Court File and Parties

COURT FILE NO.: CV-16-556749 DATE: 20190312 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: FERNDALE ENTERPRISES INC., Plaintiff AND: EXPERTUS TECHNOLOGIES INC. and JACQUES LEBLANC, Defendants

BEFORE: Cavanagh J.

COUNSEL: Robert W. Staley and Jason M. Berall, for the Plaintiff Eli Mogil, for the Defendants

HEARD: By Written Submissions

Costs Endorsement

[1] The defendants brought a motion for summary judgment dismissing the plaintiff’s claims or, alternatively, granting summary judgment in favour of the plaintiff and assessing the plaintiff’s damages based upon the evidence tendered on the motion.

[2] I dismissed the defendants’ motion for summary judgment: Ferndale Enterprises Inc. v. Expertus Technologies Inc., 2019 ONSC 711.

[3] The plaintiff seeks costs of this motion on a substantial indemnity scale pursuant to rule 20.06 of the Rules of Civil Procedure in the amount of $137,221.06 (comprised of $117,614.25 for fees, $15,289.85 for HST and $4,316.96 for disbursements). Alternatively, the plaintiff seeks costs on a partial indemnity scale in the amount of $92,919.70.

[4] The defendants submit that costs should not be awarded on a substantial indemnity scale. They submit that costs should be awarded on a partial indemnity scale in the amount of $70,000 representing a roughly 25% reduction from the proposed partial indemnity costs in recognition that the work product of both parties was, and will be, useful for the rest of the action and would have been required in any event.

Should costs be awarded on a substantial indemnity scale?

[5] Rule 20.06 of the Rules of Civil Procedure provides:

The court may fix and order payment of the costs of the motion for summary judgment by a party on a substantial indemnity basis if,

(a) the party acted unreasonably by making or responding to the motion; or

(b) the party acted in bad faith for the purpose of delay.

[6] In Ashim v. Zia, 2015 ONSC 564, Emery J. addressed at para. 9 what it means for a party to have acted unreasonably by bringing a motion for summary judgment:

What does it mean for a party to act unreasonably by bringing a motion for summary judgment in a post Hryniak environment? The court in Hryniak was clearly concerned about access to justice, particularly with respect to making litigation routes available to litigants that are proportionate to the case. It is my view a moving party would be seen to have acted unreasonably if:

1. The evidence on the motion was clearly insufficient to show facts on which the court could conclude that there was no genuine issue requiring a trial;
2. The legal basis for the motion was wrong more clearly insufficient for the court to conclude that there was no genuine issue requiring a trial;
3. The evidence and legal principles when applied to the issues on the motion did not engage the economies that Hryniak contemplated as a proportionate, timely and affordable procedure to justify bringing the motion having regard to the nature of the action or prevailing circumstances in the litigation; or
4. No meaningful order is made by the court under Rule 20.05 to assist with the trial management process for the action or that part of the action for which the motion for summary judgment was refused.

[7] Where a Rule 20.06 applies, the court does not need to find conduct which is egregious, reprehensible, or acts constituting an abuse of process, as it does in making substantial indemnity costs determinations pursuant to rule 57.01: Tanfi v. Slade, [2017] O.J. No. 48 at para. 36.

[8] In Himidan v. 2546579 Ontario Inc., 2018 ONSC 6037, Schreck J. referred at para. 8 to the factors cited in Ashim and held that these factors should be applied with considerable caution and that in determining whether a party acted unreasonably in bringing a motion for summary judgment “the ‘omniscience of hindsight’ should play no role in the analysis”: Schreck J. addressed at paras. 10 and 11 how rule 20.06 should be applied:

Summary judgment motions can provide proportionate and expeditious determinations of legal disputes: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87 (S.C.C.), at paras. 2-5, 30-34. For this reason, their use is to be encouraged. However, not every motion for summary judgment will be successful. A party contemplating bringing such a motion must weigh the risks in doing so, including the risk that she will be liable for costs if the motion fails. If parties face the risk of having substantial indemnity costs awarded against them whenever a court concludes, with the benefit of hindsight, that the motion was unlikely to succeed, parties will be less likely to bring such motions, even in cases where they are arguable. The overall effect of this will not enhance the “culture shift” which the Court in Hryniak concluded is needed in the civil justice system.

While resort to Rule 20.06 may not require a finding that a party acted “egregiously” or in a “reprehensible manner”, in my view it does require some finding of improper conduct. The heading in the Civil Procedure Rules under which Rule 20.06 is found is entitled “Costs sanctions for improper use of rule.” In my view, Rule 20.06 should be employed only in “exceptional circumstances” where a party has behaved improperly: 1095909 Ontario Inc. v. Westmount-Keele Ltd., 2016 ONSC 3507 (Ont. S.C.J.), at para. 10.

[9] In my Endorsement, I wrote that I was not able to conclude on the evidentiary record before me that there is no genuine issue requiring a trial in relation to whether Expertus was justified in terminating the Independent Contractor Agreement, one of the two relevant commercial agreements, at will or for cause. Although I disagreed with the moving parties that there is no genuine issue requiring a trial, I did not and do not conclude that the evidentiary record was such that, as the plaintiff put it in its written costs submissions, “it was obvious when the defendants brought this motion that it stood virtually no chance of success”.

[10] This motion is not one where the unsuccessful party should be required to pay costs on a substantial indemnity scale pursuant to rule 20.06. The plaintiff is entitled to costs on a partial indemnity scale.

What amount of costs should be awarded?

[11] The plaintiff submits that the summary judgment motion involved 1,500 pages of evidence, cross-examinations of three witnesses and a full day of oral argument. The motion was very important to the plaintiff because, if the defendants were successful, the plaintiff’s entire claim would have been dismissed. The plaintiff submits that, having regard to the complexity of the motion and the importance of the issues, the amount of costs that it seeks are reasonable.

[12] The defendants do not contest the hours spent by the plaintiff’s counsel nor the allocation of work among the lawyers.

[13] The defendants submit that a reduction is called for in recognition of the fact that the work product of both parties was, and will continue to be, useful for the rest of the action and was going to be required in any event. The defendants submit that preparation of the affidavits caused both parties to crystallize their arguments and the evidence required to advance those arguments to trial. They submit that each party researched and briefed the law that will be required for the trial and that the cross examinations will assist the parties as a helpful forecast of the trial evidence. The defendants submit that a roughly 25% reduction of the partial indemnity costs claimed would be proper and that an award of costs in the amount of $70,000 should be made.

[14] The plaintiff submits that the defendants should not be allowed to avoid the costs consequences of their unsuccessful motion for summary judgment by proposing an arbitrary percentage by which to reduce the plaintiff’s costs. The plaintiff submits that all of the work needed to proceed to trial will still be required.

[15] I am not able to conclude on the materials before me that the plaintiff will have benefited significantly from the work done responding to this summary judgment motion, other than through the benefit of at least some of the legal research that was done.

[16] When I apply the factors in Rule 57.01(1) and the principle in Boucher v. Public Accountants Council for the Province of Ontario at para. 26 (that the objective in fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding), I fix the plaintiff’s costs of this motion on a partial indemnity scale to be paid by the defendants in the amount of $85,000 inclusive of fees, disbursements and HST.

Cavanagh J. Date: March 12, 2019

Cited Cases and Legislation

Legislation:

• Rules of Civil Procedure, R.R.O. 1990, Reg. 194

Case Law:

• Ashim v. Zia, 2015 ONSC 564
• Boucher v. Public Accountants Council for the Province of Ontario
• Ferndale Enterprises Inc. v. Expertus Technologies Inc., 2019 ONSC 711
• Himidan v. 2546579 Ontario Inc., 2018 ONSC 6037
• Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87
• 1095909 Ontario Inc. v. Westmount-Keele Ltd., 2016 ONSC 3507 (Ont. S.C.J.)
• Tanfi v. Slade, [2017] O.J. No. 48