Court File and Parties

Court File No.: CV-14-502250 Motion Heard: 12 February 2019 Superior Court of Justice - Ontario

Re: RBC Dominion Securities Inc., Plaintiff, Defendant by Counterclaim And: Jeffrey Kowal, Defendant, Plaintiff by Counterclaim

Before: Master Jolley

Counsel: Matthew Sammon, Counsel for the Moving Party Plaintiff, Defendant by Counterclaim Sunira Chaudhri and Nick Papageorge, Counsel for the Responding Party Defendant, Plaintiff by Counterclaim

Heard: 12 February 2019

Reasons for Decision

[1] RBC Dominion Securities Inc. (“RBCDS”) wishes to amend its statement of the defence to the counterclaim of Mr. Kowal to allege new grounds for terminating Mr. Kowal’s employment. Mr. Kowal does not object to the amendment but argues that he is prejudiced thereby and is entitled to be compensated for that prejudice in costs.

[2] Rule 26.01 provides that on motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

[3] The court has discretion to impose “such terms as are just” as a condition of granting an amendment. I do not agree that costs that can be awarded as a term of the amendment are as narrowly prescribed as submitted by RBCDS. There are many cases where the courts have awarded the opposite party its costs to amend its pleading to respond to the new amended pleadings, to deal with new productions and to conduct additional discoveries. By way of example, the court in Turek v. Kaycan Group of Cos. 2005 CarswellOnt 6925 granted the defendants leave to amend their pleading but ordered them to pay the plaintiff not only costs thrown away but also costs to prepare new pleadings, costs for the assembly and review of additional productions and costs of further discovery if required. The same approach was followed in Moyal v. Hawa 2004 CarswellOnt 4877 where the court ordered costs thrown away and costs to cover additional work required by the amendment, including pleadings, production and discovery.

[4] I find, as did the court in Allen-Vanguard Corp. V. L’Abbé 2013 ONSC 6295, that there are costs inherent in having to deal with an enlarged pleading at this late stage. There is a need to review the amended defence and prepare a reply. This duplication would not have been necessary if the action as originally pleaded had included the amendments now sought. Additionally, there are aspects of the claim and defence that take on enhanced significance and there may be issues that need to be canvassed again or differently during examination for discovery.

[5] I also note the delay of RBCDS in seeking these amendments. RBCDS commenced this action in April 2014 for repayment of a transition loan given to Mr. Kowal when he moved his business from a competitor to RBCDS in June 2010. RBC argues that the balance of the loan, in the amount of $390,519 came due when it terminated Mr. Kowal’s employment in June 2013. In May 2014 Mr. Kowal defended the action and issued a counterclaim for wrongful dismissal. RBCDS defended the counterclaim in June 2014.

[6] In June 2015 RBCDS delivered its affidavit of documents listing seventy documents and Mr. Kowal delivered an affidavit of documents with nine productions. The parties conducted examinations for discovery thereafter, Mr. Kowal being examined in October 2015 and the plaintiff being examined in April 2016. The parties participated in mandatory mediation in July 2017.

[7] RBCDS initially alleged that it terminated Mr. Kowal for cause as a result of his insider trading activity. It reported the matter to the Investment Industry Regulatory Organization of Canada (“IIROC”), which investigated and determined that it would not initiate disciplinary proceedings against Mr. Kowal. Now RBCDS wishes to allege that, whether or not Mr. Kowal is guilty of insider trading, it had grounds to terminate him because he was not forthright and actively mislead RBCDS when it interviewed him about his trading activities in June 2013.

[8] There is no explanation proffered as to the delay in seeking this amendment. It is not contested that the materials upon which the amendments are based have been in the possession of RBCDS since June 2013 when it terminated Mr. Kowal. It appears from the record that the amendment may be sought as a result of a change in litigation strategy brought about either by RBCDS’ appointment of new counsel or the decision of IIROC not to commence proceedings against Mr. Kowal. While RBCDS is entitled to change its litigation strategy, Mr. Kowal should not bear the expense of that decision. He now finds himself responding to an additional defence of after-acquired cause that could have been pleaded and dealt with at the outset of the pleadings.

[9] Mr. Kowal advises that he will be required to review the new productions and conduct a further examination for discovery of RBCDS, to which RBCDS has agreed.

[10] In December 2018, RBCDS delivered a supplementary affidavit of documents with ten volumes of new productions covering 760 tabs and 4,900 pages, increasing its original productions more than tenfold. While significant, the documents are comprised of public filings of a company whose role has been in issue since the outset of the litigation and of Mr. Kowal’s own emails covering 2010 to 2012 relating to that same company. The other document produced is the audio recording of the June 2013 interview by RBCDS of Mr. Kowal and requested by Mr. Kowal’s lawyers almost since that time.

[11] RBCDS takes the position that there is insufficient information before me to fix the costs either for the work to be redone or for future work arising from the amendments because Mr. Kowal refused to answer proper questions about how his costs estimates were determined.

[12] These are documents and issues that RBC was aware of at the time it filed its defence and delivered its productions. Mr. Kowal now has to re-open his examination to deal with questions that would have otherwise been dealt with in the original examination. It is reasonable to assume that it will take at least the 15 hours that Mr. Kowal suggests will be needed to review these additional productions. Given the sheer volume, it is also reasonable that it will take at least 15 hours to prepare for and conduct a further examination for discovery. While Mr. Kowal’s counsel suggested she would need 2-3 days for that examination, I have assumed one day of preparation time and a one day examination, noting that 7 hours is usual under the Rules and that these new productions are not authored by RBCDS. As they are either public filings or Mr. Kowal’s own emails, RBCDS may not have much to say about them. I am satisfied that the sum of $12,000 is a reasonable amount to cover the cost of reviewing the new volumes of material, preparing a reply to the amended defence to counterclaim and conducting a further examination for discovery. Any costs underestimated or overestimated, which can be justified, are reserved to the trial judge.

[13] I am not satisfied that the trial preparation costs claimed to date will be thrown away as a result of granting the amendment. The matter is not set down for trial and the trial preparation costs referenced relate to review of productions, examinations for discovery and review of case law. If those are the costs, they are not thrown away as all the issues upon which RBCDS was initially examined remain live issues for trial.

[14] While RBCDS was successful in obtaining leave to amend its pleading, the key issue on the motion was the terms of granting the amendment. Given the position of RBCDS that no costs should be paid to Mr. Kowal, I find Mr. Kowal was more successful on the motion than was RBCDS and award him his costs. RBCDS submitted a costs outline in the amount of approximately $10,300 on a partial indemnity basis. Mr. Kowal’s costs outline totalled $14,650. I note that RBCDS chose to cross examine Mr. Kowal on his affidavit filed in response to the motion which it was entitled to do but which necessarily added costs to the proceeding. Considering what is a fair and reasonable amount for RBCDS to pay in the circumstances of this motion, I order it to pay Mr. Kowal costs in the amount of $10,000 within 30 days and as a condition of filing its amended defence to counterclaim.

Master Jolley Date: 20 February 2019