Court File and Parties

COURT FILE NO.: CV-17-582364 MOTION HEARD: In Chambers SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Long Term Recovery Limited, Plaintiff AND: David Ted Bolden and Antoinette Arian Bolden, Defendants

BEFORE: Master P.T. Sugunasiri

COUNSEL: E. Lederman, Counsel for the Defendants J. Blinick, Counsel for the Plaintiff and S. Morrison, student-at-law

HEARD: In Chambers by written submissions

Costs Endorsement

Overview

[1] On August 17, 2018, I allowed the Defendants’ highly contested motion to set aside default judgment and the noting in default. I then encouraged the parties to resolve the issue of costs, failing which they could make brief submissions to me on the issue. For the Boldens, the issue is whether or not they should be awarded substantial indemnity costs for what they believe was an ill-founded and unwarranted opposition to their motion. LTR Limited seeks costs thrown away as a result of the default or at worst, costs in the cause.

[2] For the brief reasons that follow, this is an appropriate circumstance to award substantial indemnity costs against LTR.

Chronology

[3] The action relates to a promissory note executed by the Defendants in April of 2012 (“Note”). The Note was a promise to pay $800,000 Bermudian dollars (“BMD”) over five years in respect of fees owing to the firm of Mello, Jones & Martin (“MJM”) for legal services rendered. MJM had defended the Boldens in criminal proceedings in Bermuda.

[4] No formal action was taken on the Note until September 8, 2017 when LTR issued its Statement of Claim (“Claim”). After receiving the Claim, the Boldens attempted to retain RV Law LLP who delivered a Notice of Intent to Defend on September 26, 2017 on behalf of them.

[5] The Boldens subsequently sought to retain Lenczner Slaght Royce Smith Griffin LLP as counsel going forward. Immediately after being contacted, anticipated counsel, Mr. Lederman, advised counsel for LTR, Mr. Blinick, of his impending retainer and requested that no steps be taken without notice.

[6] Mr. Blinick responded to Mr. Lederman on October 10, 2017 and granted the Boldens an indulgence to October 24, 2017. By October 24, 2017, Mr. Lederman had still not been retained. He advised Mr. Blinick that he expected to be retained shortly and that the Boldens were arranging for the funding needed for the retainer. That was the basis of the delay.

[7] LTR granted the Boldens another indulgence to deliver a defence by November 3, 2017 failing which LTR would move for default judgment without notice. The Boldens failed to deliver a defence or communicate with LTR with respect to the defence by November 3, 2017. As such, without further notice, LTR noted the Boldens in default on November 8, 2017 and obtained default judgment on November 22, 2017. On the very same day, Mr. Lederman wrote to Mr. Blinick to advise that he had been formally retained.

[8] The Boldens then took immediate steps to set aside the noting in default, not knowing about the default judgment. After serving their motion record, Mr. Blinick advised Mr. Lederman that LTR had in fact obtained default judgment against the Boldens. The Boldens immediately amended their motion to set aside default judgement and the noting in default.

[9] Notably, even after being advised of Mr. Lederman’s retainer and seeing a draft defence, LTR persevered in its opposition to the relief sought in the motion and forced the parties to come before me. Its main submission was that the Boldens’ defence lacked merit. Ultimately, I set aside default judgment so that the matter could proceed to allow a trier a fact to determine exactly that on a full record.

Law and Analysis

[10] As often noted by the Honourable Madam Justice Beverley McLachlin, access to justice is a cornerstone of our justice system. If it is to be something more than a theoretical construct in our province, the Court must do what it can, where possible, to encourage a measured and meaningful approach to motions. In deciding to either bring, or oppose a motion, parties ought to be guided by three fundamental questions: a) does the motion matter significantly to a material issue in the action; b) is the motion needed to preserve an important legal principle; and c) is the motion the most cost effective means of achieving the desired end result. This approach is reflected in a recent decision by Justice Dunphy in which he states:

The rule of law is a hollow principle without meaningful access to justice. It is both a public right and a matter of imperative public policy. It is the raison d'être of the judicial system of which we are servants. Access to justice is best secured when every appearance in court secures a meaningful advance in the resolution of the issues rather than being simply an occasion to add expense, delay or both to the burden borne by litigants. Strategic choices, including the choice to bring summary judgment motions and how to respond to them, have strategic consequences. [1]

[11] The same considerations are relevant to all motions. Unreasonable, costly, and purely tactical interlocutory positions ought to be deterred by the risk of higher costs. Otherwise the notion of access to justice will be nothing more than a topic at continuing legal education programs. Rule 57.01 of the Rules of Civil Procedure and section 131 of the Courts of Justice Act affords the Court broad discretion to fashion an appropriate costs award. In my view, in addition to the factors set out in Rule 57.01 and the indemnity function of costs awards, the Court must also consider the goal of promoting efficient and cost-effective access to justice to litigants in a climate of ballooning costs and scarce judicial resources.

[12] In the present case, LTR took an aggressive and overly technical approach to the motion with the hopes of jumping to judgment without a full adjudication on the merits of its claim. It took this position after leaving the subject promissory note in limbo for six years. The case law is clear that the threshold for setting aside default judgment is low. Courts are loath to diminish the policy thrust of having cases decided on their merits. It is only where defences are essentially meritless or the defendant’s default is so acute that a defendant will not be permitted to proceed. While I appreciate that LTR strongly believes the Boldens’ defences to be “red herrings”, its arguments essentially invited the Court to make substantive rulings on the enforceability of the Note. LTR might have spent virtually the same amount of time allowing the defence to be filed and making their submissions to a judge on a motion for summary judgment or a determination of an issue of law, using essentially the same materials. LTR took a litigation risk that it was entitled to take in opposing the motion, but with the risk comes costs consequences.

[13] Historically, substantial indemnity costs are only awarded in the rare and exceptional cases where the conduct of the party against whom costs are being sought is “reprehensible”. [2] In modern litigation, what is considered “reprehensible” must include parties taking grossly unreasonable positions in low threshold motions. In my view, we are at the point when at least one of the lenses of for the assessment of substantial indemnity costs is the impact of a party’s position on access to justice. Parties who choose to take highly aggressive positions on low threshold motions should be subject to a real risk of substantial indemnity costs awards. As we can see from the strong motions culture in Toronto, partial indemnity costs are not deterring parties from taking positions that do little to advance the case on its merits. In my view, it is unjust to force a party to incur even 35% of their legal costs to prepare and argue a low threshold motion that should have proceeded on consent.

[14] In the present case, LTR took the risk of substantial indemnity costs when it persevered in its opposition to the motion to set aside default judgment, even in the face of anticipated defence counsel being in touch with a draft statement of defence in hand. In the circumstances of this case, substantial indemnity costs are warranted.

[15] LTR argues that the motion is an indulgence, that the Boldens are the authors of their own misfortune and should not be rewarded for their default. Overall, I would agree that a defendant seeking to set aside default judgment is seeking an indulgence. In this case, however, I found that the Bolden’s were making bona fide attempts to retain counsel in order to defend themselves and so advised LTR. In fact they retained counsel immediately to deliver a Notice of Intent to Defend and then sought to obtain financing for their litigation counsel of choice. It is not a case where the Boldens disregarded the claim and their obligations under the Rules. The delay was two months and I accepted their explanation of lack of funding. The indulgence would not have had to be sought had LTR taken a more cooperative position. I therefore respectfully disagree with LTR that the Boldens were the authors of their own misfortune and should not be rewarded. As I noted earlier, all of this time and effort could have been spent on a summary judgment motion with the same evidence. In that sense, it is LTR that is the author of its own misfortune. To be clear, this is not a case in which hindsight is 20-20. My comments about increasing the scope of substantial indemnity costs is only with respect to low threshold motions such as this one that are so clearly likely to succeed that a crystal ball is not needed.

Quantum of Costs

[16] The Boldens seek $45,086.41 in substantial indemnity costs. LTR’s substantial indemnity costs are $25,027.18. The numbers exemplify how much time and effort was put into what is ordinarily a simple motion. I accept that the motion was important to the Boldens who were facing a $800,000 untested judgment. The consequence of a loss for LTR was less although one should never underestimate the monetary and human cost of ongoing litigation.

[17] LTR suggests that that costs should be in the cause and/or that they should recover costs thrown away of obtaining default judgment. Those costs include corresponding with Mr. Lederman, obtaining default judgment as well as preparing garnishment proceedings which were never initiated.

[18] I see no reason to award costs in the cause. Parties who are successful on motions are generally entitled to costs unless the nature of the motion or the circumstances of the case warrants a different approach. With respect to reimbursing LTR for the cost of default proceedings, I agree that there should be some set-off for the cost of obtaining default judgment and initial talks with Mr. Lederman. My decision in no way derogates from the fact that LTR had a right to take default proceedings. My concern is with the continuation of their position even after Mr. Lederman was involved and a defence was in the immediate horizon. The time spent on obtaining default and corresponding with Mr. Lederman, however is relatively little.

[19] I also find the Boldens’ costs claim excessive with apparent overlap between the work done by Ms. Robbins as junior counsel and Mr. Lederman. It is clear that counsel left no stone unturned. That is the Boldens’ choice. However, the choice to have Maserati level legal service for a Rav4 issue ought not to be borne by LTR. According to the Boldens, this was a simple motion with a low threshold in which LTR clearly took an ill-founded and overly technical position. Having succeeded in that argument, the costs claimed and awarded should be proportional to the arguments made. At the same time, the Court does not engage in a forensic line by line review of the costs.

[20] Overall, taking into account the two costs outlines, the parties’ written submissions, the entitlement of LTR to costs thrown away, Rule 57.01 and the reasonable expectation of the parties, I award substantial indemnity costs to the Boldens in the all-inclusive amount of $35,000 payable within 30 days of today’s date.

Original Signed Master P.T. Sugunasiri Date: January 10, 2019

[1] Mazza v Ornge Corporate Services Inc., [2015] OJ No 6773 at para. 50. [2] See Justice Perell’s summary of the law of costs in 394 Lakeshore Oakville Holdings Inc v Misek, 2010 ONSC 7238 at paras 10-17 (“Misek”).