Court File and Parties

COURT FILE NO.: CV-09-391349 DATE: 20190628 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: PROLINK BROKER NETWORK INC., Plaintiff/Defendant by Counterclaim – and – RAKESH (RICK) JAITLEY, MY INSURANCE BROKER CORP. and MY INSURANCE BROKER CANADA CORP., Defendants

AND BETWEEN:

MY INSURANCE BROKER CORP., Plaintiff by Counterclaim – and – PROLINK BROKER NETWORK INC., Defendant by Counterclaim

BEFORE: R.F. Goldstein J.

COUNSEL: Richard P. Quance, for the Plaintiff Rahul Shastri, for the Defendant

HEARD: In Writing

Revised Costs Endorsement

[1] The Plaintiff claims that it is entitled to partial indemnity costs for this action in the amount of $75,300.27, inclusive of disbursements and taxes. The Defendants say that I should not award the Plaintiffs anything. The Defendants say that based on an offer to settle I should award them $33,900 in costs.

[2] After the original trial, I issued an endorsement where I declined to grant costs. I found that each party should bear its own costs.

[3] After the damages re-hearing, I again declined to order costs. I again found that each party should bear its own costs. The parties then pointed out an error that I made in the endorsement. I agreed to reconsider my decision.

[4] Upon re-consideration, I believe that this case is one where each party should bear its own costs. For the reasons that follow, I still decline to order costs.

Background

[5] I will reiterate some of the history of this matter. It is set out in my judgment from the damages re-hearing: Prolink Broker Network Inc. v. Jaitley, 2018 ONSC 7577. For the purposes of clarity, I will set out the key court dates (corrected from my earlier endorsement):

• September 15, 2011: The Plaintiff offers to settle the action for by accepting $125,000 plus costs.
• December 26, 2011: The Defendants offered to settle the action by paying $10,000 all-inclusive.
• April 4, 2013: The Defendants offer to settle the action by paying $20,000 all-inclusive.
• April 8-12, 2013: Trial begins before me sitting alone.
• July 2, 2013: I release my decision. I find for the Plaintiff but do not make a finding on the quantum of damages (Prolink Broker Network Inc. v. Jaitley, 2013 ONSC 4497).
• October 3, 2013: The parties make further submissions on the quantum of damages. The only issue for me to determine is the value of Prolink’s 25 shares of MIB, the brokerage owned by Mr. Jaitley.
• October 9, 2013: I release my decision on the quantum of damages. I find that the value of the 25 shares is $12,656.38 (Prolink Broker Network Inc. v. Jaitley, 2013 ONSC 6253).
• August 28, 2014: I release my endorsement as to costs. I make no costs order (Prolink Broker Network Inc. v. Jaitley, 2014 ONSC 4993). (I will refer to this endorsement as the “original trial costs endorsement”.)
• November 24, 2015: The Divisional Court hears an appeal by the Plaintiff. The Court overturns my damages decision and sends the matter back to me for a re-hearing (Prolink Broker Network v. Jaitley, 2015 ONSC 6484).
• June 27, 2016: The Defendants offered to settle the action by paying $40,000 all-inclusive.
• June 25-27, 2018: Damages re-hearing before me. Each party calls an expert witness.
• December 18, 2018: I issue my reasons for judgment on the damages re-hearing. At para. 53 of my judgment I accepted the evidence of the Defendant’s expert. At para. 54 I indicated that the defendant’s expert was to recalculate the damages to Prolink. I find that the Defendant’s expert must re-calculate the value of the 25 shares based on 6.0, 6.5, and 7.0 times earnings and take the midpoint (Prolink Broker Network v. Jaitley, 2018 ONSC 7577). I invite the parties to make costs submissions. I later issue a costs endorsement that contains an error (I will refer to this endorsement as the “second costs endorsement”).
• December 21, 2018: The Defendant’s expert writes to Mr. Shastri, counsel for the Defendant, and finds that the 25 shares is valued at $25,000.00.

[6] In my original trial costs endorsement I awarded $7083.20 for a “stub” period after May 7, 2009: Jaitley et al. v. Prolink Broker Network Inc., 2014 ONSC 4993. That amount represented commissions owed after the contract was breached. The parties agree that amount is to be added to damages award of $25,000.00. The parties calculate pre-judgment interest slightly differently. The Plaintiff argues that The Plaintiff says the total amount of the award including the stub period and pre-judgment interest is $32,083.20. The Defendant says the amount is $33,342.00. The difference is minor but I agree with the Defendants.

Positions of the Parties

[7] After the Divisional Court ordered a new hearing on damages, I met with the parties to develop a timetable for a new damages hearing: Jaitley et al. v. Prolink Broker Network Inc., 2016 ONSC 1663. I encouraged the parties to engage in settlement discussions at para. 4 of my endorsement. On June 27, 2016 Mr. Shastri emailed Mr. Quance. In the email Mr. Shastri made an offer to settle on behalf of his client. The Defendant made an all-in offer for $40,000.00. I continued to encourage the parties to settle.

[8] The Defendant’s position is that the Plaintiff would have done better had it accepted the offer to settle. Accordingly, pursuant to Rule 49.10(2) of the Rules of Civil Procedure they should have their costs on a partial indemnity basis for the damages re-hearing. In the alternative, the Defendant’s position is that Rule 49.13 of the Rules of Civil Procedure should apply.

[9] The Plaintiff’s position is that the Defendant’s offer did not properly comply with Rule 49.10(2) of the Rules of Civil Procedure. The Plaintiff was ultimately successful at both the original trial and at the damages re-hearing. Accordingly, the Plaintiff should receive partial indemnity costs.

Analysis

[10] In my view, there are three questions to be answered at this point:

(a) Should I re-visit my original trial costs decision and award costs to the Plaintiff? (b) Should I award the Defendants costs based on the offer to settle?

[11] At para. 14 of my original costs judgment I made the following general observations:

Costs are within the discretion of the Court: Courts of Justice Act, s. 131(1); Rule 57.01(1) of the Rules of Civil Procedure. The Court must fix an amount that is fair and reasonable, taking into account the reasonable expectation of the parties: Boucher v. Public Accountants Council for Ontario. The principle of indemnification applies, such that the losing party generally (although not always) pays the costs of the winning party.

[12] Those observations obviously still apply.

[13] I have also considered whether I am functus officio as a result of my error in the second costs endorsement. The doctrine of functus officio facilitates the finality of judgments that are subject to appeal. A court ought not to continually hear applications to vary an order. That would undermine the principle of finality. It would also deny the appellate rights of the opposite party: Doucet-Boudreau v. Nova Scotia, 2003 SCC 62 at paras. 77-79; 114-116.

[14] Rule 59.06 of the Rules of Civil Procedure does not apply here. That rule deals with orders and judgments, not reasons: Susin v. Goodreau, 2008 ONCA 165.

[15] In R. v. Malicia the Court considered the circumstances under which a court could correct an error. MacPherson J.A. for the Court of Appeal found that a flexible approach could apply, especially in civil cases. Where there is an error in expressing the manifest intention of the court, an exception could apply.

[16] I believe I must also consider whether reconsidering my damages costs endorsement as a result of my error would engage the presumption of integrity.

[17] Judges enjoy a presumption of integrity. It is assumed that judges will strive to overcome their personal biases and carry out their duties to the best of their ability: R. v. Teskey, 2007 SCC 25 at paras. 19-21. The presumption of integrity can, however, be rebutted. As the Court of Appeal put it in R. v. Aranout, 2015 ONCA 655 at para. 19 (quoting from Teskey):

To rebut the presumption of integrity in cases featuring post-decision reasons, the appellant must present cogent evidence showing that, in all the circumstances, an informed and reasonable observer would think that the reasons are an after‑the-fact justification for the decision rather than an articulation of the reasoning that led to the decision.

[18] In Aranout the trial judge convicted the accused of attempted murder and other offences. The accused sent ricin in water bottles to various individuals. The trial judge, on sentencing, issued a clarification of his reasons that appeared to add an alternative path to liability. The accused, on appeal, argued that the trial judge changed his reasoning when he realized that the original reasons did not support a conviction. The Court of Appeal accepted that “an informed and reasonable observer would view the amendment as an after-the-fact justification for the verdict.” (para. 36).

[19] In R. v. Cunningham, 2011 ONCA 543 the trial judge did not issue reasons on a Charter motion until 2 ½ years after the trial. The Court stated (at para. 34):

The presumption of integrity can only be displaced by "cogent" evidence that would lead a reasonable person to apprehend that the written reasons are not the road map to the decision, but are instead an after-the-fact justification for the decision.

[20] The Court of Appeal found that the presumption had been displaced since there were no reasons – and the passage of time in and of itself was enough to engage the presumption.

[21] After much anxious consideration, I am satisfied that to reconsider the second costs award would not engage the presumption. To issue a new endorsement is not an ex post facto attempt to justify an original finding, it is the correction a factual error: R. v. Krouglov, 2017 ONCA 197. I recognize that Krouglov involved the correction of a warrant of committal to conform with reasons for sentence. In that sense, it was the correction of a mechanical calculation. I am satisfied, however, that correcting my second endorsement involved a simple factual error.

[22] I will therefore apply the Malicia exception here. My intention as set out in the second costs endorsement was based on an error. I made the error based on misreading a document. A judge, by definition, could not have a manifest intention to make a factual error. Nonetheless, judges are human and do so from time to time. To refuse to correct the error would, in these circumstances, actually upend the principle of finality. That is because everyone would know that an error had been made, but it could only be corrected on appeal. It therefore seems to me unjust under these particular circumstances not to reconsider the matter. It would also be an abdication of my duty to adjudicate the issue of costs – even if I am wrong. I also take into account that the parties agree that I should reconsider my original costs endorsement. Moreover, this reconsideration only involves an award of costs. It does not affect any substantive finding. Accordingly, I will apply the flexible approach discussed in Malicia and reconsider my second costs endorsement.

[23] I now turn to the issues:

(a) Should I re-visit my original trial costs decision and award costs to the Plaintiff?

[24] The Plaintiff argues, by implication, that I should revisit my original trial costs decision. The Plaintiff argues that since it has been successful throughout, both at the original trial, and on appeal, the usual rule should apply. Furthermore, the Plaintiff argues that the award is beyond the monetary jurisdiction of the Small Claims Court.

[25] I respectfully disagree. It is true that the Plaintiff was successful at trial in that I found the Defendant liable in contract. It is also true that the damages that I originally awarded were very small in relation to the amount sought. The Plaintiff’s success was arguably a Pyrrhic victory. In my respectful view, the reasons for refusing to order costs at the original trial still apply. At para. 17 of my original costs endorsement I stated the following:

In balancing all the factors I find that no costs should be payable in this case, for the following reasons:

• The Plaintiff had very limited success at trial. The amount claimed was $750,000 and the amount recovered approximately $20,000.00: Rule 57.01(1)(a) of the Rules of Civil Procedure.
• Even with prejudgment interest, the Plaintiff’s award is still within the current monetary jurisdiction of the Small Claims Court: Rule 57.05(1) of the Rules of Civil Procedure.
• The Plaintiff recovered just under $20,000.00; or just over $20,000.00 when pre-judgment interest is calculated. In my view, the judgment is so close to the offer to settle, especially in light of the amount claimed, that there is a reasonable argument that the principle of Rule 49.10(2) of the Rules of Civil Procedure should apply in these circumstances. Even if the offer to settle is not strictly applied, it is a factor to take into consideration: Rule 49.13 of the Rules of Civil Procedure.
• Court time and resources were taken to deal with the counterclaim for $750,000.00. The Plaintiff was required to call evidence to deal with the counterclaim. The counterclaim was abandoned in argument.

[26] I also note that the amount ultimately recovered is now $33,342.00. Although this amount now brings the total award to an amount above the monetary jurisdiction of the Small Claims Court, it is only some $7,000.00 more. Moreover, when the stub period amount of about $7,000 was added to the $20,000 award (admittedly overturned by the Divisional Court) the total of about $27,000.00 is, again, not that different from the total award after the damages re-hearing of about $33,000.00. The difference is relatively small.

[27] In my respectful view, the Plaintiff’s success is still limited. At the damages re-hearing it is true that the Plaintiff obtained a larger award; but that was still substantially less than it sought. At the end of the day, I accepted the conclusions of the Defendants’ expert. The Plaintiff’s expert testified that the value of the Plaintiff’s shares of MIB were in the range of $111,625.00 to $125,375.00. The Defendant’s expert testified that the value was in the range of $16,000.00 to $23,000.00.

[28] In other words, the Defendant essentially won at the damages re-hearing, not the Plaintiff. I essentially agreed with the Defendant. Moreover, the Divisional Court did not interfere with either my finding of liability or my costs order, and left the matter of costs in my discretion. In other words, the Divisional Court did not find that I erred in declining to order costs. Since the same situation basically prevails at the end of the costs re-hearing, I see no reason to change my original decision not to award costs to the Plaintiff.

(b) Should I award the Defendant’s costs based on the offer to settle?

[29] The Defendants argue that I should rely on Rule 49.10(2) of the Rules of Civil Procedure. That rule states:

49.10 (2) Where an offer to settle,

(a) is made by a defendant at least seven days before the commencement of the hearing;

(b) is not withdrawn and does not expire before the commencement of the hearing; and

(c) is not accepted by the plaintiff,

and the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless the court orders otherwise.

[30] In the alternative, the Defendants rely on Rule 49.13 of the Rules of Civil Procedure:

49.13 Despite rules 49.03, 49.10 and 49.11, the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer.

[31] I originally erred in noting the date of the offer to settle, an error that the parties pointed out to me. This factual error was purely clerical on my part but it led to misapprehending one of the factors mitigating against awarding costs to the Defendants. I have reconsidered the matter.

[32] Upon reconsideration, I do agree that the offer was made in a timely manner. I accepted before, and still accept, that the offer was a good faith attempt to settle the matter. That militates in favour of granting costs in favour of the Defendants. On the other hand, the Plaintiff would have done better by about $6,700.00 had the Plaintiff accepted the $40,000.00 all-in offer. That, of course, does not necessarily account for costs.

[33] The Plaintiff argues that the offer was not “crystal clear”: Mayer v. 1474479 Ontario Inc., 2014 ONSC 2622. That is true, in that it did not set out details. That said, counsel have been dealing with each other on this matter for years and have communicated. Plaintiff’s counsel likely knew what Defendant’s counsel meant by an “all-in” offer and certainly could have called for clarification. The offer likely was not refused because it was unclear.

[34] After carefully re-considering the offer to settle in light of the date upon which it was made, I am of the view that it is still appropriate that each party bear its own costs. The fact that the parties had mixed success, and that neither party obtained what it wanted in the overall context of the litigation, has not changed. Moreover, if I were to order costs in favour of the Plaintiff (the usual rule since I found for the Plaintiff on liability) the offer might well not have applied. Even a modest costs award would have taken the eventual amount well over $40,000.00.

Disposition

[35] There will be no order as to costs.

R.F. Goldstein J.

Date: June 28, 2019