Court File and Parties

COURT FILE NO.: CV-18-597979 DATE: 20190502 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: EVERTZ TECHNOLOGIES LIMITED and EVERTZ MICROSYSTEMS LIMITED, Plaintiffs AND: LAWO AG, LAWO HOLDING AD, LAWO INC., LAWO GROUP USA INC., LAWO CORP, PROVIDUS CORP., TONY ZARE (a/k/a ANTONY ZAREZADEQAN), AYMAN AL KHATIB, JACKSON WIEGMAN and ALBERT FAUST, Defendants

BEFORE: Cavanagh J.

COUNSEL: James C. Orr, Kyle R. Taylor, and Annie (Qurrat-ul-ain) Tayyab, for the Plaintiffs Barry B. Sookman and Martin Brandsma, for the Defendants, Providius Corp., Tony Zare, Ayman Al Khatib and Jackson Wiegman John E. Callaghan and Laurent Massam, for the Defendants, Lawo AG, Lawo Holding AG, Lawo Inc., Lawo Group USA Inc., Lawo Corp. and Albert Faust

HEARD: By written submissions

Costs Endorsement

[1] In this action, the plaintiffs claim remedies based upon seven causes of action that are founded, at least to some extent, on claims that the defendants misappropriated and misused confidential information that belongs through to the plaintiffs.

[2] There are two groups of defendants. I refer to the defendants Providius Corp., Tony Zare, Ayman Al Khatib and Jackson Wiegman as the “Providius Defendants”. I refer to the defendants Lawo AG, Lawo Holding AG, Lawo Inc., Lawo Group USA Inc., Lawo Corp., and Albert Faust as the “Lawo Defendants”.

[3] The Providius Defendants and the Lawo Defendants moved to strike out the statement of claim in its entirety, without leave to amend. I granted these motions in part, and ordered that the statement of claim is struck out. I granted leave to the plaintiffs to serve an amended statement of claim.

[4] The Providius Defendants request an order for payment of costs on a substantial indemnity scale in the amount of $32,633.52. The amount claimed is comprised of fees of $26,706.97, disbursements of $2,172.25 and HST on fees and taxable disbursements of $3,754.30.

[5] With respect to the scale of costs, the Providius Defendants submit:

a. The Providius Defendants include three individuals and their small technology start-up company. They do not have access to substantial capital which makes defending against the claims challenging. b. The Providius Defendants’ motion was very important to them. c. In the action, the plaintiffs claim substantial damages as well as punitive, exemplary and aggravated damages in a pleading that, the Providius Defendants submit, was devoid of particulars. The Providius Defendants submit that the allegations in the statement of claim were devoid of merit, an abuse of process and involved baseless allegations. d. The plaintiffs made claims of conspiracy and theft of confidential information, and their statement of claim was struck out. The Providius Defendants submit that, as a result, there was a finding that the pleaded allegations were unfounded. e. An award of costs on a substantial indemnity scale will encourage future cooperation from the plaintiff should this litigation proceed. f. All parties requested costs on a substantial indemnity scale in their factums for the motions.

[6] Costs on a substantial indemnity scale should only be awarded where there has been reprehensible, scandalous or outrageous conduct on the part of a party. The kind of conduct that will justify an elevated level of costs is not limited to conduct in the proceedings, and can include the circumstances that gave rise to the litigation: Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239, at para. 43.

[7] In this case, the statement of claim was struck out because of my conclusion that the facts pleaded, as supplemented by the responses to demands for particulars, were not sufficient to satisfy the minimum level of fact disclosure that is required for causes of action based upon alleged misappropriation and misuse of confidential information. I was not satisfied that the statement of claim was necessarily fatally defective or that it would not be possible for the plaintiffs to cure the defects through proper amendments. I did not make any findings of fact with respect to the allegations that were pleaded.

[8] I do not agree that there has been any reprehensible, scandalous or outrageous conduct on part of the plaintiffs that would justify an award of costs on a substantial indemnity scale. The matters cited by the Providius Defendants do not constitute such conduct. The Providius Defendants are entitled to costs on the usual partial indemnity scale.

[9] The plaintiffs submit that their reasonable expectations for an award of costs for a two-hour pleadings motion is in the range of $7,500 inclusive of taxes and disbursements, for each set of defendants. The plaintiffs submit that although the motion was important to the parties, it was not complex. The plaintiffs submit that they should not be expected to pay the costs for two sets of lawyers making essentially the same arguments, and that it would be unreasonable and disproportionate to require the plaintiffs to pay for excessive preparation.

[10] The fixing of costs is not a mechanical exercise and does not begin and end with a calculation of hours times rates. In addition to the factors in rule 57.01 of the Rules of Civil Procedure, the court must consider the amount that would be fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than the amount fixed by the actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario, at para. 26.

[11] I accept that the motion was an important one for the defendants. The motion was of moderate complexity for this type of motion.

[12] Having regard to the factors in rule 57.01 and the principles in Boucher, I fix fees to be paid by the plaintiffs to the Providius Defendants in the amount of $12,000. This amount, together with HST, is $13,560. The disbursements incurred by the Providius Defendants amount to $2,454.64 inclusive of HST. I therefore fix costs to be paid by the plaintiffs to the Providius Defendants in the aggregate amount of $16,014.64.

[13] The Lawo Defendants also seek costs on a substantial indemnity scale. They seek costs in the amount of $32,294.80 plus disbursements of $491.21.

[14] In support of their claim for costs on a substantial indemnity scale, the Lawo Defendants submit:

a. The issues in the action are very important to them. b. The allegations made in the statement of claim were serious ones which are prejudicial to the reputations of the Lawo Defendants. Because the statement of claim was struck out, the pleaded allegations should be taken to have been unfounded. c. The plaintiffs claimed substantial amounts in damages and for punitive, exemplary and aggravated damages, exposing the Lawo Defendants to significant liability. The plaintiff should be discouraged from making excessive claims. d. The Lawo Defendants made repeated requests that the plaintiffs provide material facts to support their allegations and, in light of the plaintiff’s failure to do so, they were left with no choice but to proceed with their motion. e. The plaintiffs had requested that, if they were successful, they be awarded costs on a substantial indemnity scale. The Lawo Defendants submit that this shows that all parties reasonably expected that substantial indemnity costs would be awarded to the successful parties.

[15] The circumstances identified by the Lawo Defendants do not warrant an award of costs on a substantial indemnity scale. This was a pleadings motion, and the fact that the motion is important to parties, or that the claims were substantial, does not justify an elevated award of costs. There were no findings made with respect to the merits of the allegations in the plaintiffs’ statement of claim. I also do not accept that because all parties seek costs on a substantial indemnity scale in their factums, the court should conclude that all parties reasonably expect that the successful party will be awarded costs on a substantial indemnity scale. I have no doubt that if the defendants had been unsuccessful on their motion, they would be opposing an award of costs in favour of the plaintiffs on a substantial indemnity scale.

[16] The Lawo Defendants are entitled to an award of costs on a partial indemnity scale.

[17] The Providius Defendants and the Lawo Defendants acted reasonably at the hearing of the motions to avoid making overlapping submissions that were not considerate of the court’s time. The claims made in the action are substantial, and the two sets of defendants were entitled to choose to be represented by separate law firms. I do not reduce the costs claimed by the defendants because each set of defendants retained separate counsel.

[18] Having regard to the factors in rule 57.01 and the principles in Boucher, I fix fees to be paid by the plaintiffs to the Lawo Defendants in the amount of $12,000. This amount, together with HST, is $13,560. The Lawo Defendants incurred disbursements in the amount of $491.21 inclusive of HST. I therefore fix costs to be paid by the plaintiffs to the Lawo Defendants in the aggregate amount of $14,051.21.

[19] The costs, as fixed, are to be paid within 30 days.

Cavanagh J. Date: May 2, 2019