Court File and Parties

COURT FILE NO.: 12-32479 DATE: 2019/04/24 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Harry Pohl Plaintiff – and – Walter Palisca, Palcam Technologies Ltd., Karen Palisca, 1401763 Ontario Inc., and Palcam Solutions Inc. Defendants

Counsel: Marc A. Munro, for the Plaintiff Hedy L. Epstein, for the Defendants Walter Palisca, Palcam Technologies Ltd., 1401763 Ontario Inc., and Palcam Solutions Inc.

AND BY COUNTERCLAIM BETWEEN: Walter Palisca and 1401763 Ontario Inc. Plaintiffs by Counterclaim – and – Harry Pohl Defendant by Counterclaim

Costs Endorsement

[1] The judgment in this matter was issued on January 2, 2019 (2019 ONSC 19). At para. 153 of the judgment, I ordered that the plaintiff was to be paid his costs of the action and a schedule for the receipt of submissions on costs was set. Counsel have provided me with their written submissions.

[2] Neither party served an Offer to Settle pursuant to Rule 49 of the Rules of Civil Procedure at any stage of this very protracted matter.

[3] The Ontario Court of Appeal has stated that costs awards should reflect “what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties”. Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 at para. 24.

[4] In Serra v. Serra, 2009 ONCA 395, the court noted at paragraph 8 that there are three fundamental purposes to costs orders: (1) to partially indemnify successful litigants for the cost of litigation; (2) to encourage settlement; and (3) to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan (1999), 46 O.R. (3d) 330 at para. 22.

[5] In assessing costs, the court is bound to consider the factors listed under Rule 57.01(1) of the Rules of Civil Procedure.

[6] In this proceeding, the plaintiff’s statement of claim asserted that the defendants were liable to him in the amount of $1,500,000. The defendants counterclaimed seeking $2,500,000 of damages. The defendants did not pursue their counterclaim at trial. The plaintiff was successful in obtaining judgment in the amount of $225,297.20 with pre-judgment and post judgment interest thereon from November 1, 2010 to the date of payment at the same rate charged to Mr. Pohl by the Royal Bank of Canada on the secured line of credit he had personally guaranteed for Die Metric Tools. In his submissions, counsel for the plaintiff estimated that the amount payable under the judgment would be in the range of $400,000. In my view, particularly for the plaintiff, this is a significant amount of money, despite the fact that it is nowhere near the damages sought in the statement of claim.

[7] I found this matter to be fairly complex. Die Metric was put into bankruptcy by the defendants. The records of the Trustee had to be obtained, reviewed, organized and produced. The issues were somewhat complex and many documents were referred to in five volumes of documents filed by them at trial. In addition, there were a number of other exhibits filed. A significant number of issues were raised in the evidence and in submissions of counsel. These are reflected in the forty eight page judgment issued by the court.

[8] The plaintiff has submitted a Costs Summary in which he seeks costs of $90,329.00 on a substantial indemnity basis and $77,428.00 on a partial indemnity basis. For reasons I shall provide, I find that the plaintiff should be awarded costs on a partial indemnity basis.

[9] Considering that the trial involved eleven days of evidence and submissions, I found the amounts claimed extremely modest when compared to other proceedings in which I have been called upon to award costs. Counsel for the defendants fairly agreed the hourly rates claimed were not unreasonable. The defendants did not submit a copy of their solicitor/client bill to support any submission that the plaintiff’s claims for costs were excessive.

[10] Counsel for the defendants submitted that Mr. Pohl was seeking a judgment of $1,600,000 but after an eleven day trial, was only awarded $225,297.20 plus interest. She asserts that the costs awarded should be proportionate to the judgment awarded. I agree with this statement and find that the partial indemnity costs which I am awarding in this matter are very proportional to the amount recovered. Frankly, if the costs claimed by the plaintiff had been in the range of $200,000 to $250,000, I would not have been surprised. The amounts claimed are appropriate and proportional.

[11] While I found that Mr. Palisca had breached certain duties as a director of Die Metric Tools, I do not feel this case warrants the sanctions of substantial indemnity costs. The behaviour of both Mr. Pohl and Mr. Palisca was not totally blameless in this unfortunate matter.

[12] Counsel for the defendant took issue with the amount claimed for partial indemnity fees stating that they were much too high relative to the amount claimed for substantial indemnity fees. I concur. As a very general rule, partial indemnity costs have been recognized by our costs as constituting about 60 per cent to 66 per cent of full indemnity costs. Substantial indemnity costs have been found to approximate 90 per cent of full indemnity costs.

[13] I have looked at the time spent by counsel for the plaintiff on this case and have no trouble with the time docketed or spent. I allow the plaintiff his partial indemnity costs in the amount of $66,000 plus HST, subject to the comments below relating to Karin Palisca.

Karin Palisca

[14] The defendants allege that fees and disbursements related to Karin Palisca’s involvement should be disallowed. She is the wife of the named defendant Walter Palisca. As soon as it was disclosed that she was not a director or officer of the defendant corporations, she was released as a party to the action. In correspondence to the court on the issue of the involvement of Karin Palisca, Ms. Epstein noted that the parties agreed to a dismissal of the action as against her without costs. Hence, to the extent that the amounts claimed relate to work involving the claim against Karin Palisca, they must be removed from the assessment of costs awarded to the plaintiff. From my review of the time dockets provided by Mr. Munro and from my review of the file and my knowledge of the case from having presided over the trial, I do not estimate that the costs related to Karin Palisca’s involvement in this matter would be substantial. I therefore deduct the sum of $2,000 inclusive of fees, disbursements and HST from the plaintiff’s claim for costs.

[15] The proceedings were unnecessarily protracted. From the review of the submissions made by counsel, the degree of co-operation usually expected between counsel appears to have been somewhat lacking in this case. The affidavit of Mr. Munro sworn August 1, 2017 and found at tab 14 of his Costs Submission Brief outlines in some detail the difficulty the plaintiff faced getting this action to trial. That affidavit was filed in response to a motion brought by the defendants to have the action dismissed and which Arrell R.S.J. dismissed. On the other hand, Ms. Epstein has noted that counsel for the plaintiff failed to communicate with her for over two years from August 14, 2013 to February 11, 2016 when the first version of the plaintiff’s affidavit of documents was finally served.

[16] Counsel for the defendants has submitted that the plaintiff has improperly claimed $4,062 related to the Motion to review the Trustee’s files. She contends that all parties required access to the files of the Trustee in Bankruptcy and the plaintiff should have agreed to a consent order splitting the costs and providing copies to both parties. From my review of the exchange of emails between counsel [^1], it appears that counsel did communicate and were unsuccessful in reaching a resolution of the matter. While the latter course of action may have been preferable, I do not find the plaintiff’s behaviour in this respect to have been unreasonable. Mr. Munro has noted in his reply submissions on costs that counsel is permitted to conduct his client’s case as he deems best unless his conduct is demonstrably obstructive or creates inordinate costs. I do not find that exists in this instance, particularly in light of the evident difficulty counsel had in agreeing to almost anything.

Disputed Disbursements

Witness Fees Paid to Judy Francioso and Robert Phillips

[17] The defendants object to the disbursements paid out to two witnesses called by the plaintiff, namely Robert Phillips who is the former accountant for Die Metric Tools, and Judy Francioso, the former secretary and “scribe” at Die Metric.

[18] Mr. Phillips was paid $2,192.26. One invoice from him in dated October 19, 2018 relates to his attendance as a witness in this matter on October 16th and 17th, 2018. Mr. Phillips was not called as an expert witness in this matter as he did not serve and file an expert’s report. He did give opinion evidence on the issue of the value of Die Metric Tools at various stages of its decline. Hence, he should only be allowed witness fees and travel and parking costs which I estimate to be $150.00 plus HST and which are accordingly allowed for his testimony before the court.

[19] Mr. Phillips also provided consulting services to counsel for the plaintiff. Those services were reflected in detail in his invoice dated December 4, 2017 and in my view are appropriate expenses incurred by plaintiff’s counsel in preparing for the presentation of the rather complicated financial picture associated with Die Metric Tools from time to time. Thus, I allow the amount claimed in the amount of $1150 plus $149.50 for HST.

[20] Ms. Francioso’s employer was reimbursed the sum of $855 which presumably reflects the amount she was paid while she was excused from work to testify. Ordinarily, witnesses are subpoenaed to testify and only conduct money is payable under the Tariffs. I concur with the position of the defendants on this issue. Mr. Franciosi was an important witness for the plaintiff but I do not consider that the Tariff provides for payment of witnesses in the manner claimed.

Payments to Korbitec Inc. and iCore Group

[21] The defendant objected to the claims for licence fees for litigation software from Korbitec Inc. for which they should not be liable. In addition, they object to disbursements sought for a hard drive and IT services from Icor Group Ltd. in the amount of $4392.96 inclusive of HST. I requested further information from Mr. Munro and reply submissions from Ms. Epstein on or before April 1st, 2019 with respect to why these services and products were required by the defendants to prosecute this case. I have received those submissions.

[22] Mr. Munro submits that the payments of $841.55 for the Korbitec Inc. software were necessary to open and maintain an electronic litigation file in the Automated Civil Litigation (ACL) software which automates the entire process of creating court documents, thereby enabling lawyers and staff to prepare documents quickly and accurately. He suggests that the expense incurred in creating and maintaining an ACL file represents a significant net costs saving. He relies on the case of Moon v. Scher, 2004 CarswellOnt 4702 (C.A.) as authority for the position that the purchase of this software “was necessary for the conduct of the proceeding” within Tariff item 35.

[23] Ms. Epstein noted that the Korbitec Inc. software is standard office overhead as it is software used by the plaintiff’s law firm to make it more efficient. I concur with her submission. The disbursements considered by the Court of Appeal in Moon v. Scher, supra, related to Quicklaw services, courier services, stationary and postage and were solely related to the conduct of the proceeding. The software purchased by a law firm to efficiently present a case and which can be used by the firm in future cases is not in my view an expense “reasonably necessary for the conduct of the proceeding”. It may very well have made the presentation of the case easier to organize but it is part of standard office overhead for which the defendants should not be responsible.

[24] I find that the plaintiff’s disbursements with respect to iCore Group are reasonable and were necessary for the prosecution of the plaintiff’s case. Following the Die Metric Tool Inc. bankruptcy, the Trustee in Bankruptcy seized the company’s server which contained the data for both the Business Vision bookkeeping program and the JobBoss management program. The data of these two programs were relevant to some of the issues in dispute. The plaintiff employed the iCore Group Limited to create a mirror copy of the company server. The resulting copy was listed in the plaintiff’s schedule “A” productions of its Affidavit of Production. I do not find it was unreasonable for the plaintiff to want to obtain an electronic copy of the server in order to facilitate and minimize the handling of paper and the organization of the case.

Conclusion

[25] The plaintiff shall have judgment for his costs on a partial indemnity basis in the amount of $64,000 plus HST.

[26] The Plaintiff shall be paid his taxable disbursements of $11,343.22 plus HST which are calculated as follows:

Amount of Taxable Disbursements Claimed in Plaintiff’s Costs Submissions: $13,405.57 Less: Robert Phillips Invoice : $922.35 Koribetek Invoices: $435.00 Witness Fees Franciosi: $855.00 Deducted Disbursements: $2,212.35 Allowance for Witness Fees for Phillips: $ 150.00 Total of Disbursements to be deducted from the Amounts claimed: $ 2,062.35 Total Taxable Disbursements allowed: $11,343.22

The plaintiff shall be paid his non-taxable disbursements in the sum of $1114.00.

Turnbull, J. Date: April 24, 2019. Released: April 24, 2019

[^1]: Tab 2 of the Reply Costs Submissions of the Plaintiff