Court File and Parties

COURT FILE NO.: CV-10-407826 DATE: 20190503 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1802655 ONTARIO INC., Plaintiff AND: FARID JENABIEH, SARELA FRANCO AND 2199218 ONTARIO LIMITED, Defendants

AND BETWEEN: FARID JENABIEH, SARELA FRANCO AND 2199218 ONTARIO LIMITED, Plaintiffs by Counterclaim AND: 1802655 ONTARIO INC., LAURA DORIA, ASHLEY CROZIER AND CHRIS PEREIRA, Defendants to the Counterclaim

BEFORE: Kimmel J.

COUNSEL: Sandra L. Secord, for the Plaintiff (Defendant to the Counterclaim), 1802655 Ontario Inc. and the Defendants to the Counterclaim, Laura Doria and Chris Pereira, Moving Parties Donald E. Crabbe, for the Defendants (Plaintiffs by Counterclaim), Farid Jenabieh, Sarela Franco and 2199218 Ontario Limited, Responding Parties

READ: Written costs submissions dated March 8, 2019, April 2, 2019 and April 10, 2019. (Motion and contested adjournment heard December 14, 2018 and continued at case conference on December 19, 2018).

Costs Endorsement

Procedural History

[1] I have been asked to decide the issue of costs on a motion that came before me on December 14, 2018 and that was the subject of my December 19, 2018 order in this matter (the “Appointment Order”). The Appointment Order contemplated that the costs of the motion before me would be decided at the same time that a contemplated further stay motion was heard, but that motion did not proceed. The parties have not been able to agree on the costs of the appearances before me that resulted in the Appointment Order.

[2] The plaintiff and two of other defendants to the counterclaim (“Moving Parties”) sought the appointment of Sidney N. Lederman as the arbitrator under an arbitration agreement between the parties dated December 14, 2017 (the “Arbitration Agreement”) that had been entered into at a pre-trial conference in a long-outstanding action between the parties.

[3] The defendants/plaintiffs by counterclaim (“Defendants”) requested an adjournment of the motion on December 14, 2018 pending the outcome of a motion that they advised they intended to bring for a stay of the arbitration proceedings in light of intervening criminal proceedings against them. They also indicated that there was another contemplated (related) motion concerning possible alleged breaches by the Moving Parties of their deemed undertaking under Rule 30.1 of the Rules of Civil Procedure. The Defendants had secured a motion date at the end of January, 2019 but had not delivered any supporting materials, were awaiting disclosure from the Crown in criminal proceedings, and were anticipating the need for witness examinations on their motions.

[4] The request for an adjournment of the motion before me was opposed by the Moving Parties on the basis that the stay motion was tenuous since all that had been provided was a Notice of Motion dated December 6, 2018 without any supporting material, and also on the basis that there had been significant delay since the Moving Parties had first proposed the appointment of the arbitrator back in June of 2018. The Moving Parties argued that they had been prejudiced in that their trial date had been vacated as part of the arrangements under the Arbitration Agreement, which had been entered into a year earlier (to the day). The Moving Parties wanted to ensure that there was a timetable for the stay motion and ability for them to move forward with the arbitration if the stay motion did not proceed or was not successful, and they were not content to simply adjourn everything pending the outcome of a motion or motions that had not yet been briefed and might not proceed.

[5] The Defendants opposed the appointment of the arbitrator, in part, on the basis that the arbitration had not yet been initiated. The Defendants’ concerns were primarily directed to sequencing. They also raised (“jurisdictional”) concerns about consenting to the appointment of an arbitrator given their intended stay motion (predicated on the pending criminal proceedings). While not consenting to Mr. Lederman’s appointment, their objection was to the appointment of any arbitrator (and to the arbitration proceeding while the other issues were before the court), and not specifically to Mr. Lederman as the arbitrator.

[6] Based on my review of the motion materials and the Arbitration Agreement, it appeared to me that the arbitration had been triggered at least by the time of the pre-trial attendance before Justice Sanderson in June of 2018 and that there was no good reason to delay the appointment of the arbitrator as long as the Moving Parties agreed not to take steps in furtherance of the arbitration for a reasonable time period in order to allow the Defendants to bring their stay motion on, if so advised. The Moving Parties agreed to this and it is reflected in my Appointment Order. In these circumstances, there was no apparent prejudice to the Defendants. The potential prejudice to the Defendants in the criminal proceedings as a result of the arbitration continuing was precisely what they expected to address on the stay motion. Any jurisdictional issues that they faced already existed as a result of the Arbitration Agreement and it was not suggested that they would be incrementally affected by the identification and appointment of the arbitrator.

[7] I have been advised through the parties’ costs submissions that the Defendants did not proceed with their stay motion. That may provide some context but is not something I have relied upon in my costs decision (other than to take note that it is because that motion did not proceed that the costs of the Appointment Order have come back to me to decide). Similarly, while the parties have devoted some time and attention in their costs submissions to the history of this matter and who is to blame for various delays that have ensued in the prosecution of the action, I have not made or relied on any findings in that regard and have only considered the delays associated with the appointment of the arbitrator and the positions of the parties in relation to his appointment.

[8] I received on April 10, 2019 and have reviewed the written costs submissions of the parties and will not repeat them in this endorsement, except to highlight some aspects for emphasis. Whether mentioned or not in this endorsement, I have considered all of the arguments made.

Entitlement to Costs

[9] The starting point is that I find that it was entirely appropriate in the circumstances for the Moving Parties to have brought their motion for the Appointment Order, and I find that they are entitled to their costs for having done so. I do not agree that the motion(s) had a mixed result or outcome – the relief sought by the Moving Parties was granted. I simply encouraged them to agree to a brief standstill of the implementation of the Appointment Order in the interests of efficiency and given the proposed stay motion, which they readily did agree to.

Scale and Quantum of Costs

[10] As to the scale of costs, I agree with the Moving Parties that the conduct of the Defendants in refusing to engage meaningfully on the topic of the appointment of an arbitrator, both before and after any issue was raised regarding the criminal proceedings, is a relevant consideration, as is the fact that they had no apparent objection to Mr. Lederman as the arbitrator (but they waited to communicate that until the hearing). Their concerns were ultimately addressed by a standstill arrangement that was consented to by the Moving Parties and I would expect that those terms could have been worked out in advance of the two appearances before me if the Defendants had been willing to meaningfully engage on the topic of the appointment of an arbitrator.

[11] The Defendants put forward various explanations for why they did not agree to the appointment of the arbitrator while expert reports and continuing pre-trials were ongoing in the summer and fall of 2018, and because of the criminal proceedings, after they became aware of them. In my view, these were not reasons to oppose the appointment of the arbitrator, but rather considerations to be accounted for in the scheduling of the arbitration and any related motions, including (eventually) their proposed stay motion.

[12] The Moving Parties also rely on an offer they made for an order appointing Mr. Lederman as arbitrator, without costs, that was open for acceptance until a week before the motion came before me. While I do not consider this to be an offer that attracts the mandatory effect of a Rule 49.10 offer under the Rules of Civil Procedure, it is a relevant consideration.

[13] The Moving Parties seek all-inclusive substantial indemnity costs of $23,598.56. In the alternative, they seek all-inclusive partial indemnity costs of $16,264.97.

[14] The Defendants argue that the Moving Parties are not entitled to any costs, and alternatively submit that the costs should be on a partial indemnity scale and that the amount requested by the Moving Parties is excessive. They rely on the case of Boucher v. Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (C.A.), at para. 37, and suggest that there is a concern in this case about a “chilling effect” of a costs award in either of the magnitudes requested by the Moving Parties, although the support for this was only provided in very general terms, by reference to a “costliness strategy” and the costly “litigation grind”. Their submissions did not go so far as to provide a foundation for me to find that any costs award would be prohibitive to the Defendants’ ability to continue with the arbitration.

[15] The Defendants also challenge some of the specific charges and the timeframe covered by the Moving Parties’ Bill of Costs. I find this latter submission surprising given that they have provided no Bill of Costs of their own against which these alleged excesses could be compared. The Boucher case stands for the proposition that, in deciding what is fair and reasonable, the reasonable expectation of the unsuccessful party concerning the amount of costs that they may have to pay for a particular step in the proceeding is a relevant factor. (See Boucher at paras. 26 and 38) Since that case was decided, this factor has been expressly incorporated into Rule 57.01(0.b) of the Rules of Civil Procedure. The reasonable expectation of the losing party of what it would pay is a consideration that can in many instances be readily ascertained by having regard to that party’s own bill of costs. The absence of such makes it difficult for me to assess the Defendants’ reasonable expectation of what the costs award against them would be if they lost, on any basis other than what has been presented by the Moving Parties.

[16] I have looked at the Moving Parties’ Bill of Costs and observe that the overall number of hours spent by the Moving Parties’ law firm on this motion, given that there were no cross-examinations, is on the high end of what I would expect. However, the protracted period of time over which the appointment of the arbitrator was sought, dating back to June of 2018, logically would have increased the time and attention that would have to be devoted to this motion, and on the whole I do not consider their total number of hours, or hourly rates, to be unreasonable. That said, the Boucher case reinforces that the overarching objective in the assessment of costs “is to fix 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”. (See Boucher, at para. 26) I am concerned about the overall fairness of a costs award in the amounts requested by the Moving Parties which would be in excess of $15,000 (or as high as $23,000) for a relatively straightforward motion.

[17] This concern must be balanced against the delays in getting the arbitration underway, the necessity of the motion and the offer and other conduct of the Moving Parties suggesting that they were prepared to be reasonable as long as the arbitration was not being further unduly delayed.

[18] In the exercise of my discretion under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and having regard to the factors in Rule 57.01 of the Rules of Civil Procedure, I am awarding the Moving Parties their costs of their motion to appoint Sidney N. Lederman as arbitrator fixed in the amount of $8,000 in fees, plus all of their disbursements and applicable taxes, for a total amount of $10,637.80 payable by the Defendants within 30 days. I find this amount to be fair and reasonable in the circumstances.

[19] To be clear, I have not reduced the fees claimed by the Moving Parties to penalize them for any of their conduct or because I consider the amounts claimed to be unreasonable, nor should this reduction be taken as a wholesale acceptance of the Defendants’ position about the chilling effect of costs awards. Rather, it is my assessment, having considered all of the submissions and factors, about what is fair and reasonable in the circumstances of this case.

Kimmel J. Date: May 3, 2019