COURT FILE NO.: CV-16-566632

DATE: August 21, 2019

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Multiplex Construction Canada Limited v. Princes Gates Hotel Limited Partnership by its General Partner Princes Gates GP Inc., Roth Toronto Management Inc. and Romspen Investment Corporation;

BEFORE: MASTER C. WIEBE

COUNSEL: Brendan Bowles for Multiplex Construction Canada Limited (“Multiplex”); Riccardo Del Vecchio and Sam De Caprio for Princes Gates Hotel Limited Partnership by its General Partner Princes Gates GL Inc. (“PGH”) and Roth Toronto Management;

Michael Miller for George Colk.

DECISION: July 19, 2019.

COSTS DECISION

[1] On July 19, 2019, I released my decision on remainder of the motions that were commenced back on April 23, 2019. These were the Multiplex motion for a sealing order, the Multiplex motion to amend pleadings, and the Multiplex motion for a Rule 31.10 examination for discovery of George Colk. As directed, the parties delivered costs outlines after the argument. After the release of my decision, they also delivered written costs submissions on costs in light of the outcome.

[2] Incidentally, I note that on July 31, 2019 Mr. Miller delivered only a costs outline for his client, Mr. Colk, a costs outline that shows actual costs of $5,559.60, substantial indemnity costs of $5,003.64 and partial indemnity costs of $3,335.76. There were no written submissions on costs from Mr. Colk.

[3] I have reviewed all of the written submissions of Multiplex and PGH, and herewith make my decision on the costs of the motions.

Sealing order and pleading amendment motions

[4] Concerning the Mulitplex sealing order motion and pleading amendment motion, undoubtedly PGH was the successful party. I dismissed both of those motions. PGH, therefore, is entitled to the costs of these motions. It appears that Multiplex does not dispute this, as its written submissions do not appear to address these motions other than to say that PGH is not entitled to substantial indemnity costs.

[5] I agree that PGH is not entitled to substantial indemnity costs. Elevated costs should only be awarded on a “clear finding of reprehensible conduct”; see Davies v. Clarinton (Municipolity), 2009 ONCA 722 at paragraph 39. I do not find such reprehensible conduct on the part of Multiplex. To date, the only evidence of the alleged fraud scheme in action is that of Mr. Wilson who ties it entirely back to Mr. Colk, and there has been no evidence from Mr. Colk other than hearsay evidence. There is also no evidence implicating the three named individuals, Messrs. Pryor, Tulipano and Crosby. In these circumstances, I do not find the steps Multiplex took to protect the reputations of these individuals and the company reprehensible.

[6] PGH may have a point that Multiplex’s strategy in bringing these motions was puzzling due to the governing tests on sealing order motions and pleading amendment motions. There is indeed authority for imposing substantial indemnity costs where the proceeding is “wholly devoid of merit”; see Standard Life Assurance Co. v. Elliott, (2007) 2007 CanLII 18579 (ON SC), 86 O.R. (3d) 221 (SCJ) at paragraph 9. But, due to the evidence in these motions as described above, I am not prepared to find that Multiplex’s motions were so totally devoid of merit as to warrant an award of substantial indemnity costs. PGH is entitled to a partial indemnity award of costs.

[7] As to quantum, PGH seeks $18,059.37 in partial indemnity costs for these two motions. This is significantly higher than the $10,997.56 in partial indemnity costs shown in the Multiplex costs outline. The Multiplex document shows a total of 50.2 hours of work, whereas the PGH costs outline shows 67.7 hours. It appears that Multiplex did a better job of dividing its labour on these motions amongst individuals who had lower hourly rates than did PGH. It is also not clear to me how PGH derived its figure, as its costs outline covered all three motions.

[8] This all goes to the issue of the reasonable expectation of the unsuccessful party, which is the major factor in my award of costs on these motions. Generally, I believe that PGH should not have spent more time and cost in defending these motions than Multiplex did in bringing them. Both parties prepared significant oral and written argument and motion materials. Indeed, one could make the argument that these motions were more important to Multiplex than to PGH, thereby justifying greater cost for Multiplex, not the lesser cost for Multiplex shown in the cost outlines.

[9] Multiplex argues, I believe, that I should wave any PGH entitlement to costs on these motions given Multiplex’s success on the Rule 31.10 motion. In the alternative, Multiplex wants me to defer the determination of these costs until the determination of the fraud allegations.

[10] I am not prepared to do these things. There is no necessary linkage between the two motions, and they deserve to be treated differently when it comes to costs. The subject of the sealing order and the pleading amendment motions was different than the subject matter of the Rule 31.10 motion. The sealing order and pleading amendment motions concerned the present effect of the fraud pleading per se regardless of the eventual evidence of the alleged fraud. In this regard they engaged other important issues, such as the principle of open courts and the use of evidence to justify striking an otherwise sufficiently pleaded fraud pleading. The Rule 31.10 on the other hand concerned the acquisition of further evidence of the alleged fraud to be used if necessary at the trial hearing. Finally, I note that in any event more work was done on these motions than on the Rule 31.10 motion, thereby making the complete set-off of costs claimed by Multiplex problematic.

[11] For all these reasons, I have decided to award PGH $11,000 in partial indemnity costs for these two motions, to be paid by Mulitplex in 30 days.

Rule 31.10 motion

[12] In this motion, Multiplex was the successful party, as it succeeded in obtaining orders for the two Rule 31.10 examinations it originally sought. It wants a costs order in this motion as against Mr. Colk. Due to my ruling above, I infer from Multiplex’s written submissions that it also wants a costs order as against PGH.

[13] Presumably, as it is not clear from Mulitplex’s written submissions, the amount of the claimed cost is the $6,803.45 of partial indemnity costs that appears in the Multiplex costs outline for this motion. In any event there is nothing in this motion that would justify a substantial indemnity award of costs. As to how I am to assign liability to pay these cost as between Mr. Colk and PGH, Multiplex did not give clarity. In the end, I find that I do not have to rule on that point, and I do not do so.

[14] Concerning Mr. Colk, Multiplex argues that Mr. Colk’s conduct merits an award of costs against him. Multiplex argues that Mr. Colk did not cooperate in any way in resolving this motion, that Mr. Colk insisted on $15,000 in payment up front that I did not award him, and that Mr. Colk refused an offer to settle the costs of this motion as it relates to Mr. Colk made after my decision came out, which offer proposed having Mr. Colk bear the costs of the examination and Mulitplex the costs of this motion. Instead, Mr. Colk insisted on being paid the same up front $15,000 despite having lost on that issue before me in the motion.

[15] Concerning PGH, Multiplex argues that PGH should be made liable for costs as, according to Multiplex, PGH resisted this motion and lost. Multiplex points to the PGH factum as proof that PGH resisted this motion. PGH argues in response that it took a “pragmatic” approach to this motion, arguing initially that it was premature since PGH had not been examined on the issue of fraud. It also argued that it limited its involvement by just questioning the method and costs of examining Messrs. Colk and Wilson. It conceded that it resisted the claim for an order prohibiting Mr. Colk’s evidence at trial in the event he does not appear at his examination, an issue on which it lost. PGH argued in short that it did not resist the essence of the motion, namely the Rule 31.10 examination of Mr. Colk per se, and should not have to bear costs as a result.

[16] After careful consideration, I have decided to make the following orders as to costs, which I believe are reasonable in the circumstances.

[17] Concerning Mr. Colk, I have decided to defer this costs issue to be brought back for determination only if Mr. Colk moves to have his costs of the ordered examination reimbursed by Multiplex, and to have this costs determination made in that same motion. On the other hand, if Mr. Colk does not move for reimbursement of his examination costs, this costs issue will be moot. In that event, either Mr. Colk will bear his own costs of the examination and Multiplex will bear its costs of this motion, or Mr. Colk will not attend the examination and will be excluded from the trial thereby rendering the issue of Mr. Colk’s evidence moot.

[18] Here is my rationale for this order. I have stated in previous rulings in this matter that Mr. Colk did not appear to be cooperating. In the end, I am not sure how cooperative Mr. Colk should have been in the circumstances. He is not a party. He does not reside in Canada. The evidence was not clear as to when he was served with the motion material and whether that service was done in accordance with the Hague Convention, as it should have been. Multiplex has the onus under Rule 31.10 to meet the specified test. As a result, Mr. Colk had good reason to wait until he was properly served with motion material to hire a lawyer and take a position. He is understandably concerned about the costs of this examination in a foreign country. I am not, therefore, in a position to decide at this time that Mr. Colk’s conduct merits an award of costs against him. That issue can be better addressed if and when Mr. Colk brings his application for reimbursement of his costs of the examination.

[19] Concerning PGH, I find that PGH did indeed resist the motion. In its factum, PGH states clearly that the Multiplex motion should be rejected. Paragraphs 44 to 49 of the PGH factum fall under the stated heading, “Rule 31.10 has not been satisfied.” It was unsuccessful, and as a result PGH should be made potentially liable for Multiplex’s costs.

[20] As to quantum, given what Multiplex did not claim for costs from its cost outline in the sealing order and pleading motions, the $6,803.45 is not per se unreasonable based solely on the principle of what PGH could reasonably have expected to pay in the event of defeat. But I make no final ruling on this point.

[21] This is my ruling concerning PGH. Unlike the sealing order and pleading amendment motions, PGH’s final liability to pay the claimed costs should be determined in the context of the eventual outcome on the fraud issue. If the fraud allegations are confirmed, PGH should not have to pay the costs Multiplex incurred to uncover further evidence of Multiplex’s own fraud. If the fraud allegations are not confirmed, PGH should have to pay these costs, which Multiplex will have had to incur to vindicate itself. Therefore, I rule that PGH’s liability to pay Multiplex’s costs of this Rule 31.10 motion will be determined in the cause of the determination of the fraud allegations.

DATE: August 21, 2019

MASTER C. WIEBE