Court File and Parties

COURT FILE NO.: CV-18-589787 DATE: 20190416 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

108 MEDIA CORPORATION Applicant – and – BGOI FILMS INC. Respondent

COUNSEL: Meredith Bacal, for the Applicant Jenna Anne de Jong, for the Respondent

HEARD: In writing

M. D. FAIETA j.

Reasons for Decision on Costs

Introduction

[1] For reasons dated March 4, 2019, I dismissed the Applicant’s application for leave to appeal from an arbitrator’s award that requires the Applicant to pay $130,319.41 to the Respondent and granted the Respondent’s application to recognize and enforce an arbitrator’s award. See 108 Media Corporation v. BGOI Films Inc., 2019 ONSC 880.

[2] The Respondent, having been successful in both proceedings, seeks costs of $43,588.92 from the Applicant on a full indemnity basis, or alternatively, costs of $35,564.14 on a substantial indemnity basis.

[3] The Applicant submits that the Respondent is entitled to partial indemnity costs of $9,229.42.

[4] For reasons described below, I order that 108 Media Corporation pay costs of $30,000.00, inclusive of disbursements and HST, to BGOI Films Inc.

Analysis

[5] The fixing of costs is governed by s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Rule 57.01 is the primary rule governing costs. It enumerates various factors to consider when exercising discretion to award costs. Also relevant is Rule 1.04(1.1), which provides that “[i]n applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.”

[6] The ultimate question is whether an award of costs reflects “an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant”: Boucher v. Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (C.A.), para. 26.

Should Elevated Costs be Awarded?

[7] The most significant issue raised on this costs application is whether BGOI is entitled to elevated costs. Typically, costs are awarded on a partial indemnity scale. Elevated costs are warranted only when the losing party has engaged in behavior worthy of sanction or when Rule 49.10 is engaged as a result of an offer to settle that was not accepted by the losing party: Sarnia (City) v. River City Vineyard Christian Fellowship of Sarnia (Trustees of), 2015 ONCA 732, paras. 12-13. Elevated costs are awarded on a substantial indemnity basis, rather than on a full indemnity basis, unless the conduct of the losing party is especially egregious: Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766, para. 8.

[8] The Respondent submitted an offer to settle dated February 16, 2018 that made two alternate offers to the Applicant. Offer #2 provided that:

BGOI offers to settle 108 Media’s Leave Application and BGOI’s Enforcement Application only on the following terms:

1. 108 Media shall discontinue its Leave Application;
2. 108 Media shall consent to an order recognizing and enforcing the Award;
3. 108 Media shall pay BGOI’s costs of the Leave Application and the Enforcement Application on a partial indemnity basis, up to the date of the acceptance of this offer; and
4. This offer remains open until 5 minutes following the commencement of the hearing of the Leave Application or the hearing of the Enforcement Cross-Application, whichever is earlier, unless earlier withdrawn in writing.

[9] The Applicant submits that “Rule 49.10 entitles BGOI to costs on a partial indemnity scale to the date of its offer and a substantial indemnity scale thereafter”. Despite this admission, it is clear that, on its face, Rule 49.10 applies to actions rather than applications given its reference to plaintiffs and defendants rather than applicants and respondents. Nevertheless, the failure to accept a reasonable offer to settle is a relevant consideration in fixing costs and, where warranted, may be the basis for finding that an elevated costs award is justified.

[10] Counsel for the Applicant, Mr. Diskin, delivered the following proposal by letter dated December 14, 2018:

We write offering to settle the dispute between the parties in the above-captioned matters, subject to the conclusion of a formal settlement agreement.

Our client is prepared to acquire BGOI Films Inc.’s rights in and to Pinup Dolls on Ice (the “Film”) for $50,000 CAD, payable in the installments, in consideration for a full and final release. Please let us know if you or your client would like to discuss these terms in more detail. To clarify, this is not an offer capable of acceptance.

If the parties are unable to reach a resolution, we are instructed to proceed as follows:

1. Continue with the applications;
2. If unsuccessful in the applications, appeal the decision(s) of the Court;
3. If unsuccessful on an appeal, proceed with the arbitration commenced in May 2018; and
4. If unsuccessful in the second arbitration, proceed with Steps 1 and 2 above in connection with that proceeding.

With the potential for protracted litigation and the associated risk and cost of same, we believe it is in the best interests of the parties to settle their dispute on the terms as set out above. …

[11] The Applicant explains the above letter as follows:

If BGOI refused to engage in meaningful settlement discussions, 108 Media preserved its legal rights, which is no way improper, vexatious or unnecessary.

[12] The Applicant’s letter goes far beyond preserving its legal rights. I agree with the Respondent’s view that the letter reveals the Applicant’s dubious litigation strategy, namely, to prolong litigation as long as possible, regardless of its merits.

[13] Considering all of the circumstances described above, I find that the Applicant’s conduct is worthy of sanction and that an award of substantial indemnity costs is warranted.

What Amount of Costs could the Applicant Reasonably Expect to Pay?

[14] The Respondent delivered a Bill of Costs for each of the two applications claiming, on a full indemnity basis, costs of $43,588.92 comprised of:

• $21,513.04 in respect of its application to enforce the arbitrator’s award;
• $22,075.88 in respect of responding to the application for leave to appeal the arbitrator’s award.

[15] The Applicant makes the specious argument that it expected to pay costs in the same proportion as awarded in another case where the court refused to grant leave to appeal from arbitral awards that totaled more than $100 million and granted costs of $94,212.61 in respect of the leave applications.

[16] A much better measure of what the Applicant could have expected to pay for costs in this case would have been the bill that its lawyers delivered to them in respect of these two applications. There is no requirement for a losing party to file a bill of cost however it may be considered by the court in assessing the reasonable expectations of the losing party: Smith Estate v. Rotstein, 2011 ONCA 491, para. 50. Given its failure to deliver its own bill of costs, the Applicant’s challenge regarding the amount of costs claimed by the Respondent is, as former Chief Justice Winkler stated, “no more than an attack in the air”: Risorto v. State Farm Mutual Automobile Insurance Co., (2003), 64 O.R. (3d) 135, para. 10.

The Amount Claimed and the Amount Recovered

[17] The Respondent was entirely successful. Its’ application to enforce the arbitral award, which amongst other things, requires the Applicant to pay the sum of $130,319.41 to the Respondent was granted.

The Complexity of the Proceeding

[18] I reject the Applicant’s submission that these were relatively simple applications. I find that the leave application was of moderate complexity.

The Conduct of any Party that Tended to Shorten or Lengthen Unnecessarily the Duration of the Proceeding

[19] I reject the Applicant’s submission that the Respondent’s enforcement application was unnecessary. However, I agree that the Respondent unnecessarily sought to have the enforcement application heard by a Judge on the Commercial List (which was refused) when the leave application was to be heard by a Judge on the Civil List.

Conclusions

[20] I find that it is fair and reasonable for 108 Media Corporation to pay costs of $30,000.00, inclusive of disbursements and HST, to BGOI Films Inc, in respect of both applications, within 30 days.

Mr. Justice M. D. Faieta Released: April 16, 2019