Court File and Parties
Court File No.: CV-18-602355 Date: 2019/06/05 Ontario Superior Court of Justice
Between: BARRY PAULIN and WAYNE BIGGAR, Plaintiffs
- and - JACK PINDER, VICTOR DUSIK, and INNOTECH SAFETY SOLUTIONS INC., Defendants
Counsel: Douglas J. Spiller for the Plaintiffs Stephen R. Barbier for the Defendants
Heard: In writing
Perell, J.
Reasons for Decision - Costs
[1] In warfare, when a combatant declares that “no quarter will be given” it means that the combatant will show no mercy and not spare the life of a foe even if the vanquished foe unconditionally surrenders. Under the modern laws of war, it is forbidden to declare that no quarter will be given. [1] The Rules of Civil Litigation have no equivalent to the modern laws of war, which is unfortunate, particularly with respect to family disputes, partnership disputes, and corporate disputes, where the parties have no trust and only anger for their foe with the result that it becomes difficult if not impossible to secure the just, most expeditious and least expensive determination of the civil proceeding on its merits. [2] The case at bar is an example where an interlocutory proceeding became senseless and counterproductive.
[2] In the case at bar, there were two major legal battles in the internecine warfare amongst the shareholders of the startup company, Innotech Safety Solutions Inc. One battle was about whether several minority shareholders have voting rights. The second battle was an oppression remedy action and a fight for control between the Plaintiffs, Barry Paulin and Wayne Biggar, and the Defendants, Jack Pinder and Victor Dusik.
[3] The Plaintiffs brought an oppression remedy action, and they obtained an interlocutory injunction from Justice Myers that included terms that the Defendants provide information about, among other things, a $10 million private investment by the State of Kuwait to establish a subsidiary Innotech corporation in the State of Kuwait.
[4] Thus, the Plaintiffs obtained an interlocutory injunction to restrain conduct, but in short order, they learned that the Defendants’ conduct did not need to be restrained. There was and there never had been a binding agreement with the Kuwaiti investors. Nevertheless, the Plaintiffs persisted in enforcing an injunction that they did not need with the result of running up enormous litigation expenses that ultimately served no purpose. When the Defendants produced documents, the Plaintiffs were never satisfied and demanded more. When they got still more documents, the Plaintiffs complained about the timeliness of the production and demanded still more.
[5] Finally, after months of wrangling and complaints by the Plaintiffs about whether the Defendants had complied with Justice Myers’ and Justice Lederman’s orders, the Defendants brought a motion to dissolve the interlocutory injunction, and they sought other relief that would allow for a meeting of the shareholders to go forward.
[6] In particular, the Defendants sought: (a) an order lifting the interim injunction ordered by Justice Myers on August 24, 2018; (b) declaring that TFT Investments Ltd. is the valid holder of 417 Class “A” common shares in Innotech, and declaring that Ashley Spilak is the valid holder of 278 Class “A” common shares in Innotech, and declaring that Carrie Wilcox is the valid holder of 278 Class “A” common shares in Innotech, and that they all are entitled to notice of and participation in any shareholders’ meeting.
[7] The Plaintiffs, however, submitted again that the information ordered by Justice Myers has not been provided, and they brought a contempt motion and they asked that the Defendants’ motion be adjourned. The Plaintiffs also asked that the injunctive orders be continued and made permanent and that the Defendants be expelled from their positions at Innotech.
[8] At the hearing of the motions, I dismissed the contempt motion and I heard the parties competing motions on their merits. I reserved judgment on the motion and cross-motion.
[9] Ultimately, I dissolved the injunction. I ordered the Plaintiffs to pay costs for the failed contempt motion and for the motion for injunctive relief. I make no further order with respect to declaratory relief. I concluded that beyond dismissing the contempt motion and the motion for injunctive relief, any other order for a remedy required a trial or a summary judgment motion. [3]
[10] For this ten months of useless litigation, the Defendants now seek costs of $217,146.57 on a substantial indemnity basis comprised of $204,457.68 for counsel fees, inclusive of HST, and $12,688.89 for disbursements. The Defendants’ partial indemnity claim is $149,421.15, all inclusive.
[11] It is very far from clear from the Plaintiffs’ rambling costs submissions, but I gather that they are requesting costs of $49,636.46 to be set off against a substantially discounted award tending toward a nominal award to the Defendants.
[12] In making their costs submissions, both parties more or less ignored my direction that the Plaintiffs pay costs for the failed contempt motion and for the motion for injunctive relief. The direction was meant to signal that the Plaintiffs would not be entitled to costs at all and the Defendants should reduce their claim for costs on account of such matters as; (a) the unresolved matter of the nature of the shareholdings of TFT Investments Ltd., Ashley Spilak, Carrie Wilcox; and (b) the reality that the Defendants should share a small part of the blame for an interlocutory motion that went pathological, although the much larger blame goes to the circumstance that the level of distrust between the parties was such that the Plaintiffs would give no quarter.
[13] It may be that the parties did not understand the signal in my direction, but the result is that I do not find their costs submissions particularly helpful. I did, of course, consider their submissions in reaching my decision that the Plaintiffs should within sixty days pay to the Defendants $110,000, all inclusive, on a partial indemnity basis for the litigation to date.
[14] As I view the matter, the Defendants were successful in resisting the contempt motion and in dissolving the injunction. The normal rule is that the successful party is entitled to costs on a partial indemnity basis.
[15] I see no basis for making a punitive award of costs on a substantial or full indemnity basis. I appreciate that the Defendants made an offer to settle, but it was a fundamental term of that offer that the matter of the nature of TFT Investments Ltd., Ashley Spilak, Carrie Wilcox shareholdings be resolved, and that has not occurred. It cannot be said from the Plaintiffs’ perspective that the offer to settle was more favorable than the outcome of the motions.
[16] I also appreciate that the Plaintiffs originally framed their motion to continue the injunction as a summary judgment motion, but that circumstance does not alter my analysis that the proper scale in the immediate case is costs on a partial indemnity basis. Nor does the fact that the Defendants warned the Plaintiffs that they would be claiming costs on a substantial indemnity basis, change my analysis.
[17] The Defendants say that the Plaintiffs knew or ought to have known that their motions had virtually no chance of success. This aggressive posturing is commonplace and given that the Defendants had expanded the battle to include the corporate governance matter of the nature of TFT Investments Ltd., Ashley Spilak, Carrie Wilcox shareholdings, there was little likelihood that their warning about substantial indemnity costs would lead to an armistice.
[18] The result is that the Defendants are the victor, and they are entitled to the victor’s normal spoils of a partial indemnity award.
[19] Having regard to the way this litigation was waged, an award of $110,000 on a partial indemnity basis is or should have been within the reasonable expectations of the unsuccessful Plaintiffs.
[20] As noted above, the Plaintiffs are not entitled to any offsetting award of costs.
[21] Order accordingly.
Perell, J. Released: June 5, 2019.