Court File and Parties

Court File No.: C-457-12 Date: 2019-03-14 Ontario Superior Court of Justice

Between: Al Way, Kingsley Financial Inc. and Triumph Financial Holdings Inc. Plaintiffs – and – Gordon Schembri, Schembri Financial Limited, 1765998 Ontario Inc., 41 Columbia Inc., King & Columbia Inc., 69 Columbia St. Inc., 5 Rittenhouse Inc., The Block Inc., The Block I Inc., and The Block II Inc. Defendants

Counsel: Heath P. L. Whiteley, Laughlin J. Campbell & T. Moum - Counsel for the Plaintiffs James M. Wortzman - Counsel for the Defendants

The Honourable Justice James W. Sloan

Costs after ROFR summary judgment motion

Endorsement

[1] Schembri was successful on a Summary Judgment Motion striking out a $30,500,000 claim in its entirety and is entitled to costs.

[2] There were two large court actions proceeding between the parties at the same time. They have been commonly referred to as the Main action and the ROFR (right of first refusal) action. The issues in the actions are intertwined.

[3] Sometime ago the actions were ordered to be tried together or one after another and therefore most of the pretrial steps in the actions such as examinations for discovery overlapped.

[4] Schembri seeks $411,180 for fees, $53,453.40 for HST and $31,299.66 for disbursements for a total of $499,933.06.

[5] When the issues on a summary judgment motion were distilled down, despite the complexity of the allegations, the outcome turned on the contractual interpretation of Clause 13 of the shareholders agreement.

[6] Schembri’s motion record was focused on Clause 13.

[7] In response to the motion, Way filed a 10 volume responding motion record which filled a banker’s box. The responding material did not focus on Clause 13 and through an affidavit Way requested significant relief, although no notice of motion was ever filed.

[8] In reply to Way’s response material, Schembri prepared substantive reply material.

[9] In Way’s responding 63 page Factum, served on the afternoon before the return of the motion, Way essentially ignored Schembri’s position on Clause 13 and although never pleaded, for the first time submitted that Schembri had breached a fiduciary duty owed to Way under s. 134 of the OBCA.

[10] When it became apparent that Way’s lawyer intended to take the court through virtually every page of his 10 volume responding record, Schembri advised the court that he was prepared to withdraw his fallback legal position with respect to Way’s bad conduct, “except for the general purpose of saying that Schembri did not want to proceed with any business arrangements with Mr. Way”.

[11] Following the first two days of submissions Way served a Supplementary Factum that for the first time attempted to address the enforceability of Clause 13. In addition, the Supplementary Factum argued that the motion should be dismissed to “condemn” Schembri’s conduct, being the withdrawal of his fallback position to expedite the motion.

[12] Both parties, and particularly Way, is no stranger to litigation. On this motion three gowned lawyers were present on Way’s behalf. At the outset of this litigation both parties hired a top-notch downtown Toronto legal firm, although Mr. Whitely has since left Gowlings. Based on this fact, neither party should be surprised at the charge out rates of the opposing lawyers.

[13] Way takes exception to the quantum of costs and the division of time between the main and ROFR actions that Schembri seeks to recover here. I agree that there is some arbitrariness when splitting the costs between the two actions, however, when weeks of discoveries are held which encompass two intertwined actions, it would be mathematically impossible to determine with precision how much time should be allotted to one action or the other.

[14] To essentially audit Schembri’s accounts as suggested by Way would take a multiple day hearing.

[15] Although Way argues that there should be a dramatic reduction in costs because of Schembri’s withdrawal of Way’s bad conduct allegations, the unfortunate fact for Way is that the outcome of the motion would have been the same, but the argument of the motion would have continued for at least two or three more days, significantly increasing legal fees on both sides.

[16] To the untrained eye and average person, the costs requested of course seem high.

[17] When the responding party in its Cost Submissions contends that the requesting party’s costs are excessive, it has become common practice for that party to produce their own cost outline, which presumably, based on their argument, would be significantly lower. I have no difficulty in drawing an adverse inference when this is not done. That inference in this case is that Way’s costs are in line with or higher than Schembri’s costs.

[18] Since the main action shows no sign of being settled, there will in the future be another determination on the issue of costs, at which time this determination can be referred to.

[19] On the material before me I order that Way shall pay costs to Schembri fixed in the amount of $499,933.06, inclusive of HST and disbursements.

James W. Sloan J. Released: March 14, 2019