall seeing or hearing evidence that the Respondents had such ulterior motives.
[24] Ms. Ahmad stated that 639 had brought a motion for security for costs returnable November 30, 2017, which she argued should have been brought with the 639 cross-motion on August 31, 2017 as there were apparently many issues in common between the two 639 motions. I fail to see how a 639 motion for security for costs could have been argued on the same day as the Swiss Tech CPL motion and 639 cross-motion to stay. The argument before me lasted the whole day.
[25] There is one matter, however, where, in my view, the Respondents should pay full indemnity costs, namely the motion against Mr. Jaar. This motion was, in my view, without merit and unreasonable. The allegation in the 639 notice of motion was essentially that Mr. Jaar was not a director, shareholder and representative of Swiss Tech but was nevertheless the real driving force behind the Swiss Tech motion. As a result, so the argument sent, he should pay costs. The allegation was further that Swiss Tech itself was a shell corporation. Mr. Jaar indeed gave the bulk of the key evidence for Swiss Tech; but this was because he acted as its agent throughout and had the bulk of the relevant evidence. There was no credible evidence either that Mr. Jaar was primary beneficiary of the CPL motion or that Swiss Tech was a shell. Yet, Mr. Jaar was forced to retain separate counsel, which Swiss Tech had to pay.
[26] I will award costs to Swiss Tech on a partial indemnity basis. The one exception is the Jaar motion, the costs of which in the full amount of $7,679.87 I award to Swiss Tech.
Quantum
[27] Mr. Hine took issue with the claimed rate for Ms. Ahmad, namely $300/hour. He argued that, as Ms. Ahmad has been an Ontario lawyer since 2009, namely 8 years, her time should be awarded on the basis of the $225/hour rate in the old costs grid for lawyers of less than 10 years of experience. I do not agree. Ms. Ahmad was called to bar in New York in 2004 and has been a practicing lawyer for 13 years. The $300/hour rate is reasonable.
[28] There were no other criticisms of the quantum of the Swiss Tech Costs Outline. This is understandable as the 639 Costs Outline showed figures that were more than four times greater than the figures in the Swiss Tech Costs Outline.
Complexity and importance
[29] I agree with Ms. Ahmad that the motions were “relatively complex,” with extensive affidavits, cross-examination transcripts and facta in both motions.
[30] There is also no doubt that the motions were vitally important to all parties. Swiss Tech, on the one hand was pursuing security for the payment of a substantial amount from an entity that did not appear to have means. 639 and 231, on the other hand, were deeply concerned about the continuing viability of the project in light of the CPL. I will bear all this in mind.
Conclusion
[31] In conclusion, and after considering all of these issues, I have decided that 639 and 231 should jointly and severally pay Swiss Tech the all-inclusive amount of $30,000 in partial indemnity costs in 30 days from today. I so order.
DATE: March 13, 2018 __________________________
MASTER C. WIEBE