COURT FILE NO.: CV-18-000178-00
DATE: In Writing
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1324789 ONTARIO INC.
Plaintiff
– and –
GAVIN MARSHALL, SUSAN MARSHALL, MAGENTA WATERFRONT DEVELOPMENT CORPORATION, HELIOTROPE INVESMENT CORPORATION, MAGENTA CAPITAL CORPORATION, MAGENTA MORTGAGE INVESTMENT CORPORATION, MAGENTA II MORTGAGE INVESTMENT CORPORATION, and MAGENTA III MORTGAGE INVESTMENT CORPORATION
Defendants
Christopher J. Edwards and Kevin Cooke, for the Plaintiff
Denise Sayer and Adam Stikuts, for the Defendants
Hurley, J.
ENDORSEMENT on costs
[1] I dismissed the plaintiff’s motion for the appointment of a receiver and an interlocutory injunction and granted the defendants’ motion in part, dismissing the action against the defendant Susan Marshall and discharging a notice registered under section 71 of the Land Titles Act by the plaintiff against property owned by the defendant Magenta Waterfront Development Corporation: 2019 ONSC 517. The parties were unable to agree on the costs of the motions and have delivered written submissions.
The positions of the parties
[2] The defendants are seeking costs on a substantial indemnity basis of $290,313.82. They submit that the plaintiff made unsubstantiated allegations of serious wrongdoing by the defendant Gavin Marshall and brought the motion for an improper purpose. Alternatively, they propose that the costs be fixed on a partial indemnity basis in the amount of $233,787.95. Both sums are inclusive of HST and disbursements.
[3] The plaintiff points out that costs on a substantial indemnity basis are exceptional and that it did not engage in the “reprehensible, scandalous or outrageous” conduct necessary for an award of costs on this scale. It argues that success was divided because the defendants did not obtain most of the relief they were seeking in their motion and, as a result, the parties should bear their own costs or they should be fixed on a partial indemnity basis and payable in the cause. Finally, it complains that the fees of the defendants are excessive, stating that its costs were substantially less (full indemnity of $184,779.93, substantial indemnity of $166,301.37 and partial indemnity of $110,867.58).
The scale of costs
[4] In Hunt v. TD Securities Inc., 2003 3649 (ON CA), Gillese, J. A. stated at para. 123:
The test for awarding costs on a solicitor and client scale is well established. It was articulated by this court in Mortimer v. Cameron (1994), 1994 10998 (ON CA), 17 O.R. (3d) 1, 111 D.L.R. (4th) 428 (C.A.), and more recently in McBride Metal Fabricating Corp. v. H & W Sales Co. Inc. (2002), 2002 41899 (ON CA), 59 O.R. (3d) 97 (C.A.). Both cases refer to the following passage from Orkin, The Law of Costs, 2nd ed. (Aurora: Canada Law Book, 1993), at pp. 2-91 to 2-92:
Costs on the solicitor-and-client scale should not be awarded unless special grounds exist to justify a departure from the usual scale.
Such orders are not to be made by way of damages, or on the view that the award of damages should reach the plaintiff intact, and are inappropriate where there has been no wrongdoing. [page509]
An award of costs on the solicitor-and-client scale, it has been said, is ordered only in rare and exceptional cases to mark the court's disapproval of the conduct of the party in the litigation. The principle guiding the decision to award solicitor-and-client cost has been enunciated thus:
[S]olicitor-and-client costs should not be awarded unless there is some form of reprehensible conduct, either in the circumstances giving rise to the cause of action, or in the proceedings, which makes such costs desirable as a form of chastisement.
[5] Both sides made allegations of improper conduct by the other party. But none were about fraudulent behavior or serious acts of dishonesty. While I ultimately found in favour of the defendants in the plaintiff’s motion, I accept that Mr. Beach genuinely believes that he was mistreated by Mr. Marshall and started this litigation to seek redress for that perceived unlawful conduct. There was nothing done by the plaintiff during the course of the litigation which would warrant the imposition of substantial indemnity costs.
[6] Because the plaintiff’s motion was dismissed, the defendants are presumptively entitled to costs on a partial indemnity basis. They were only partially successful in their motion and that is a factor which I will address in assessing the overall amount of costs.
The quantum of costs
[7] In deciding this issue, I am guided by the general principles outlined by Justice Lax in Jude Anderson v. St. Jude Medical Inc., 2006 85158 (ONSC DC) at para. 22:
The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in rule 57.01(1).
A consideration of experience, rates charged and hours spent (formerly a costs grid calculation) is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant.
The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: rule 57.01(1)(0.b).
The court should seek to avoid inconsistency with comparable awards in other cases. "Like cases, [if they can be found], should conclude with like substantive results”
The court should seek to balance the indemnity principle with the fundamental objective of access to justice. [citations omitted]
[8] Overall, the costs must be reasonable, taking into account all relevant factors: Davies v. Clarington (Municipality), 2009 ONCA 722. Epstein, J. A. stated at para. 52:
As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, at para. 37, where Armstrong J.A. said "[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice.
[9] I will now turn to the specific factors enumerated in rule 57. 01:
(a) the amount claimed and the amount recovered in the proceeding
This does not apply because there were no monetary amounts either claimed or awarded.
(b) the apportionment of liability
The defendants were wholly successful in obtaining a dismissal of the plaintiff’s motion. They achieved only minor success in their motion.
(c) the complexity of the proceeding
The law with respect to the appointment of a receiver and an interlocutory injunction is well settled. The defendants’ motion did not involve the consideration of any caselaw. The evidentiary record was extensive but the facts, when distilled to the salient ones, were not particularly complicated. I consider the combination of the law and evidence to have been moderately complex.
(d) the importance of the issues
The stakes were high for both sides. They agree on this. Mr. Beach sought a court order which would maintain his position in the development projects indefinitely and preclude the defendants from pursuing repayment of the substantial loans made to him, his wife and the plaintiff. Mr. Marshall faced the prospect of losing the control of the development projects that he had bargained for and obtained through the joint venture agreements and his significant capital investment might have been put at serious risk if the plaintiff’s motion had been granted. It was the plaintiff’s motion that mattered; the defendants’ motion concerned issues of comparatively little importance.
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding
The plaintiff’s original motion was brought in May 2018 and, in August, Justice Tranmer made an order which resulted in the motions being heard in December. This fits within the usual timeframe for long motions of this nature.
(f) whether any step in the proceeding was improper, vexatious or unnecessary, or taken through negligence, mistake or excessive caution
The parties each complain about the other’s conduct before the hearing of the motion. The plaintiff says that there was preliminary skirmishing which could have been avoided if the defendants had complied with an interim court order and the joint venture agreements. The defendants contend that the plaintiff made numerous unsubstantiated or meritless allegations that unduly complicated the proceedings. Both sides, I find, share the blame in making this case expensive to litigate.
(g) a party’s denial or refusal to admit anything that should have been admitted
Neither side consider this a relevant factor in this case. I do. For example, the plaintiff could have acknowledged that many of its objections over financial disclosure were no longer at issue following the cross- examinations and the defendants raised issues about Mr. Beach’s credibility that could not be resolved on a paper record and were of little relevance to the motions. It appears that the parties made no effort to agree on anything.
[10] What were the parties’ reasonable expectations? This was hard-fought commercial litigation. Neither side gave quarter. There was a voluminous record with lengthy cross- examinations. Multiple lawyers were involved – the total hours for the plaintiff are 583.8 and for the defendants 643.3. No expense, it seems, was spared. In these circumstances, both would know that success or failure would carry with it a large award of costs.
[11] With that said, I must bear in mind the overriding principles of reasonableness, fairness and proportionality. Although the plaintiff does not specifically identify in what way the defendants’ costs are excessive other than in comparison with theirs, I find that there should be a considerable reduction in the counsel fees. The record was substantial but many of the documents could have been reviewed and compiled by a law clerk and junior counsel. A portion of the work will be of benefit in the remaining litigation. The motion was not exceptionally complex and the hearing took one and half days. The defendants achieved, at best, modest success in their motion; practically speaking, the plaintiff won that motion. The disbursements should also be less because the plaintiff should not bear the expense of out-of-town counsel in a case of this nature and no explanation has been provided for the added cost of expedited transcripts.
[12] This is not a case of divided success given the importance of the plaintiff’s motion to both parties nor is there any reason to depart from the rule that the costs be fixed and made payable within 30 days: 57.03(1).
Conclusion
[13] I consider a fair and reasonable amount to be $120,000 inclusive of HST and disbursements and I order that the plaintiff pay those costs to the defendants within 30 days. For the purposes of taking out the orders, the costs can be ascribed to the plaintiff’s motion and the order in the defendants’ motion can state that costs are those ordered in the plaintiff’s motion or, with the parties’ agreement, can omit any reference to costs.
Hurley, J.
Released: March 29, 2019
COURT FILE NO.: CV-18-000178-00
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1324789 ONTARIO INC.
Plaintiff
– and –
GAVIN MARSHLL, SUSAN MARSHALL, MAGENTA WATERFRONT DEVELOPMENT CORPORATION, HELIOTROPE INVESMENT CORPORATION, MAGENTA CAPITAL CORPORATION, MAGENTA MORTGAGE INVESTMENT CORPORATION, MEGENTA II MORTGAGE INVESTMENT CORPORATION, and MAGENTA III MORTGAGE INVESTMENT CORPORATION
Defendants
Decision on costs
Justice P. Hurley
Released: March 29, 2019