Court File and Parties
Court File No.: CV-15-531384 Date: 2019-01-11 Ontario Superior Court of Justice
Between: Amelin Resources, Inc., Plaintiff – and – Victory Energy Operations, L.L.C., Takado Industrial, A.G., and OOO ГРУППА "НЕФТЕХИММАШ" (C.O.B. AS NEFTEHIMMASH), Defendants
Counsel: Matthew Diskin for the Plaintiff J. Thomas Curry and Christopher Yung for the Defendant Victory Energy Operations, L.L.C.
Heard: In writing.
Reasons for Decision - Costs
Perell, J.
[^1] Amelin Resources, Inc. (“Amelin Canada”) sues Victory Energy Operations L.L.C. (“Victory Energy”) for breach of contract and conspiracy. It joined OOO ГРУППА "НЕФТЕХИММАШ" (c.o.b. as Neftehimmash), a Russian corporation, and Takado Industrial A.G., a swiss corporation, as co-defendants to the conspiracy claim. In June 2017, Amelin Canada discontinued the action as against Takado. The statement of claim was never served on Neftehimmash, and Amelin filed a notice of discontinuance as against Neftehimmash on June 30, 2017.
[^2] Amelin Canada brought a summary judgment motion as against Victory Energy. It sought a judgment for $25.1 million (USD), approximately $33 million (CDN), and a reference to assess remaining damages and punitive damages. I dismissed the summary judgment motion.[^1]
[^3] Victory Energy seeks partial indemnity costs of $254,680.61 comprised of $189,883.50 for fees and $64,797.11 in disbursements.[^2] The partial indemnity costs were calculated at 60% of counsel’s hourly rates.[^3] The cost claim are those of Lenczner Slaght LLP, who assumed carriage and the costs of Victory Energy’s former counsel are not included.
[^4] Victory Energy submits that the summary judgment motion should never have been brought as the breach of contract and conspiracy action had a profusion of genuine issues requiring a trial and was not remotely appropriate for a summary determination. It submits that it was put to the considerable effort and expense of putting its best foot forward in resisting the summary judgment motion and will now have to do so again at the trial because the summary judgment motion did not resolve any substantive issues.
[^5] Victory Energy submits that before the 2010 amendment as the successful party on a failed summary judgment motion, it would have been entitled to a substantial indemnity unless the court was satisfied the motion was reasonably brought. It submits that Amelin’s motion was unreasonable.[^4] And although Victory Energy is not seeking costs on a substantial indemnity basis, it submits that the unreasonableness of Amelin’s motion should be considered in the exercise of the court’s discretion to award costs in the immediate case.
[^6] The summary judgment motion was brought before there were any examinations for discovery. Without accounting for transcripts of cross-examinations, Amelin filed a motion record that exceeded 1,300 pages. Victory Energy’s responding motion record added another 350 pages. Affiants were cross-examined over three days, and the transcripts exceeded 500 pages. There was over 1,000 pages of case law briefs. The factums were lengthy. Amelin particularized its damages hard upon the hearing of the summary judgment motion. Victory Energy hired an expert to opine on the damages, but the expert reported that he did not have sufficient information to provide an opinion. The argument of the motion took a day in court.
[^7] In response to Victory Energy’s request for costs, Amelin submitted that the costs of the summary judgment motion were not thrown away. It submits that the disclosure made for the summary judgment motion and the efforts of both parties in presenting their case remain useful and will reduce the time and effort required to prepare for trial. It submits that the costs therefore should be reserved to the trial judge. Relying on Justice Akbarali’s judgment in 238341 Ontario Inc. v. Rose of Sharon (Ontario) Retirement Community,[^5] Amelin submits that since the only matter that was decided on the motion was that it ought not to be have brought and there was no determination of the merits of the claim or the defence, it would not be just or fair to award costs at this stage of the proceeding.
[^8] In 238341 Ontario Inc. v. Rose of Sharon (Ontario) Retirement Community,[^6] Justice Akbarali stated:
In this case, I am satisfied that it is more just to order that costs of this motion be reserved to the trial judge.
The issues – both the claims and defences – raised in the motion remain live. The defendants successfully resisted summary judgment, but the plaintiff may yet obtain judgment. The work that has been done to date will reduce the costs of the trial. How much of the costs, if any, were thrown away on the motion will only be ascertainable after the trial is complete.
[^9] Without disclosing its own expenditure on legal fees, in the alternative, Amelin submits that Victory Energy’s claim for costs is excessive and should be set at $25,000, all inclusive.
[^10] Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely;[^7] (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences;[^8] (4) to discourage and sanction inappropriate behaviour by litigants in their conduct of the proceedings;[^9] and (5) to encourage settlements.[^10]
[^11] The court's discretion in awarding costs arises under the authority of s. 31(1) of the Courts of Justice Act,[^11] and is to be exercised by a consideration of the factors in rule 57.01 (1) of the Rules of Civil Procedure.[^12] These factors include the principle of indemnification, the reasonable expectations of the parties, the complexity of the proceeding, the importance of the proceeding and the conduct of the parties in litigation.
[^12] The traditional discretionary principles developed for costs awards are codified in rule 57.01 (1), which states:
Factors in Discretion
57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(a) the amount claimed and the amount recovered in the proceeding;
(b) the apportionment of liability;
(c) the complexity of the proceeding;
(d) the importance of the issues;
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(g) a party’s denial of or refusal to admit anything that should have been admitted;
(h) whether it is appropriate to award any costs or more than one set of costs where a party,
(i) commenced separate proceedings for claims that should have been made in one proceeding, or
(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and
(iii) any other matter relevant to the question of costs.
[^13] The most general rule about costs, not to be departed from without good reason, is that costs at a partial indemnity scale follow the event, which is to say that normally costs are ordered to be paid by the unsuccessful party to the successful party on a partial indemnity scale.[^13]
[^14] A critical controlling principle for the awarding of costs is that the sum awarded reflect the fair and reasonable expectations of the unsuccessful litigant.[^14] The overriding principle in awarding costs is reasonableness.[^15]
[^15] The assessment of reasonableness is discretionary and very much dependent upon the circumstances of each case. In some cases, it may be reasonable for the successful party to make exhaustive efforts and to commit enormous legal resources, and in those cases, it might be said that the unsuccessful party could reasonably expect to pay those costs. In other cases, however, the successful party may have been well served by giving his or her lawyer instructions to make exhaustive efforts, but it might be disproportionate and unreasonable to expect the unsuccessful party to pay those costs, even if he or she would have expected or anticipated that his or her foe would have marshalled those legal resources.[^16]
[^16] Although the unsuccessful party is not obliged to disclose what he or she expended on costs, where the unsuccessful party submits that the costs claimed by the successful party are excessive, evidence of what he or she expended is relevant to the determination of what is reasonable and of what the unsuccessful party might reasonably have expected to pay and the failure to proffer this evidence tempers and diminishes the unsuccessful party’s criticism of the excessiveness of the costs claim.[^17]
[^17] Putting aside for the moment, Amelin’s argument that the costs should be in the cause, I shall first address Amelin’s argument that a $254,680.61 claim for a summary judgment motion is excessive and unreasonable and beyond the reasonable expectations of the unsuccessful party.
[^18] The force of Amelin’s argument is substantially diminished by its non-disclosure of its own legal expenses for the motion. I would infer that Amelin’s expenditures were at least equal to Victory Energy’s and I infer that had Amelin been successful, it would have expected to be paid a similar sum if not a greater one for the costs of the summary judgment motion along with its costs for the action.
[^19] The force of Amelin’s argument is further weakened when one recalls that had Amelin been successful, then Victory Energy would have been exposed to a $33 million dollar liability. It is, therefore, not unexpected or unreasonable that Victory Energy would expend $254,680.61 to resist a $33 million summary judgment motion.
[^20] Further still, the force of Amelin’s argument is weakened by the circumstance that it does not explain why $25,000 is a reasonable alternative, nor does Amelin provide a critique of Victory Energy’s Bill of Costs.
[^21] I, therefore, conclude that the quantum of the costs award should be the $254,680.61 claimed, which I round up to $255,000, all inclusive.
[^22] The remaining question then is whether the costs should be payable forthwith or whether costs should be reserved to the trial judge.
[^23] I begin the analysis of this question by making three observations. The first observation is that in the exercise of the court’s discretion, I have more than just the two alternatives of costs forthwith or costs reserved to the trial judge.
[^24] I could make no order as to costs. I could order costs in the cause. I could order costs to the successful party the cause. I could order costs to the successful party in any event of the cause. I could make a hybrid order making a portion of the costs payable forthwith and a portion payable in the cause or in any event of the cause.
[^25] The second observation is that the policy of making the costs of a motion payable forthwith was designed to discourage motion activity, but this policy is sometimes difficult to apply to a summary judgment motion because the utility and the appropriateness of the motion depends, in part, on the position of the responding party.
[^26] In this regard, it should be noted that under subrule 20.04 (1)(b), the court shall grant summary judgment if the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment. In some cases, the responding party essentially concedes that a summary judgment motion is appropriate by bring a cross-motion.
[^27] In the immediate case, there was no agreement about the appropriateness of a summary judgment motion, there was no cross-motion, and it ought to have been apparent from the outset that a summary judgment motion was inappropriate, but the point is that even in the immediate case, the policy of discouraging motion activity is difficult to apply when the motion is a summary judgment motion and until the precise position of the responding party is determined, which sometimes does not occur until the argument of the motion.
[^28] The third observation is that awarding costs both encourages and discourages litigation, including motion activity, and thus costs influences access to justice. The prospect or the reality of an adverse costs award may discourage a litigant with a meritorious claim or defence from accessing justice. The immediate payment of a quarter of a million dollars may discourage access to justice.
[^29] With these observations in mind, in the immediate case, the summary judgment motion should not have been brought, but I do not see any useful purpose in burdening the trial judge with the task of assessing how much of the parties’ investment in the summary judgment motion was carried forward. Rather, in my opinion, I should decide the matter of costs forthwith.
[^30] The order I propose to make is a hybrid order of $100,000 payable forthwith, $77,500 payable to Victory Energy in any event of the cause, and $77,500 payable in the cause. Thus, Victory Energy will receive $177,500 in any event, and it will receive the balance of $77,500 - if it is successful on the merits of its defence.
[^31] The rationale for making the balance of $77,500 payable in the cause is that both parties had an opportunity to kick the tires and road test their cases, the road test revealed genuine issues, there was no ruling on the merits of the claim or defence, and the outcome is uncertain; therefore, it is fair and just that a portion of the costs be in the cause and abide the outcome.
[^32] As already noted, generally speaking, and particularly in cases where the claim for costs for a motion is hundreds of thousands of dollars, an advantage of making a portion of the costs payable in the cause or in any event of the cause is that the order does not frustrate access to justice. There are serious issues that ought to be tried in the immediate case.
[^33] I do not disagree with 238341 Ontario Inc. v. Rose of Sharon (Ontario) Retirement Community, but the core of that exercise of discretion was that it was an appropriate case for all the costs to follow the final outcome not that the motions judge was unable to determine how much of legal costs were wasted by an inappropriate summary judgment motion.
[^34] In the immediate case, in the exercise of my discretion, I conclude that the fair costs order is the hybrid order described above.
Perell, J.
Released: January 11, 2019
[^1]: Amelin Resources, Inc. v. Victory Energy Operations, L.L.C., 2018 ONSC 7104 [^2]: Victory Energy is exempt from HST. [^3]: Inter-Leasing Inc. v. Ontario (Minister of Revenue), 2014 ONCA 683. [^4]: See Ashim v. Zia, 2015 ONSC 564. [^5]: 2017 ONSC 3372. See also Hoyle (Estate) v. Gibson-Heath, 2017 ONSC 6718; Sofina Foods Inc. v Meyn Canada Inc. 2018 ONSC 981. [^6]: 2017 ONSC 3372 at paras. 8-9. [^7]: Hamilton-Wentworth (Regional Municipality) v. Hamilton-Wentworth Save the Valley Committee, Inc. (1985), 1985 1957 (ON SC), 51 O.R. (2d) 23 (H.C.J.). [^8]: Standard Life Assurance Co. v. Elliott (2007), 2007 18579 (ON SC), 86 O.R. (3d) 221 (S.C.J.); Benquesus v. Proskauer, Rose LLP, 2005 21097 (ON SC), [2005] O.J. No. 2418 (S.C.J.). [^9]: Standard Life Assurance Co. v. Elliott (2007), 2007 18579 (ON SC), 86 O.R. (3d) 221 (S.C.J.). [^10]: Reynolds v. Kingston (City) Police Services Board (2007), 2007 ONCA 375, 86 O.R. (3d) 43 (C.A.); 1465778 Ontario Inc. v. 1122077 Ontario Ltd. (2006), 2006 35819 (ON CA), 82 O.R. (3d) 757 (C.A.); British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371; Somers v. Fournier (2002), 2002 45001 (ON CA), 60 O.R. (3d) 225 (C.A.); Fong v. Chan, (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330 (C.A.). [^11]: R.S.O. 1990, c. C-43. [^12]: R.R.O. 1990, Reg. 194. [^13]: McCracken v. Canadian National Railway, 2012 ONSC 6838; Hague v. Liberty Mutual Insurance Co., 2005 13782 (ON SC), [2005] O.J. No. 1660 (S.C.J.); Pike's Tent and Awning Ltd. v. Cormdale Genetics Inc. (1998), 27 C.P.C. (4th) 352 (Ont. Gen. Div.); Bell Canada v. Olympia & York Developments Ltd. (1994), 1994 239 (ON CA), 17 O.R. (3d) 135 (C.A.). [^14]: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 at para. 24 (C.A.); Stellarbridge Management Inc. v. Magna International (Canada) Inc., 2004 9852 (ON CA), [2004] O.J. No. 2102 at para. 97 (C.A.); Zesta Engineering Ltd. v. Cloutier (2002), 2002 25577 (ON CA), 21 C.C.E.L. (3d) 161 at para. 4 (Ont. C.A.); McGee v. London Life Insurance Co., [2008] O.J. No. 5312 at paras. 5-8 (S.C.J.); Caputo v. Imperial Tobacco Ltd. (2005), 2005 63806 (ON SC), 74 O.R. (3d) 728 at paras. 23-25 (S.C.J.). Lee v. General Motors Co. of Canada, [2004] O.J. No. 2245 (S.C.J.). [^15]: Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 at para. 52 (C.A.). [^16]: Das v. George Weston Limited, 2017 ONSC 5583 at para. 65, var’d 2018 ONCA 1053. [^17]: Chapman v. Benefit Plan Administrators Ltd., 2014 ONSC 537 at paras. 11-12; MacDonald v. BMO Trust Co., 2012 ONSC 2654 at para. 27; United States of America v. Yemec, 2007 65619 (ON SCDC), [2007] O.J. No. 2066 at para. 54 (Div. Ct.); Hague v. Liberty Mutual Insurance Co. (2005), 2005 13782 (ON SC), 13 C.P.C. (6th) 37 at para. 15 (S.C.J.); Risorto v. State Farm Mutual Automobile Insurance Co. (2003), 2003 43566 (ON SC), 64 O.R. (3d) 135 at para. 10 (S.C.J.).